Tuesday, January 09, 2018

Contributions to Clintons dropping?

This is not a political blog, but we like to look at businesses of all kinds.  Charities are a special kind of business - a business in which value provided to end users is less than the cost of the inputs of that value, necessitating continuous access to capital.  Government supports that access through favorable tax treatment (either at the organizational level, where an organization itself pays no taxes on its inflows) and/or at the donor level.

One of the largest charities in the United States is the Clinton Foundation, which during the presidential campaign came under mild scrutiny for being a (taxpayer supported) campaign in waiting and for offering opportunities for foreign and domestic interests to buy access to the Clinton family and therefore indirectly the White House.

The Clintons insisted that this was all simply due to the unique scale and reach of the Foundation which enabled (big money) donors to write one check and have significant impact.

The telltale signs would always be, what happened to donations if Hillary lost.  Absent future access to the White House, would the donors keep giving?

The first results are in and they suggest that interest might be falling.  In November 2017, the foundation finally published financials for 2016.  Comparing them to 2015 indicates that there have been a decline both in receipts and also in the balance sheet (assets).  It will apparently be another year before we get the details on 2017, but isn't it simply interesting that 2016 was down about 15%, which is about 6 weeks of the year, or about the amount of time between election day and December 31.  Could it be that funds just dried up on November 9, 2016?  Only time will tell.

Interestingly, though, the "Clinton Health Access Initiative" CHAI, made a decision on March 7th, 2017 (a subsequent event to the released financials) to change its governance.  Prior to that date the Clinton Foundation appointed five of the nine members effectively controlling the charity (and so it was consolidated).  Thereafter, the Clinton Foundation is entitled only to "recommend" five members to an expanded board of 15, with the other 10 members being recommended by the independent board members, and with the charity then ratifying the entire slate (or not).  Thus, the charity is no longer controlled by the Clinton Foundation and will be deconsolidated (indeed, it will cease reporting).  This takes about $152mn of revenue (from a total of $222mn) out of the picture.  It effectively reduces the scale of the Foundation by 68% on a revenue basis and about 21% of the assets.

Many postulates are possible here - perhaps in a post-campaign world the Clinton team no longer have enough human resources to staff the larger institution.  Perhaps fundraising will be easier if there is more separation from the Foundation?  This would make sense if most of the donors up to this point saw the charity less as a civic duty and more of an influence buying vehicle.

This is one of the perils of having a business that has a moat which is heavily dependent on the personal assets of the people running it.

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