The Bamboo Project Blog

Crisis of Confidence in U.S. Charities

A disturbing story on the front page of MSNBC tonight about the lack of confidence average Americans have in the nonprofit system:

Americans’ charitable spirit peaks during the holiday season, but this year the urge to give is battling a strong contrarian tide – a crisis of trust born from public disenchantment with a philanthropic system that many consider disorganized, under-regulated and tainted by scandal.

A poll by Harris Interactive released this summer found only one in 10 Americans strongly believes charities are "honest and ethical" in their use of donated funds. And nearly one in three believes nonprofits have "pretty seriously gotten off in the wrong direction," it found.

This is serious on a lot of levels, not the least of which is the fact that the contributions of "average donors" to nonprofits total some $260 billion. Obviously if they're questioning what's happening to their money, we have a serious problem on our hands, particularly as we head into the holiday season when people are more likely to give.

Compounding the problem is the explosion in the number of smaller nonprofits, which further fragments donor attention. People are still aware of the large nonprofits--the United Ways, the Easter Seals--but smaller charities are left to compete among themselves for increasingly scarce resources. Not that this is news to anyone in the nonprofit sector.

This story is part of a larger series that MSNBC is producing on nonprofits called Give and Take. Through the series they intend to explore "the good and the ugly in the world of charity." The message board is particularly interesting, with the vast majority of comments coming from disgruntled donors.  Among the complaints:

• Sending a thank-you asking for another donation in the same envelope.

• A belief that nonprofits are basically "hounding" donors. "Harassing me for money makes me think my gift wasn't appreciated," reports one person.

• A perception that money is being "wasted" on frequent mailings, especially mailings that include small gifts.

• That too much money is going to administrative fees, rather than to helping people.

Nonprofits already have a tough battle with marketing and fundraising. Stories like this aren't going to help.

Collaboration Redux--What if Funders Worked Together?

Commenter Elizabeth from the Great Bay Foundation suggests an interesting twist on collaboration (scroll down to Comment #26) that I think deserves some additional exploration.

While non-profits are increasingly encouraged to form partnerships in responding to grant applications and delivering services, there is no corresponding coordination of resources on the funder side of the equation. I see this all the time in my work with Department of Labor-funded programs where it's more common than not to have several grants funding virtually the same thing, but only for the "start-up" phase, often leaving non-profits in the lurch when it comes to building up to a sustainable program.

To address this issue, Elizabeth suggests that funders should collaborate to fund various phases of a particular initiative so that non-profits are in a better position to build the capacity and infrastructure to support longer-term growth. For example, one funder might fund the "start-up" costs of a particular initiative, while another might come in a year or two later to provide resources that support expanding the idea.

What I think is interesting is that in the corporate world, for-profit companies are often able to access large sums of capital at various phases of their organizational growth through venture funding, etc. While there may be some strings attached to that funding, in general they are able to go to their "funders" and say "This is what we want to do and this is the money we're looking for to do it. Want to pony up?"

Non-profits generally don't have that option. Instead, some funder puts out a request for proposals, describing in sometimes excruciating detail exactly what they want. Non-profits are then forced to create a program that meets those requirements and tries to make it "fit" their mission. Then they get money for a year or two to do what the funder decided they should do. And if the non-profit isn't able to locate a new source of funding (which is often difficult, given that funders aren't talking to each other and they each want to put their own "stamp" on what the program should be), then the program is generally finished once the intitial dollars dry up.

I think it would be really interesting to see what would happen if funders coordinated their resources, just as they expect NPOs to do. The question is, what is the mechanism for making that happen?