Posts Tagged ‘charity’

Taxes vs. philanthropy: the view of a raving lefty

January 11, 2012

I am distressed by the sight of poverty; I am benefited by its alleviation; but I am benefited equally whether I or someone else pays for its alleviation; the benefits of other people’s charity therefore partly accrue to me.  To put it differently, we might all of us be willing to contribute to the relief of poverty, provided everyone else did.  We might not be willing to contribute the same amount without such assurance.

Therefore, this wild-eyed radical continues, the government must step in.  If poverty is to be alleviated, everyone must be taxed so that no one gets a free ride to the benefits of poverty eradication.

How appalling!  How socialistic!  Of course, what else could one expect from an ivory-tower academic complete with Nobel prize?

No, not that one (or even that one): Milton Friedman.

When the man said “There ain’t no such thing as a free lunch,” he meant it.

H/t Allen R. Sanderson.

At war with oneself over the charitable deduction

January 10, 2012

From an article in the New York Times whose date the Nonprofiteer neglected to notice:

“It’s admirable when people back their charitable impulses up with donations,” said Scott Klinger, tax policy director of the group Business for Shared Prosperity.  “But the tax code shouldn’t allow the wealthy the kind of loopholes that let them, essentially, force other taxpayers to underwrite donations to their pet causes.”

“The kind of loopholes . . . “  Is there some other kind?  That is, can we have the tax code encourage individual generosity without delegating to private individuals decisions about what constitutes the public good?  The Nonprofiteer doesn’t see how.  Either you have a tax subsidy—which means by definition that other taxpayers bear a bigger burden—or you don’t. 

Without the subsidy, current donors might give less but the government would have more to give out to public causes (health, education, welfare) now privately supported.  And perhaps without the subsidy, current donors would be replaced by those less-burdened other taxpayers in a burst of their own generosity.  And maybe this would mean fewer snow-globe museums and more attention to human services in the nonprofit sector.

Or maybe it would just mean a reduction in charity and an increase in the government’s resources, which could then be used on public education and public housing.  Or missiles and drones.

This is why the Nonprofiteer remains at war with herself over the charitable deduction.  She wants a thousand flowers to bloom.  She believes any free society requires a counter-balance to whatever the current government has decided about anything.  And she believes this counter-balance requires money.  The whole point of the nonprofit sector is that it permits people to identify and respond to their own needs in their own communities, producing a closer fit between service and community than is possible with centralized programs.

But she also believes that society-wide priorities should be funded society-wide, which means limiting the number of pots of money exempted from inclusion in the public fisc.  And she doesn’t want society-wide priorities to be determined by people who have so much money they can buy entire public school systems and experiment on them.

To quote the great Yul Brenner: Is a puzzlement.

Guest post: One Book, Three Challenges

January 1, 2012
by Lesley Rosenthal

Good Counsel: Meeting the Legal Needs of Nonprofits
by Lesley Rosenthal
(John Wiley & Sons 2012)

As I embarked on writing Good Counsel: Meeting the Legal Needs of Nonprofits, well-meaning and concerned folks cited at least three reasons why no one had written such a book before, and (implicitly) why I shouldn’t try: it’s too dangerous, too hard, too scary.

The “too-dangerous” crowd, personified by some of the most successful leaders of nonprofit turnarounds on several continents, worried that legal information in non-lawyers’ hands would result in the unlicensed practice of law by a bunch of irresponsible, budget-strapped do-it-yourself nonprofiteers. Who knows what kinds of mission mischief non-lawyers would make with their newfound knowledge – the legal equivalent of sewing your own sutures! Fortunately my own boss, the President of Lincoln Center, and several of my other mentors before him, including a former Bar Association president and a federal judge, helped forge my conviction that the law belongs to the people. They encouraged my desire to put it into plain English for all to know.

The “too-hard” folks, also well meaning, recognized the enormous variety of laws that commonly arise in nonprofits and thought it impossible to provide a general overview in one volume. I know what they meant: the tangle of specialized state and federal laws that make our sector one of the most highly regulated in the whole economy, such as state nonprofit corporations laws, Section 501(c) of the internal revenue code, IRS rules, regulations and expectations surrounding the tax exemption and good governance, multi-level filing and disclosure requirements, pension, endowment and investment laws, lobbying restrictions, and a web of 50 different states’ fundraising laws. Many fine books have been written on each of these subjects, but rare is the legal resource that touches upon them all. Then, the skeptics continued, there are also general business laws that apply to these organizations – contract law, labor and employment laws, intellectual property laws, consumer regulatory laws, real estate laws, building codes and more. And business laws apply to the nonprofit sector in weird ways not necessarily intended by lawmakers, forcing volunteer-driven organizations, for example, to think long and hard about how to structure their activities to comply with minimum wage and hours laws. Pile on top of all of those layers the additional specialized laws that apply to the wide world of nonprofits, such as FDA regs for blood banks, student privacy laws for higher ed, permitting and accreditation for hospitals and mental health facilities and so on, and the whole enterprise of writing a book about the legal context of nonprofits threatens to die under its own weight.

The “too-scary” people are the most sympathetic people of all. They are the good-hearted lawyers who are already serving as counsel, as board members – or as both simultaneously – to nonprofit organizations. Their values may line up perfectly with the mission of the organization they serve – an elder care lawyer, for example, serving on the board of a community-based senior center, a real estate lawyer counseling a neighborhood development organization, a sports and entertainment lawyer doing board duty on her town’s local Little League or scout troop – but their legal expertise may be far afield of the legal issues facing the organization. It scares them to no end when a legal question arises in the boardroom and all eyes turn toward them. UBIT – what’s that? Conflict of interest policy pertaining to co-investment interests? Ugh. Section 501(h) election for lobbying activities? Isn’t this meeting almost over? They could have just begged off answering these questions – that’s not my area of law, you see, you wouldn’t ask a dermatologist about your chest pains, would you? – if only Good Counsel didn’t exist to connect the dots between the law they do know and the law they need to know to better serve their favorite charity.

Good Counsel is intended – charitably – to defy all three objections. In 300 pages it places the law of nonprofits in the hands of board members that oversee and executives that actually run the organizations – CEOs, CFOs, program managers and staff, fundraisers, personnel directors, communications professionals, operations and facilities managers and more. Does it answer every question? No. Does it sensitize non-lawyers to common legal issues in the highly regulated context in which they operate? I sure hope so.

Lawyers who make their living practicing in this field needn’t worry that this one volume will displace them; to the contrary, placed in the right hands, the book will generate more sophisticated questions and ultimately more and better client relationships. Corporate and transactional lawyers who have not yet found an outlet for their volunteer yearnings – because it seems that most pro bono projects are more aligned with the skills of litigators, not business lawyers – may feel empowered to see how readily they can translate what they know to the legal needs of prospective nonprofit corporate clients.

Law school deans concerned about the criticism being leveled at the entire enterprise of legal education may find a path forward in Good Counsel. With case studies, work plans and focus questions following each chapter, the book lays out a path for law students supervised by clinical professors to engage with a particular nonprofit organization and assess its legal needs – growing the students’ legal skills and stretching their capacities as counselors in ways that will serve them well even if they do end up in private practice after graduation, as most do.

And the legal profession, which despite the canon of lawyer jokes is as public-spirited as any I know, may find that Good Counsel can be used to foster and strengthen more pro bono relationships between lawyers and organizations. There is a great deal of goodwill for nonprofit organizations among public-spirited lawyers. I know, because I have been both a purveyor and voracious consumer of pro bono legal services, that there is more time and willingness to serve among the legal profession than has been fully tapped to date. A pilot program of the New York State Bar Association and the New York Attorney General’s Office Charities Bureau has adopted Good Counsel as a training resource for that very purpose: to help launch up to 50 new pro bono relationships between lawyers and charities in the initial pilot year of a program called Charity Corps: Lawyers Helping Nonprofits.

Far too many of our nation’s one million public charities lack regular access to counsel. At the same time, good-hearted lawyers are floundering in their efforts to help their favorite nonprofits, or are afraid to try because they think the field is so distant from subject matter they know. Law students graduate in debt up to their ears but lacking the practical skills they need to begin servicing clients after law school. Good Counsel is a playbook, intended for all three audiences.

And while I admit it was a little hard, scary and dangerous, ultimately there were far more supporters than skeptics for this project. I invite readers – lawyers, nonprofit leaders, and academics – to take a look and let me know if it works.

Lesley Rosenthal
www.goodcounselbook.com

goodcounselbook@gmail.com

Schedule of upcoming Good Counsel events in NYC, LA, Detroit, Miami, Philadelphia, Boston, DC and Buffalo, NY available on www.facebook.com/GoodCounselBook or at the book’s website, www.goodcounselbook.com.

Available for purchase at http://www.amazon.com/dp/1118084047/ref=rdr_ext_tmb

Review copies for academics, media, upon request to tbatanchie@wiley.com

Staying out of jail and up to technological speed while running a nonprofit

December 21, 2011

Some days the Nonprofiteer is happy to serve just as a pass-through for the good work other people are doing. This is one of those days.

On January 11, look out for the publication of Good Counsel: Meeting the Legal Needs of Nonprofits, Lesley Rosenthal’s guide to every possible legal issue in nonprofits. (The Nonprofiteer urged Lesley, who is Lincoln Center’s general counsel, to call the book “How to stay out of jail while running a nonprofit,” but for some reason she demurred!) Having had a chance to review the book in manuscript, the Nonprofiteer is happy to give Good Counsel her strongest possible endorsement, and not only—not even primarily—for big agencies with their own general counsels.  The lawyers on your Board who are forever being expected to know everything legal that might affect your agency (and who are secretly wetting their pants from anxiety because they don’t actually know all those things) will be particularly grateful for this brief, well-written and comprehensive guide to, well, staying out of jail. And—how moderne!–it’s also available for Kindle and I-Pad.  Publisher John Wiley & Sons/Lincoln Center.

And, in other useful news, elevationweb.org announces that it’s prepared once again to provide free Web development services to nonprofits which can match Elevation Web’s contribution.  Last year this “socially conscious Web design and media company” donated $400K in services to 95-plus nonprofits.  So if you (like most of the Nonprofiteer’s clients) think that upgrading your Website and making it easier to use (i.e. donate from) is of critical importance in the coming year, check out the group and complete the application at http://www.elevationweb.org/one_for_one.php.

What should (but won’t) be the last word on the charitable tax deduction

December 20, 2011

The most powerful argument Jack Shakely makes in his LA Times op-ed piece opposing the charitable tax deduction is that it’s a poor trade-off.  The retired foundation executive points out that charities have permitted themselves to be shorn of their ability to influence policy and politics in return for a mess of pottage.  Of course the restrictions on charitable participation in the public arena aren’t as draconian as nonprofit executives (and especially Boards) think they are—but the point is that nonprofits understand themselves to be constrained, and rather than bothering with the details remain quiescent politically.

As strong a proponent as the Nonprofiteer is of the pursuit of individual gifts, in the real world virtually every social service agency needs seriously more government money if it’s going to make any dent in the social problems it faces.  The more social service agencies feel free to advocate for this particular budget bill or that particular provision in a piece of legislation—both prohibited by the current tax-code provisions—the more likely it is that those bills and provisions will pass, which would serve way more of the agencies’ clients than the most blue-sky estimates of their potential for growth in individual giving.

And for someone with foundation cred to say this!  All hail Jack Shakely.

h/t The Nonprofit Quarterly Newswire.

Dear Nonprofiteer, Should I face the music, or dance?

December 16, 2011

Dear Nonprofiteer,

If you could stand one more letter asking about Boards of non-profit arts organizations — or even point me in the right direction — I’d be very grateful!  I’ve been the school director for a small non-profit music organization for several months. The organization has two parts — there are performance choirs and then there’s the school.

But maybe it would be more accurate to say that there are two organizations, because I’ve been told that the school is “technically” for profit, meaning that only the performance choirs can receive grant money.  I’m not sure why, or even if, this is so, though I understand that we make more money charging for music lessons than we do sending out the performance choirs, whose members are paid a pittance that nonetheless exceeds the amount companies and civic organizations are willing to pay for being entertained by them.

The main problem: the performance-choir conductor is also Artistic Director of the entire organization, AND is Chair of the Board of Directors.  He is paid $20,000 a year for what’s supposed to be a 12-hour-a-week job, but in fact he doesn’t work nearly that much.  He lives a couple of hours away, so he only comes in once a week to rehearse, and not even that during the summer (or the Christmas holidays, or the Easter holidays, or St. Swithens’ Day!).  And whenever he can he schedules performances near his home rather than near the school, which means we’re not really serving our community.

Meanwhile, I work full-time (theoretically 40 hours a week but actually closer to 90, what with teaching as well as administrative work).  This huge job pays me $34,000 with no benefits.  The Board sees itself as my “BOSS” and reminds me of that often. In addition to the Chair, the Board members are 1.) one of the school’s teachers, who’s also the Board treasurer; 2.) a member of one of the performance choirs who writes the grant applications; 3.) the mother of a former student, who is paid to be secretary; 4.) the mother of a current student, who is paid to be DIrector of Development; 5.) another one of our teachers; and 6.) a lawyer who takes voice lessons from the treasurer.  In other words, NOBODY is without connections to the school and thus a personal agenda.

The school went downhill financially during my predecessor’s tenure, to the point where we’ll probably have to give up half of our space.  But when I say I need help with fundraising, I get, “Sallie Jo managed it.”   I’m expected to do everything Sallie Jo did but with more “Board oversight,” which means micromanagement and no actual help.  That’s not their role, apparently—their role is being my superiors, scrutinizing me, complaining to each other about me, and occasionally sending me a condescending note giving me reprimands and further orders.

As a seasoned professional who is keeping the place together single-handedly, I consider these missives insulting at best. But there is no one I can appeal to. Do you have any suggestions? Advice? Articles you could point me to? (Templates of letters of resignation?)   I’m near the end of my rope.  Signed,

Hanging on By a Thread

Dear Hanging:

This is like one of those children’s puzzles, “Can you spot what’s wrong with this picture?”  There are so many things wrong that even the youngest child can detect some of the problems, while others are so subtle that older children will be challenged.  Or, in other words: what a mess!

Once you’ve said that the Artistic Director is the chair of the Board, you’ve already described an organization in trouble.  One function of an arts Board is, indeed, to support the vision of the Artistic Director, but the other is to counter-balance that vision with business acumen and an awareness of what a nonprofit arts organization owes the community.  Even if every single member of the Board weren’t compromised in the way you’ve described, the organization itself would be hopelessly compromised by having a single person leading both the Board and the staff.

If the Board were independent, the fact that you and the Artistic Director both report directly to it would provide a healthy balance: he would say “I want to do blah-blah-blah” and you would say “blah-blah-blah costs three times as much money as we’ve raised in any year in the history of the organization” and the Board would weigh these competing points of view and make a decision.  In those circumstances, it would be a good thing that the Board knows it’s your boss—that would mean the Board knew that you and the Artistic Director were co-equals reporting to a common authority rather than an inferior (you) reporting to a superior (him).

But with a Board that’s essentially an extension of the Artistic Director’s personality, you have the worst of both worlds: multiple superiors and no equal colleagues.  No wonder you’re feeling besieged and insulted: you were hired with the title of a director and the status of a secretary.

That’s what the salary situation means: they’ll pay you less than half (on a per-hour basis) of what the Artistic Director makes, because he has more than twice your power.  The fact that you’re also earning less than the singing lawyer’s administrative assistant is just icing on the cake.

And now we get into the subtle stuff: what, exactly, is this nonsense about the school’s being “technically” for profit?  It either is, or it isn’t; it either files a Form 990 informational return with the IRS, or pays taxes on its profits like any other business.  It’s hardly unusual for an arts organization to run a school whose earnings help sustain the actual performances: most likely that’s the real function of the School of the American Ballet.  It’s a prestige training program for the New York City Ballet, and as a result it’s also a cash cow for the company.  But the Nonprofiteer strongly doubts there’s any ambiguity in the status of either the ballet company or the school, whether they’re independent or intertwined.  All the hair goes up on the back of her neck when she hears the word “technically;” in the nonprofit sector it almost always means some corner is being cut that shouldn’t be.

So let’s review: you’re overworked and underpaid in an organization where your input is ignored but your grunt labor is expected and taken for granted.  This may also be an organization with a dodgy relationship to the laws of your state concerning nonprofits and community benefit, and the laws of the United States concerning nonprofits and taxation.  Given all this—surprise!  You’re having a terrible time.

The Nonprofiteer ran a small nonprofit herself—a choir, as it happens—back before the glaciers melted.  It was a complete debacle, though it did provide one of the world’s fastest educations in nonprofit management.  It took her nine months to realize that she was on a dead-end path, and to quit.  She urges you to be more expeditious.

It’s a terrible economy and no doubt you want to work in the music world that you love.  But you’d be better off working as a temp and looking for a job with a functional school or music group than staying where you are and having your spirit ground down by fighting against impossible odds.

The Nonprofiteer’s advice: give two weeks’ notice and start the New Year off fresh.  As for templates of resignation letters, the simplest are the best.  Justifiably angry as you are, don’t burn any bridges.  Just write, “Ladies and Gentlemen: I’m sorry that I will be unable to continue as the director of [Name] School.  My last day will be [date].  Thank you for having given me the opportunity to work with you.  Sincerely, [you].”  If you just can’t stand the thought of writing something so polite, write a letter that expresses how you really feel—and then put it under the chestnuts and roast away.

Submit your letter today, and you’ll have yourself a merry little Christmas.  You deserve no less.

Why the public should fund the arts, after all

December 6, 2011

The Nonprofiteer had a fascinating conversation with Margy Waller, a special advisor to Cincinnati’s ArtsWave, which leads the nation in evidence-based approaches to advocating for arts funding.  Ms. Waller had reached out to correct the Nonprofiteer’s misunderstanding (and therefore misreporting) of ArtsWave’s efforts, noting that the argument is not that the public should fund the arts to promote economic recovery but that it should fund the arts to promote neighborhood vibrancy.  This nuance turns out to make all the difference.

Here’s the ArtsWave insight: people are ready enough to agree with the notion that the arts are good for the economy.  But if you probe deeper, and ask what top three things we should do to improve the economy, no one answers “subsidize the arts.”  So apparently the argument that the arts are an economic engine (true or false) is unpersuasive, which is what really matters.

But the ArtsWave research also uncovered the fact that if you ask people what would improve their neighborhood the most, the arts come up time and time again.  Why?  Because artists’ residences are known to herald an improvement in real-estate values; because arts audiences mean feet on the street and therefore greater public safety; because arts venues are known to spawn coffee shops and restaurants and other places of urban liveliness.

Therefore, the argument for public funding needs to be focused not on the art but on the public benefits of art-making.  This simultaneously ends the unwinnable argument about whether x or y is valid art or a useful expenditure of public funds and reminds people of what they believe anyway, that investment in arts-related infrastructure benefits everyone—not in some airy-fairy, soul-stirring, life-improving sense but in the grossest day-to-day experience of quality of life.

Thus an appeal to provide tax breaks to bring artists to a particular area would be framed not as a subsidy to these all-important art-making beings (read: overprivileged white people who ought to get jobs) but as a way to offset (maybe even reverse) the damage to property values wrought by foreclosures.  The subsidy is to the value of private property (something that can be monetized) rather than to the value of art (something that cannot).

As instrumental and cold-blooded as this approach may seem, Ms. Waller makes the powerful point that vibrancy is what people love about the arts—and that weaving the arts into the fabric of other social needs and activities enables people to appreciate the arts “not as consumers but as citizens.”

The Nonprofiteer was particularly struck by that last point.  Asked what citizens should do to respond to 9/11, then-President Bush had nothing more to offer than, “Go shopping.”  Anything that enables us to respond to public concerns in a public spirit; anything that combats the notion that government is the problem and privatization the solution; anything that reminds us that we’re a republic if we can keep it; anything that illustrates we don’t have to buy something to value it—any of these is a consummation devoutly to be wished.

As a wise person once noted, the important thing is not to have BEEN right, but to BE right.  The Nonprofiteer has been wrong in her blanket condemnation of public funding for the arts, because she thought of it exclusively in the frame established by its opponents: as subsidies to artists to create what might or might not actually be valuable.  Once the framing shifts to “vibrancy,”* and to concrete benefits to the broader society, public arts support suddenly makes sense.  No one else may care, but it will be a relief to her to stop being the only left-wing theater critic in the country opposed to public funding for the arts.

She continues to think that the NEA itself is a lost cause and that energy spent defending it would be better spent squeezing support for the arts out of HUD, Fannie Mae/Freddie Mac and local housing authorities.  But that’s a matter of strategy.  As a matter of principle, the Nonprofiteer is grateful to have discovered a valid way to defend taxpayer support to something that matters so much to her.

—————–

*Yes, “vibrancy” can be a euphemism for “gentrification,” or at least its prodroma.  But if we plan for vibrancy (instead of simply hoping that lightening strikes in this ‘hood or that), we can also plan to prevent displacement.  And without displacement, “gentrification” is just another word for “safe streets, amenities and public services”—for everyone, rich or poor.

A remarkably clear statement of what’s wrong with L3Cs. . .

November 29, 2011

for which the Nonprofiteer can take no credit.  Rather, thanks to her friend, Baltimore tax lawyer Stuart Levine, for laying out so clearly the problem with low-profit limited-liability companies, the latest fad in efforts to do well by doing good.  Stuart’s argument appears in response to, among other things, a recent New York Times report that foundations have increased the proportion of their “grants” which are actually program-related investments, that is, grants for which repayment is expected to a greater or lesser degree.

Words from the wise:

Look, there are numerous “good cases” where one can see that infusion of capital that doesn’t really have to be repaid at market rates makes good sense.  (Actually, government loan guarantees of, say, solar power start-ups falls into this category.)  The problem with allowing 501(c)(3)’s to make these sorts of investments is that the process is subject to abuse.

Say that I want to create “Stuart Levine’s Good Works Foundation.”  The Foundation attracts $10M in tax deductible contributions.  The Foundation uses the cash to “invest” in projects operated either by me or my Aunt Minnie.  While Minnie and I invest our own funds in these businesses, our capital position is ahead of the Foundation’s and gets a higher return, so that the first profit out goes to pay us and, if the deal craters, the biggest part of the hit will fall on the foundation.  (Did I mention the $250K a year consulting fee paid to me by the investment entity?)

I don’t for a minute believe that the Bill and Melinda Gates Foundation is engaged in double-dealing of the sort that I described.  I have less faith in the “Stuart Levine’s Good Works Foundation.”   Has everyone forgotten the Pallottine Fathers?  See here:

http://tvnews.vanderbilt.edu/program.pl?ID=254962

Or, as one might say, everything old is new again.

The burden of proof rests on those who believe L3Cs are essential.  They must demonstrate that the entities’ potential for abuse is outweighed by their capacity to meet needs that are otherwise unmet.  But all that’s unmet so far is that burden of proof.

No good deed goes unpunished

November 22, 2011

Now here’s something that breaks the Nonprofiteer’s heart: the MacArthur Foundation is making grants to a dozen libraries and museums nationwide to establish youth computer learning centers modeled on YOUMedia, the Chicago Public Library’s innovative youth learning project.

Why does such good news evoke such profound sorrow?  Because the Nonprofiteer can remember when the notion was that the philanthropic sector would serve as a laboratory, trying out new approaches to solving social problems and then passing along the ones that worked to be funded by the government.  What we have here, however, is a model already vetted in the public sector whose future sustenance apparently will have to come from private charity.

This role-reversal is particularly galling here in Chicago, where the reward for the library’s pioneering work has been a substantial chop in the city’s library budget.

It’s hard to read a computer screen, or learn anything, when the world is upside-down.

Everybody who’s not here please raise your hand

November 21, 2011

Will anyone reading this blog who was invited to this event, or knows anyone who was, please comment and tell the rest of us what it was supposed to accomplish and what actually happened?  Many thanks from the—oh, what’s the term?  “Other 99%”?

From the Chronicle of Philanthropy via LinkedIn (emphasis mine):

White House Hosts Meeting on Nonprofit Leadership

November 14, 2011,  5:07 pm

By Lisa Chiu

The White House has invited leaders from about 200 nonprofits to Washington to take part in a daylong program that will focus on the role of nonprofits and how charities can develop effective leaders. The event, which takes place Tuesday at the national office of the American Red Cross and is closed to the public, will feature discussions led by White House officials and business and nonprofit leaders.

Speakers include Valerie Jarrett, senior adviser to President Obama; Jonathan Greenblatt, director of the White House Office of Social Innovation and Civic Participation; Joshua DuBois, executive director of the White House Office of Faith-Based and Neighborhood Partnerships; and Kenneth I. Chenault, chief executive of American Express. The White House worked with American Express as well as the Annie E. Casey Foundation, the Aspen Institute Program on Philanthropy and Social Innovation, the Center for Creative Leadership, Commongood Careers, Independent Sector, and Public Allies to organize the event.


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