Foundation Friday: Giving With One Hand, Taking Away With the Other

A program officer with a community foundation brings the following to our attention, with the observation, "This just blew my mind… they REQUIRE their grantees to donate a portion of their awards directly back to them!  This may be legal, but is it ethical?!?"

Here’s the questionable practice:

ProLiteracy is entering the thirteenth year of the National Book Scholarship Fund, a project that supplies books and materials to local adult basic education and literacy programs. The resources available through NBSF are from New Readers Press, the publishing division of ProLiteracy.

Programs providing direct service in the areas of basic literacy, adult basic education, English-as-a-second-language, and family literacy will be considered for support. NBSF grants are made in the form of the New Readers Press materials requested in the grant proposal. Grants typically average $500 to $2,000 each but can vary depending on the needs of the applicant organization.

Programs awarded a grant must provide a cash contribution to ProLiteracy equal to 20 percent of the grant award. These funds are used to defray the costs of NBSF program administration. Organizational members of ProLiteracy must provide a cash contribution equal to 10 percent of the grant award.

So you (charity) will buy x amount of my product, while I (foundation) jack up the list price of the product and pretend that the difference between what you paid and what I listed is a donation.  Of course this isn’t ethical; and if the sole asset of the foundation is this product which it’s turning into cash, the IRS will probably be very interested.

This is the second time in her career the Nonprofiteer has encountered what seems to her to be an obvious scam connected to literacy programs.  Maybe the people who have these ideas are under the impression that literacy program officers can’t read, either.

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3 Responses to “Foundation Friday: Giving With One Hand, Taking Away With the Other”

  1. Alanna Says:

    New Readers Press seems to be a tiny little outfit based in Syracuse, NY. (wesbite here: http://www.dreamscape.com/deborah/laubach/NBSF/howtoapp.htm) I am not sure if they’re crooked or just really amateurish. Their site design has a certain earnest ugliness that you’d think they would have designed away if they were a serious scam.

  2. Alanna Says:

    Okay, the plot thickens. Here is their new website: http://www.proliteracy.org/. Now they look like a scam, especially with the affiliate program.

    Also check out their FAQ on the scholarship program: http://www.nbsf.org/faq_donors.asp – if 15% of each donation goes to admin cost, why are they also asking grantees for money? Fishy.

    Sorry to hijack your blog, but I am fascinated by this.

  3. Ben Says:

    Wow.I don’t know the exact laws around it, but I know that every single in-kind contribution confirmation/thank-you letter has a statement to the effect of “No cash or services were provided in return for this donation.” They’re wording it as a grant rather than a donation, so maybe that changes things. But wow.

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