Hi,
In class last night a couple of pressing question came to mind that I wish to pose to all of you.
Quite a few years ago someone said to me that philanthropy was both a leading and a lagging economic indicator. If you are unfamiliar with the terms - basically, philanthropy slows well before an economic downtown, and then is one one of the last things to start up again after the economy recovers. Also, for definitions of terms look here: http://www.investopedia.com/ask/answers/177.asp
With this latest deep recession (depression?) I observed my organization to see if this idea held true, and tried to talk to other colleagues at other organizations to get their perspectives. In my opinion it is an accurate description. Although, when dealing with high net worth philanthropists they tend to recover more quickly than others, so my observations may be slightly skewed. First questions - do you agree, or what has been your observation? And, how does this effect management priorities as fundraising drops or rebounds? Is it different from how private company management would respond to economic downturns and recoveries?
One thing that I have also found in the non profit sector is that many donations and grants are made as restricted funds - in other words specifically designated for a purpose to be used as the donor intended. Unrestricted funds can be used as the organization sees fit, and often go towards funding overhead costs. Many people do not wish to subsidize the salaries of people, but rather prefer to provide "help" directly to a cause. As fiscal years draw to a close what I have seen and heard described is that in order to ensure spending of restricted funds organizations will actually find ways to spend the money down in compliance with donor intentions, or in extreme cases, go back through and falsify documentation to make it appear that money was spent as donor intended. Have any of you seen or heard of these things happening?
After considering these questions and responses, are non profits and private sector organizations extrememely different? Does it change the way you thought about it last night after class?
In my opinion both are inherently similar, even after considering the nuances - at the end of the day it is about the money. Whether it be profit or fundraising dollar, management is about maximizing the generation of and most effecient use of the dollar. Do you agree or disagree?
-Ken
I think you raise some interesting points and questions. I have worked for a large medical relief organization that although has always respected a donor's wish to earmark the funds to a program/country, also successfully stressed the importance and the flexibility that comes with unrestricted funds. I think the way those funds are spent depends on the organization. I can tell you that following the Tsunami in Southeast Asia a few years back, we were overwhelmed by donations earmarked for that disaster - so rather than absorbing the donations and struggling to find ways to spend $, we called our donors (lots of them) and gave them the option of either de-restricting the funds or having their donation returned. Most were more than happy to put their $ toward the general funding - but the actual notion of contacting donors and giving them that option is not exactly common. I would think (and hope) that a number of measures are in place today to ensure transparency and therefore make it nearly impossible for nonprofits to in essence scam donors by falsifying documents. I know that is the case with foundations in particular.
ReplyDeleteValeria Bonanome
I left the private sector for the nonprofit because I wanted to be part of the social good. I don’t think that the two are the same at all. I’m sure that there are some nonprofits that are unscrupulous, just as there are some companies that cook the books, but I would like to believe that it is the rarity not common place.
ReplyDeleteI’ve worked with charity: water, a nonprofit that provides clean, safe drinking water to people in developing nations. They have only been around for four years and yet last year they celebrated their highest year for fundraising. Its founder and CEO, Scott Harrison, is great at fundraising. It also helps that they have a lot of celebrity supporters.
One thing that they do, which I am most impressed with is that 100% of the money donated by the public goes to water projects. They are able to do this because they have corporate and private sponsors who have committed to paying for administrative costs and the merchandise that they sell goes to cover administrative costs as well.
Catherine Crawford