I entered the world of charitable giving on March 1, 2002, at a warehouse in a dingy industrial park at Tysons Corner. I was the new president of the Herb Block Foundation and this was my office. The day before, I had retired from The Washington Post, where I worked as an editor and reporter for the last 24 years of my 42-year career in journalism. That's where I met Herb, better known to the world at large as "Herblock," the paper's legendary editorial cartoonist.
Herb died Oct. 7, 2001, just a week short of his 92nd birthday, leaving a legacy of political courage; a warehouse full of awards, trophies and papers; and more money than anyone had ever imagined. In his will, after taxes and gifts to friends and organizations, Herb left more than $50 million to create a foundation for scholarships and charitable giving. He named 18 of us to the foundation's board of directors, unbeknownst to most of us.
The nice thing about getting started when you have $50 million is that everyone wants to help you, they all couldn't be nicer. When you're in the business of giving money away, everyone tells you you're handsome and thin and you don't have to wear a necktie. It's nice, but we didn't even know that much yet.
We were a band of complete amateurs charged with the task of starting a charitable foundation from scratch; disposing of some 14,000 original Herblock cartoons, which were stored haphazardly in the basement of Block's Georgetown home; creating a Herblock Prize for editorial cartoonists, to help burnish his memory in the minds of future generations; and giving away millions of dollars a year to worthy charities.
But first there was the matter of finding a downtown D.C. office and then buying or scrounging enough furniture and equipment -- computers, telephones, copying machines -- to operate the foundation. We also needed to determine appropriate salaries for a staff of four, find an accountant and a payroll firm, sign up for liability insurance for directors and officers, create a Web site and hire an investment adviser to handle our money.
The paid staff of the foundation included myself; Executive Director Jean Rickard, for decades Herb's executive assistant; and Sarah Armstrong and Marcela Brane, both of whom serve as program officers. In addition, Sarah is secretary to the board. All four of us are members of the board hand-picked by Herb. We were the coalition of the willing; only time will tell how able.
The key ingredients to our success that first year were common sense and a good law firm. Fortunately we had both, although it still wasn't easy.
In the early 1980s, Herb hired the law firm of Caplin & Drysdale to handle his estate and set up the legal framework for creating the foundation. The Caplin of Caplin & Drysdale is Mortimer Caplin, the Internal Revenue Service commissioner in the Kennedy administration and the man blamed for taking on the three-martini lunch as a business expense.
For much of the first year I received an expensive lesson in the meaning of "billable hours" with repeated calls to the law firm for advice and sometimes for simple handholding.
Finding an office was simpler. Our first year was spent in a sublet in a Class A building (that means the water in the lavatories turns on automatically) in downtown Washington, nestled between George Clooney and his short-lived "K Street" television production operation and the College of Pathologists. Our furnishings: about $1,000 worth of stuff from Ikea and castoffs from The Post. We subsequently moved to a larger but cheaper office in an older building on M Street NW.
The next and perhaps most significant step was changing the mind-set of the board, something we managed to do with civility.
Almost everyone on the board of directors had worked with or for Herb at The Post, and we were all used to seeing him do whatever he wanted with his money. He could hire his cousin to fix the bathroom drain and pay more than the going rate without giving it a second thought, and he could throw lavish parties on a whim. (He never did.) But now, after putting the money into a largely tax-exempt charitable foundation, the rules of the game had changed. The money he left to create the Herb Block Foundation was no longer Herb's money; it was the public's money. That was the price for receiving the tax breaks of a charity, a so-called 501 (c) (3) corporation, named after the section of the federal tax code under which it was created. This came as a shock to some members of the board, but it was an important lesson if we were to carry out Herb's wishes creditably.
Salaries at the Herb Block Foundation could not be excessive; we set them by determining what executives of similar-size organizations got for similar work. Compensation for each job had to fall within a range or the foundation risked a visit by the IRS. The same for self-dealing. Boards that give out contracts that benefit a board member -- like hiring the cousin to fix the bathroom drain at higher than the going rate -- risk heavy penalties for "self-dealing." The list of do's and don'ts goes on, but those are two of the big ones.
Lawmakers at both the state and federal levels are taking a hard look at abuses by family foundations. Some families, seeking to shelter some of their fortune from taxation, have been known to appoint members of their family to the board of directors and then hold their board meetings aboard cruise ships. One newspaper account a few years ago told of a father who used money from his family foundation to give his daughter a million-dollar wedding.
The Herb Block Foundation is not a family foundation, but its structure is reasonably close. And like many small foundations, we already are warily watching events in Congress, where one proposed solution to the abuses of family foundations is to have them go out of business after a fairly short period of 10 years or so.
Herb in his will, and our board by its vote, intend to create a perpetual institution that will grow in size and continue to do good work in the future. So it is incumbent on us to make our case through our actions of giving.
That said, we first had to decide where to put Herb's archives, including 14,000 original cartoons. Herb wanted them to be seen by scholars and the public alike. After several months of negotiations we reached an Agreement of Gift with the Library of Congress in which we would pay $1 million for the conservation work to protect his original cartoons in exchange for a permanent exhibition room adjacent to the Library's Swann Gallery.
As part of our effort to keep Herb's image and the views he stood for in front of the public, we also established an annual Herblock Prize for editorial cartooning, which we hope to make one of the premier awards in its field. The first prize was awarded last March to Matt Davies of the Journal News in Westchester County, N.Y. A month later Davies won the Pulitzer Prize for his work. We were off to a good start.
We combined the prize ceremony with an annual lecture at the Jefferson Building of the Library. Former Washington Post Executive Editor Ben Bradlee, who helped propel the paper to national prominence, delivered the first lecture. Ted Koppel of ABC News will deliver the lecture next March.
In his will, Herb set forth a number of suggestions for charitable giving, all of them broad and none of them so specific as to be constraining. Throughout his 72-year career, Herb was a champion of social causes. Herb also called on the foundation to give scholarships, but here he was very specific in his wishes: Scholarships must go toward post-secondary education, be it vocational training or academic.
Concluding that community colleges are the most underserved institutions of higher learning, this fall the foundation announced the Herblock Scholarship program for community college students in the immediate Washington, D.C., area. We hope to be able to award as many as 60 scholarships a year based on financial need. The foundation has contracted with ETS in Princeton, N.J., to independently administer the program, including selection of the winners. We hope we have made the program as broad as possible, including C students who have shown improvement over the course of their high school careers. If, for example, a young immigrant student arrives at high school barely speaking English, he or she probably won't have good grades in the early years. By the time that student is a senior the grades may be A's, but the grade-point average could still be low. Such as person too would be eligible for scholarship aid.
If it seems that starting a foundation means hiring a succession of consultants, it does. Soon after our first board meeting we hired a consultant to run a one-day retreat for the board to help us set an agenda for the foundation. That step resulted in our mission statement, which essentially says all our efforts will be in keeping with the "spirit of Herblock" in a lifetime of fighting for the underdog and against the abuses of the powerful.
A second consultant helped the staff develop an agenda for making grants. We wound up with a schedule of basic grants: Defending Basic Freedoms, Pathways Out of Poverty and Encouraging Citizen Involvement.
Because our scholarship program didn't begin until the start of the 2005 academic year, we spent $1.5 million on grants our first full year of giving, which ended Sept. 30, 2004. This fiscal year we will cut that amount back, at least for now, to a total of $730,000 for grants and $730,000 for scholarships.
This will be the hardest part. We advertise for applicants on our Web site. In the end, there are some we simply have to turn down.That's the hard part of giving away money -- the people you have to turn down.
We are required by law to give away 5 percent of our base assets, although the amount can be based on a rolling five-year average. The 5 percent also includes the foundation's operating expenses, including salaries, which after full start-up we hope to have no more than 20 percent of our annual budget.
And if the financial markets ever recover, we can grow our base assets, which in turn will drive up the size of the 5 percent gift-giving requirement and reduce our overhead costs as a percentage of our budget.
We are proud of our first steps. And I suspect we're going to continue to learn something new every day.