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These articles by Barbara Fox were published in U.S. 1 Newspaper on September 2, 1998. All rights reserved.
Giving, Getting, Profitting
If you are the multimillionaire Russ Berrie, you already know about the National Association for the Exchange of Industrial Resources (NAEIR). It's one of the gift brokers to which you can donate excess inventory and take a tax deduction -- up to twice the cost of the item.
And if you are in the nonprofit sector, you may also know about the NAEIR. It's the Illinois-based organization where you can get new items for free (http://www.freegoods.com). A newer source for both giver and receiver is Gifts in Kind International (GIK), based in Alexandria, Virginia (http://www.giftsinkind.org).
Product philanthropy is, in fact, one of the hot trends in the charity business. What used to operate as an informal network for getting "free stuff" has been streamlined by gift brokers who operate like chains of superstores. And though you would think the charities would have unqualified enthusiasm about getting "something for nothing," the nonprofit gift brokering business is just like any other -- it has its drawbacks and its unhappy customers.
Paul Clolery, editor of the Nonprofit Times ((http://www.nptimes.com), points to surveys showing that, from 1995 to 1997, gift brokering organizations increased their gifts-in-kind revenue by 30 percent, in contrast to the gifts-in-kind revenues of major charities, which grew by only 7.1 percent, or at about the same rate as cash donations.
The rush to donate used technology has certainly been encouraged by the 1997 change in the Internal Revenue Code, The Taxpayer Relief Act, effective through January 1, 2000. As it applies to this kind of giving, it is effective from December 31, 1997 to January 1, 2000. Under Section 170 (e)(3), C Corporations donating to a gift broker can deduct the cost of the donated product plus half the difference between cost and fair market value, up to 200 percent of the merchandise cost. So if the item cost $1 to make but sells for $2, you can deduct $1.50. If the $1 item sells for $4, you can deduct $2.
Some companies that used to donate locally are indeed funneling most of their charity through the gift brokers, says Rosalie Burns Davis, executive director of the Milltown-based United Way of Central Jersey. "We used to individually solicit different companies for things that we needed," says Davis. "When we needed a computer we would call IBM in Dayton." Now IBM channels its computer donations through Gifts in Kind International -- but she's still getting computers. She herself uses a computer that was donated by IBM through GIK, and her constituents are waiting for a shipment of new computers any day now.
GIK gets most of the computer donations, says Clolery, editor of the 11-year-old Nonprofit Times, founded in Princeton, now located in Cedar Knolls. NAEIR, he suggests, "is more of an industrial resources type of place, and GIK is more of a technology kind of place."
Otherwise, NAEIR and GIK are similar. Both accept donations of new merchandise (often production overruns, canceled orders, and discontinued models or styles), print descriptions of the items in catalogs, take requests from paid members (non-profit organizations that qualify as 501(c)3 organizations), and provide the donor with a federal tax deduction document. Donors usually pay shipping costs to the warehouse and recipients pay shipping and handling from the central warehouse.
Available goods at NAEIR often include office supplies, books, computer software and computer accessories, appliances, clothing, sporting goods, janitorial and maintenance supplies, housewares, electrical and plumbing fixtures, flooring, hardware, and hand and or power tools. For instance, Conair, in East Windsor, has donated hair dryers to NAEIR. United Way of Central Jersey has received brand-name socks for homeless people in shelters from GIK.
NAEIR was founded 20 years ago by Norbert C. Smith, a gifts consultant who placed donations of real estate and heavy machinery. In 1976, when a new tax code was adopted, he found that excess inventory was sitting in warehouses, and he wanted to pass it on to schools and churches. Now the firm has 110 workers in Illinois in a 10-acre warehouse and 10 employees at a 92,000-foot warehouse in California.
The NAEIR has almost everything except late model computers and cars. NAEIR does receive and redistribute software and peripherals such as keyboards, wrist rests, and modems. But as for donations of used computers, it won't take anything less than a 486 and you'd even have to negotiate that. As John Zavada, the spokesperson, observes, "Pretty soon it will be hard to get software even for the 486s."
NAEIR's 250-page catalogs are issued every 10 weeks. Members, who must be based in the United States, pay dues of $375 for a three-catalog period, $475 for four, and $575 for six catalogs. First-time members get another year free of charge if they do not receive at least twice the value of their dues in free merchandise. The average nonprofit gets $12,500 of merchandise per year.
Last year NAEIR solicited and distributed $100 million worth of surplus inventory from its 10-acre warehouse. This year it may break its own record of distributing $124 million worth of merchandise. Russ Berrie is one of NAEIR's biggest donors.
Many of the members are churches and social service agencies such as hospitals and nursing homes. The items cannot be bartered, traded or sold but can be given as birthday or holiday presents. For-profit hospitals and nursing homes, though they may have the same kinds of clients as the nonprofits, cannot be members.
Current members of NAEIR include East Brunswick Public Library and Mercer Street Friends Center, but many of the nonprofits that were listed as members five years ago (U.S. 1, May 5, 1993) have dropped out. Former members that no longer belong include Recording for the Blind, the Center for Innovative Family Achievements, Presbyterian Home at Meadow Lakes, the Peddie School, and the Mercer Medical Center, and the Princeton Family YMCA.
"We found that the fee for participation was excessive, says John D. Jorgensen, executive director of the Princeton Family YMCA, which had joined in 1987 and stayed in for at least five years. "We can also work through other sources to get free things. We have learned to be careful about what we get."
"One time we received party supplies that we were going to use in our after school and daycare programs and they were great -- but not worth the storage space." The free office supplies are less useful, he says, probably because donations have dropped and superstores drove the prices down. "You pay a fee to join and pay transportation, versus getting the things at a superstore and having them delivered for free."
Gifts in Kind International, founded in 1983, has grown by 44 percent annually for the last six years, and last year distributed $311 million worth of goods, including computers from IBM and items from such Fortune 500 companies as Eastman Kodak, Gillette, Sears Roebuck, Hewlett Packard Microsoft, K-Mart, and Avon. Its memberships cost $125 annually.
Compared with NAEIA, GIK has fewer employees (29 including interns and volunteers) and a smaller (50,000 square foot) warehouse, plus regional space available in 50 partnership warehouses. "We try to keep moving products through," says Susan Corrigan, president and CEO. An alumna of Carnegie Mellon University, she has worked for the National Alliance of Business, the Department of Labor, and for the national United Way.
"In 1983 3M wanted to donate products," Corrigan explains, "and they approached United Way, Junior Achievement, and the United Negro College Fund. United Way took $4.3 million worth of products and distributed them within three months. That was the first time the United Way had ever done anything like that, and the board of directors decided it did not fit with the mission."
Corrigan was, nevertheless, very enthusiastic about the project, and signed on. The Lilly Endowment provided funds for the new organization's office space, rented from United Way, but the United Way is only one of GIK's distribution channels to more than 50,000 charities in the United States, Canada, and around the world (it has an office in London).
Small organizations that don't want to pay the $125 registration fee can get their donated goods by going through the United Way.
For a company that has products to donate but may be in financial straits, GIK makes exceptions on the shipping fees: "If the company has a problem, we can ship the product to one of 50 subwarehouses or ship it into a local community that has a warehouse and is a partner of ours," says Corrigan.
Like NAEIR, GIK also has its detractors. Corrigan was not happy about a recent article in the Chronicle of Philanthropy that aired complaints, including some customer service. "Gifts in Kind does a very good job. It is a very solid, aggressive, good organization, and it is growing in leaps and bounds," says Clolery. "You don't get to be a $297 million organization without knowing what you are doing."
"Our focus is to be sure that customers request what they want and that we get it to them," says Corrigan, pointing out that the GIK has a small staff, a relatively small warehouse ("the idea is to push things through") and operates at less than 3 percent overhead.
But the real problem with any of these product donation services is, as one would expect, the lack of control over what you get and when you get it. "We signed up for Gifts in Kind in 1997 and did not find it worthwhile to renew this year," says Michele Maw, director of corporate gifts at Recording for the Blind and Dyslexic on Roszel Road. (She notes that her agency would, nevertheless, be most happy to accept donations of computers and office furniture from individual firms.)
Maw had had a similarly unrewarding experience with NAEIR when she worked for another charity. The required orders were so large that lots of storage space was needed. "Often, what we had wanted was out of stock by the time the order was placed. It was a very long process, and the technology and equipment was just a little out of date."
"Not every nonprofit is blemishless," says Clolery, who is preparing an article on why and how nonprofits incorporate product donations into the fabric of their fundraising efforts. "Yes, there might be a problem with a product, or products get broken en route, but the whole concept of getting a double tax deduction based on excess inventory is a no-brainer."
"Members would like to see a lot of consumer electronics, but though we rent mailing lists to target things members need, we are at the mercy of our donors," says NAEIR's Zavada.
If you work for a non-profit group, get in line for a free computer next July. IBM celebrates Christmas in July when the trucks go out this month to deliver 15 computers to United Way Central Jersey and 12 to United Way of Mercer County. The new computer gifts are channeled through Gifts in Kind International through United Way chapters across the country.
"They have been giving us computers for six years now," says Rosalie Burns Davis, executive director of the United Way of Central Jersey. It's an exciting moment on the scheduled delivery day. "Everybody stands around the truck and waits to get theirs."
Central Jersey's United Way received 14 new computers this summer, and Mercer County's had a truckload with 14 computers. Each allotment included one laptop, an IBM Think Pad 380D with Pentium 150 Mhz processor, 16 MB memory, CD-ROM, 2.1 gigabyte hard disk drive, and Windows 95. The Puerto Rican Congress daycare center was assigned to Mercer County's laptop so its social workers can make home visits to assess client needs.
This year IBM is offering two kinds of PCs: PC-300 GLs with Pentium 200 or 166 Mhz processors, 15-inch color monitors, 32 MB memory, 2.5 gig hard disk drive, keyboard, and Windows 95 installed. The Pentium 200s have a CD-ROM. Organizations that want computers must submit applications and are subject to stringent guidelines.
UWMC's other recipients were scheduled to be the Habitat for Humanity of Trenton, the Nassau Street-based Environmentors' Project, the Trenton YWCA, the Children's Home Society's West Ward Family Resource Center, Mill Hill Family Development, and the John O. Wilson Neighborhood Center.
IBM requires that 25 percent of the donations go to agencies that do not receive allocations from the United Way chapter, and these recipients are Project Freedom (a housing organization in Robbinsville), Progressive Center for Independent Living, Literacy Volunteers of America, West Ward Partnership, and the Lawrence Township Meals on Wheels.
United Way of Central Jersey's member agencies that are the lucky computer recipients: Middlesex County Legal Services, Salvation Army in Perth Amboy and New Brunswick, Puerto Rican Association for Human Development, Civic League, Women Aware, Cerebral Palsy, and the Thomas Edison Boy Scout Council. The non-member agencies include the American Cancer Society, Middlesex Interfaith Partners with the Homeless, UMDN, Damon House, Brunswick Raritan Housing Development Corp., and South Brunswick Citizens for Independent Living.
Bill Holder, who handles gifts in kind for the United Way of Greater Mercer County, sometimes gets calls for donations of used computers. "Princeton University donated a number of computers a couple of years ago, and we had some that came from Liposome," says Craig Lafferty, executive director of the United Way of Mercer County. "But most of the companies haven't parted with their 486s or their low Pentiums."
If your business is thinking about donating a used computer to a school or nonprofit agency, do it now. Don't let it gather dust while you get around to it, because the value is decreasing by the week. For instance, a 386 computer was valued last year at $10 or $20 and was only worth $5 in parts.
Yet 33 million 286 and 386 computers are still in existence. A student at Tufts wrote a thesis in 1995 that estimated nearly 75 percent of computers are just lying around in offices and homes. Indeed, from 14 to 20 million computers are supposedly going to be taken out of service in the United States this year. Some statistics say that only 10 to 15 percent of them are re-used or recycled, and that 15 percent are thrown out to end up in landfills.
Alice Monachello, facilities operations manager at Bristol-Myers Squibb Nassau Park offices, makes a big effort to get old computers into good hands. She participates in a volunteer group called "The Green Team" that works on reducing the company's waste stream. The Green Team concept started at Nassau Park -- which has 900 employees -- but has expanded to the sites in Cranbury, Plainsboro, and Lawrenceville.
"We're a large corporation, and we generate a lot of waste, as does any company, and it is important to realize that what we are generating is certainly recyclable," says Monachello. "Everyone on the team is concerned. They want to make the right decision and want to look at recycling as the best criteria for waste. Rather than putting it out in a dumpster to be landfill, we are trying to be environmental and have some community involvement."
"Computers are not a worry-free donation; you often have to add money or muscle," she warns. Tech support people might have to donate some time, and money is often needed for parts. Monachello uses money from paper recycling for this purpose. "But the people who want the equipment will come and pick it up. We haven't been spending for transportation costs."
Team members make phone calls to find out who is in need of computers, and then donate their own time to be sure the computer works.
One donation of 386 computers helped introduce people at a homeless center to the concept of working with computers. Rich Cohen was in charge of that program.
The Green Team has donated computers that needed to be upgraded to Mercer County Vo-tech School to use as teaching tools for upgrading and rebuilding computers. "Then the school as a new computer," says Monachello. "They have made about 25 fully rebuilt computers."
"We are working on a process for donating computers that cannot be upgraded, but it's not solidified yet," she says.
Another recycling effort involves lab equipment. Bristol-Myers Squibb has an internal web page, Lab Mall, that serves as an online equipment store for employees. "Anything we don't use off the Lab Mall we send to American medical resources foundation," she says. "They donate it to needy universities and hospitals in Europe, anything from large equipment to beakers, all usable equipment. That idea came from our volunteers."
Reminder: Lofty ideals are one thing, but if your company donates a computer less than two years old to a school, you may qualify for a special tax break. Some resources:
To learn of the nearest collection site that accepts plastic "peanuts" used as fill in packaging, call the "Peanut Pipeline," a 24-hour toll-free hotline set-up by the Plastic Loose Fill Council, at 800-828-2214.
For information on expanded polystyrene (EPS) foam recycling, call the Association of Foam Packaging Recyclers at 800-944-8448.
Music Brokers For Charities, a Sacramento-based firm, offers on its Internet page to buy compact discs and VHS movies collected by charitable groups at a fund-raising event. Prices are determined by customer demand, age, and condition. Expect $2.25 average per item.
Don't send damaged or unpopular items, warns the 20-year-old firm, because you'll have to pay for return shipping. Minimum shipment is 200 items, and Music Brokers for Charity will return the cost of shipping.
Send E-mail to firstname.lastname@example.org or call 916-781-2800.
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