Cause for alarm? The California A.G.’s “naughty list” of commercial fundraisers

Over the weekend, I received two intriguing emails from William Ishmael, the president elect of the Sacramento Tree Foundation Board member who has been busy inviting friends to contribute to the “re-greening” of Sacramento through the planting of 5 million trees by 2025.

In the first email, he asked what I made of the recent report released by California Attorney General Jerry Brown’s office, which found that only 43.6% of donations raised by commercial fundraising companies made it to the charities for which the money was raised.  In the second email, he had just caught the January 2nd KQED Forum interview of Dan Pallotta, author of “Uncharitable,” whose private consulting firm created the AIDS rides and 3-day breast cancer rides and who has been the target of scathing criticisms for profiteering.  Pallotta challenges the assumptions that people who run charitable organizations shouldn’t make good salaries and shouldn’t advertise aggressively.  In fact, Pallotta says, the missions of these organizations might be better served if their leadership followed more traditional business practices. 

William has fallen down the rabbit hole of philanthropic metrics, a world in which up can look like down — and vice versa. 

There’s two perspectives here:  what’s good for the non-profit, and what’s good for the donor.  If you’re worried about how well your donations might be put to use by a charitable organization, I propose three steps you can take to reduce your anxiety (see bottom of post).

What’s good for the non-profit may be good for its mission

There may be instances in which a non-profit has a good cause but little access to staff or volunteers who can “farm” for new donors or shake the trees (sorry, bad pun) for lapsed members or donors.  In that case, you could argue that some money raised would be better than no money raised.  Organizations shouldn’t assume, however, that because they don’t bear the risk of the investment in the tactical campaign, they don’t face a potential cost.  For example, one Sacramento charitable organization may have suffered some damage to its reputation when Sacramento Bee subscribers read that the organization had received less than half of the money raised by a commercial fundraiser that re-upped people with lapsed memberships.  It’s not much of a step for donors to start to question any of the solicitations they receive from an organization that showed up on the Attorney General’s “naughty” list, even if the solicitation turns out to be directly from the non-profit and not the “naughty” commercial fundraiser.

The onus is on the non-profit not only to critically shop commercial fundraisers and validate their numbers with happy non-profit customers, but to consider the risk to their reputation if a fundraiser keeps too much for its own overhead or profit.

What donors should care about

What should donors care about most:  whether their dollars go to direct service, with little skimmed off; or whether the organization is making a real impact?   There are steps that donors can take if their primary concern is providing money for direct service (I’ll get to those in a minute).  But too much focus is placed on non-profit overhead ratios – and that focus on low, low overhead can actually limit organizations’ effectiveness.  Lucy Bernholz pokes holes in this traditional means of measuring the effectiveness of non-profits by noting:

“Think about it this way – in what other area of your life do you deliberately seek out the product, service, location, or experience that is being made available in the cheapest possible fashion? We don’t pick restaurants because they forgo cleanliness, we don’t buy clothes we think will fall apart, we don’t choose schools for our kids because the administration is keeping costs down and not supporting teachers, and we don’t make travel arrangements because we know the airline we’ve selected skimps on maintenance.”   

 

  1. In the words of my old boss (and my mother, for that matter), “Do your homework.  Start by asking people you know who are involved in community service.  I want to hear that a cause or organization has attracted some people who I know to give or get involved.  I like to look at publications or visit the operation to get a sense of the organization’s bonafides.  Check out charitynavigator.org or guidestar.org for similarly-formatted information about the organization you’re considering supporting (but heed the caution about relying on administrative ratios as an indicator of organizational effectiveness).
  2. If you don’t have the time to check it out, find a resource that will do the homework for you.  United Way has updated its workplace campaign approach to enable people to give directly to projects they care about, and it has established aggressive goals for insuring more kids, preparing foster youths for independent lives, preventing child abuse and getting more kids to finish high school.  Follow this link to the Capital Region info as an example.
  3. Look at organizations that practice “endorsement philanthropy” defined by Lucy Berholz as occurring “when institutions, such as foundations, make a deliberate effort to promote and stand behind the organizations that they have selected to fund”… (and when) “a trusted entity shares both its process for decision making and its own decisions, gets some real information to those who can use it..”    Check out foundations whose work you admire, or some of the online donor marketplaces that select organizations and projects, such as socialactions.com (which is actually an aggregator), change.org and kiva.org.  My only concern about many of these online donor marketplaces is that they focus primarily on global giving.  I give globally, too, but I have strong feelings about involvement “right here in River City” (Sacramento).
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One response to “Cause for alarm? The California A.G.’s “naughty list” of commercial fundraisers

  1. Great post.

    Dan pallotta