Zero Sum Pie Tastes Bitter

Posted by Laura Otten, Ph.D., Director on August 19th, 2011 in Articles, Thoughts & Commentary

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Why does the scrutiny always get focused on the charities instead of the funders?  Are the latter immune from wrong-doing or questionable-doing?  And I am sure in far too many circles, the mere fact that I’m suggesting that a funder might do wrong is blasphemous and minimally cause for tar and feathering.  After all, look what happened to Rell Grrls  when an employee tweeted about Comcast!  But two different articles, read hours apart, just got me thinking.

Go get the nonprofit!  The New Jersey Division of Consumer Affairs is in the public comment stage on a proposal that would require nonprofits to provide the means for a donor to designate funds for a particular program.  The agency’s concern?  That if a nonprofit has used a specific program as its “come on” in a solicitation pitch, a donor must be able to restrict her/his gift to that program.  No longer would you be able to tell the story of the family fed through your food cupboard and only ask for unrestricted gifts of $25, $500 and $100; you’d also have to add the option of designating the gift to the food cupboard.  (Should this get accepted, it would only apply to nonprofits who “received” $250,000 in the previous fiscal year.)

You go New Jersey! How to make a challenging situation—raising unrestricted dollars, dollars that could pay the electric bill or buy new computers or fix the plumbing or the roof, all of which are essential to distributing food from the cupboard) even more so!   While I have not read the history leading up to this proposed requirement, I can only guess:  some individual gave a gift to a nonprofit and didn’t feel as those that gift was used as s/he wanted, so s/he complained to Consumer Affairs.  And maybe that happened10 times—or even 100 times.  Given the approximate 40,000 nonprofits in New Jersey, we are talking about  .25% of the nonprofits in the state.  And there is nothing to say that these .25% did something wrong; it’s just that the donor didn’t like it.

So, now let’s look at the funders.  How does this just not stop you in your tracks?  “The United Way of Buffalo and Erie County has decided that it will stop charging a 13 percent processing fee on all contributions designated by the donor for a specific charity. ….  In total, the elimination of the fee will free up an additional $220,000 for local charities this year.”  Kudos to the United Way of Buffalo and Erie for reducing its fees and allowing more money actually to go to charities—the purpose for which people gave in the first place.  But this United Way is not the one that charges a “processing fee;” just the only one I have heard of that reduced its fee and told the story publicly.  Every United Way I know charges a processing fee, which is not to say they all do.  Do the donors know that?  Most I talk to have no clue!  Hello, Consumer Affairs?

A day or two after reading about Buffalo and Erie, another United Way reported that it had collected $48 million in its most recent campaign and would distribute half directly to nonprofits and half through its Community Impact Fund.  But how much did it really raise?  I’m betting (and the odds here are 50-50) that the $48 million was what was left after it took out its processing fee. Were all of those donors given the option to designate 100% of its gift to a specific charity or program?  Or were they told we will give 100% minus the processing fee to your designated charity?

Look, I get it.  United Way is in exactly the same boat as all of the rest of the nonprofits:  it, too, must raise or earn operating dollars.  It is the struggle all nonprofits have:  United Ways around the country can no more do their work without computers and electricity and buildings.  Yet, how sexy is it to brag to your chums that you just paid the mortgage for “Nonprofit X?” Much better bragging rights (for donors seeking that) to say, “I just paid to provide dentist visits for ten deserving children.”    So, I am totally sympathetic to United Ways’ need to raise or earn its operating costs.  And, I assume, that the United Ways, and every other funder that raises money to distribute to nonprofits, such as community foundations, throughout New Jersey would be subject to the law/regulation cited above, it passes.  But that is not the point.  Transparency is; as is fairness.

Sometimes we lump the givers and the getters into the same pool, such as the fact that we all have to file some version of Form 990 once a year.  But sometimes—and this is particularly true when it comes to lowering the microscope on practices, questionable or otherwise—we set them apart, suggesting that one is better than the other.

The opinions expressed in Nonprofit University Blog are those of writer and do not necessarily reflect the opinion of La Salle University or any other institution or individual.

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