Econ development, Navajo reservation
Diane Hirshberg
Just found this as I was searching...
If folk want me to lay off the articles, let me know...
;-)
Diane
NY Times Business Section...
July 12, 1998
For Navajos, Charity Begins at the Post Office
Related Articles
The New York Times: Your Money
By JON CHRISTENSEN
ALLUP, N.M. -- On the nearby Navajo Indian Reservation,
the Southwest Indian
Foundation blends the determination of the of the Roman
Catholic missionaries who have
been active in the region for decades with the New West chic
of stylish catalogs.
But this is no regular mail-order retailing operation. In
addition to selling merchandise nationwide,
the foundation provides jobs for as many as 60 people during
the peak holiday season and
sponsors social services on the reservation -- an expanse as
large as West Virginia that's known
as the Big Rez.
The services include installing new coal-fired stoves in homes
that lack safe heating, providing
emergency assistance and food baskets to needy families and
supporting alcoholism treatment
centers, schools and shelters for battered women.
The Big Rez, in fact, is among the poorest communities in the
United States, but it is the 64-page
direct-mail catalog, which sells turquoise and silver Indian
jewelry, Navajo rugs, kachina dolls
and clothing, that most of the outside world sees.
Distributed eight times a year, the catalog's circle is
growing; last year, the Christmas edition was
sent to four million households.
The foundation competes with Arizona Highways, Simply
Southwest and Sundance, among
others, for home shoppers who are seeking Southwestern
fashions. But when someone buys a
$19 turquoise tie-tack or a $295 squash-blossom necklace from
its catalog, 65 percent of the
price is a tax-deductible contribution.
The other 35 percent goes to cover costs, including paying the
local artisans who make the
products. Customers can add tax-deductible donations, and
about of them do so. The appeal
has transformed the once-obscure Catholic charity into a $10
million a year operation.
"We would not be able to do the amount of charitable work we
do if it were not for the
business," said William McCarthy, the foundation's executive
director.
The mingling of the commercial and the charitable is among the
most visible tensions in the world
of philanthropy. The practice is almost always controversial,
since business operations tend to
take on a life of their own.
The foundation has its share of critics. But others say that
activities intended to create jobs --
nurturing artisans, not merely dispensing handouts -- answer
charity's highest call.
The foundation enjoys a sterling reputation on the Big Rez.
"When we're not able to find
resources to help our clients and we've exhausted our
services, they help our clients in any way
they can," said Lucinda Waseta, a supervisory social worker on
the reservation.
There is also an appreciation for the business side.
"That's a project that's generating jobs and revenues for our
people," said Ferdinand Notah,
executive director of the Division of Economic Development for
the Navajo Nation. The
foundation has 45 full-time employees, most of them tribal
members; in the busy holiday selling
season, the staff grows.
It also sponsors "economic development" by supporting small
family-run handicraft enterprises,
Notah added. "The families that are participating with or are
employed by the Southwest Indian
Foundation are enjoying a livelihood and are contributing to
the local economy."
It is hard to come up with reliable economic statistics for
the remote reservation communities that
are home to about 175,000 Navajos. According to Notah's
office, about 50,000 Navajos are
counted among the active labor force, but about 40 percent are
unemployed.
The annual per capita income on the reservation is estimated
at less than $7,000. But Notah said
that doesn't include the thriving underground economy --
production of arts and crafts valued at
up to $20 million or people who work in jobs outside the
reservation, including at the Southwest
Indian Foundation.
The foundation, meanwhile, has invested $300,000 in a
renovated railroad station in the center of
town, last summer opening a gift store, a cafe, an art gallery
and a crafts museum.
Some outsiders, though, have cast a critical eye, questioning
whether the foundation is a
legitimate charity or a business hiding behind its nonprofit
status.
The American Institute of Philanthropy, a watchdog
organization in Bethesda, Md., gave the
foundation a grade of "F" in its latest charity rating guide.
Daniel Borochoff, president of the
institute, called the foundation "a crafty project" in the
institute's newsletter.
"Is it an employment project or just clever marketing?" asked
Borochoff.
He added, the catalog "paints a glowing picture of the
charity." "However, that glow fades
quickly when one tries to review how the Southwest Indian
Foundation is actually spending its
money."
Borochoff said that the foundation had not responded to
repeated requests for detailed financial
statements. The one-page statement of accountability that the
foundation sends to those
requesting it doesn't provide enough information for a good
analysis, he said, and it lists the cost
of buying and selling jewelry as an "employment project" under
"program expenditures."
Borochoff contended that the jewelry expenses should be listed
as "costs of goods sold" and be
deducted from net revenue, rather than listed under charitable
expenses. And in fact, that is how
the jewelry business is treated in the forms that the
foundation must file with the Internal Revenue
Service to report "unrelated trade or business income."
How the jewelry expenses are accounted for, the foundation
says, goes to the heart of its
mission: to provide employment for native artisans. "This is a
philanthropic charity," said
McCarthy, "but at the same time, there is a business element
that drives the energy. "The amount
of money that's being infused into our economy and the
reservation economy in direct cash to
artists and artisans is significant."
In its 1997 financial statement, the foundation reported
spending $5.3 million on "program
services," including only $1.8 million for charitable
programs.
Indeed, the remaining $3.5 million was attributed to its
employment project, that is, the catalog:
$2.3 million for buying jewelry and crafts from local artisans
and $1.2 million for costs attributed
to managing a business that sells some 250,000 pieces a year.
The foundation spent $3.6 million on "supporting services" --
fund-raising, management and
overhead. Its payroll last year was $1 million. The foundation
says its spending on its catalog has
helped the foundation's revenues grow from $2.2 million in
1987, to $10.4 million last year.
In the last decade, the foundation says, its income from
jewelry sales shot up more than tenfold,
and its total revenue rose more than fourfold. Spending on
program services has risen threefold,
but spending on charitable programs -- other than the jewelry
employment project -- has
increased only 32 percent.
Still, McCarthy said that each year the foundation has had
more money to spend on social
services and that its base of donors and buyers had grown from
around 50,000 in 1987, to
about 80,000 last year.
The ratio of revenues to expenditures is within the guidelines
of the Council of Better Business
Bureaus, which recommends that a charity's total fund-raising
and administrative costs not
exceed 50 percent of total income.
"I don't see anything of particular concern," said Bennett
Weiner, director of the council's
philanthropic advisory services, which is analyzing the its
statements.
Other experts note that customary guidelines don't always
assess the impact of charities like the
foundation.
"A lot of nonprofits are hybrids," said Ann Kaplan, research
director of the American
Association of Fund-Raising Counsel. "To me, this looks like a
good organization. They're not
making a huge profit on selling jewelry. They're using that as
a way to reach out to other people."
The Southwest Indian Foundation occupies an old two-story
brick building in downtown Gallup,
a dusty windblown strip of a town, with service stations,
motels and Indian jewelry and curio
shops strung along the old Route 66.
Staff members, mostly people from the reservation, work in
half a dozen cramped rooms, taking
orders on the telephone, processing thick bundles of mail
orders and contributions, entering
customer information into computer files and sending out
merchandise and thank-you letters.
The rooms are stuffed with boxes, bubble packaging and shelves
onwith more than 300 items of
jewelry, pottery, clothing, books and compact disks.
The foundation was started in 1968 by the Rev. Dunstan
Schmidlin, a Roman Catholic parish
priest who raised money to build bridges and dig wells in
remote villages on the Big Rez and to
open shelters in Gallup to keep homeless alcoholics from dying
of exposure.
In 1988, the foundation board hired McCarthy, who switched the
organization to a fast track.
He decided the foundation's mission could appeal to a much
wider audience than a traditional
Catholic base.
Like other sophisticated direct-mail operations, the
foundation keeps detailed records of each
donor's history of purchases and contributions. Both the
catalog and the fund-raising appeals
feature stories about the people who benefit from the
foundation's work.
The foundation works with a few individual artists, though
much of the merchandise comes from
traders and wholesalers.
"Our jewelry is mass-produced but it's handmade," said Tom
Elefson, the catalog director. "The
artists who make one-of-a-kind pieces go to Santa Fe. The
people we work with are not the
great artists. They are the blue-collar journeymen who
desperately need the money. If they get an
order for 300 pieces of jewelry, they're thrilled. "
Last year, the foundation sold nearly 250,000 items made by
artisans from 16 different tribes.
In nearby Milan, 30 Navajo women work in a small factory that
churns out as many as 1,000
kachina dolls -- colorful costumed dance dolls representing
sacred spirits -- a week in peak
preholiday season. A third of those dolls are sold through the
foundation's catalog.
Julia Loley, 35 and a mother of four, makes as much as $60 a
day decorating dolls that sell for
as much as $169 in the catalog. Most of what the foundation's
employment program -- the
money it spends on jewelry and crafts -- involves this kind of
trickle-down economics.
The foundation works directly with some suppliers, even
providing seed money for start-ups.
At the Rehoboth McKinley Christian Hospital in Gallup, 15
alcoholism-rehabilitation patients
make pottery for the catalog. They are paid minimum wage in a
program designed to help them
learn work skills and move on to other jobs. The foundation
purchased the kiln and molds to
start the operation and buys all the candleholders, cups and
wedding vases the patients make.
"It's keeping me away from doing nothing and being out of a
job, which might lead me back to
drinking," said Conrad Thomas. Thomas, 36, paints geometric
designs of his own invention on
traditional Navajo vases, which sell for $69 each in the
catalog.
He is attending college part-time and works a weekend job as a
nurse assistant, but keeps up his
pottery painting.
"For a lot of people, it's just a start," said Petra Reed,
coordinator of the ceramic workshop.
"They will go on to school or find another job or go back to a
job after showing their bosses that
they're ready."
Ms. Reed, 32, was herself living on the streets and in and out
of alcoholism programs before
enrolling at Rehoboth McKinley. Now she has her own home and
her children are living with her
again. "Everything," she said, "has changed."
Copyright 1998 The New York Times Company