The soul of philanthropy: when giving becomes receiving

Michael L. Wyland of Sumption & Wyland consulting has written an op-ed piece on Argus Leader (dot-com) under the unassuming title of "Accountability changes philanthropic landscape" that perfectly expresses what I'm sure so many of us have been thinking for years.

The opening paragraph reads:

"There has been a major change in philanthropy in recent years. Accountability and impact are increasing the demands placed on charities because the purpose of charity from the donor's perspective has changed. It's become acceptable, in the name of accountability, for philanthropy to be about receiving rather than about giving. Hypervigilant and misapplied accountability risks killing the soul of philanthropy upon which charities rely for support."

I will add to that the charge that this hyper-vigilant accountability is killing the ability of small, local, and grassroots nonprofits to operate at all. The costs of compliance are out of line with the costs of providing needed services, leaving these organizations no options but to either merge with a larger organization or close their doors.

As Mr. Wyland states, the IRS, and all the various nonprofit watch-dog groups that analyze our IRS filings, all base their evaluations on data that is "overwhelmingly financial in nature... As long as every transaction is documented and as long as no one's enriching themselves at the charity's expense, the IRS and the watchdogs are satisfied."

But what happens to the small nonprofit whose administrative expenses seem too high only because of an effort to comply with all the data collection, analysis, and reporting requirements of their funders? The same funders who will then use that nonprofits' high administrative expenses as a reason to discontinue funding them.

In another recent post here, I called out Paulette V. Maehara (president and CEO of AFP) for admonishing nonprofits to "put the needs of donors first." I believe that we've coddled and begged and babied the donor foundation long enough. We need to educate them about the needs of our clients, and how they are best served by locally provided community-based nonprofits, and, perhaps, on the true definition of the word "charity."

Why Web 2.0 is important to small local nonprofits

There's lots of talk about how nonprofits should be using "Web 2.0" - interactive applications, two-way online communications, user generated content, "social media," etc. - perhaps so much so that it can be bewildering to smaller, grassroots organizations who are just struggling to get the word out locally and are wondering what they need with a World Wide Web.

The key for these organizations to remember is to ask how each of these applications relate to their on-the-ground strategy, and how to tie it in with what they are already doing.

Using video as an example, having a video on YouTube can be wonderful exposure, and you may actually inspire a donation or two from somebody in a different part of the country, but the real reason why you should be producing a video is to update your communications with your existing constituents.

Think of how much more powerful your board members will be in asking their networks for donations when they're always carrying around a DVD with your four minute video in their purses and briefcases. Much more effective than a few wrinkled brochures and far more appealing than your tired old PowerPoint presentation.

And, yes, that video should be posted on a public site, such as YouTube, but not because YouTube alone is going to attract donors to your cause, but because having YouTube host your video for free, and then using their embedding code to place it on your own web site, will both save you on your hosting costs and make your site more interesting and compelling to visitors and potential donors.

Blogging is important, not because it's the new hip trend (and frankly, it ain't that new anymore), but because it gets you in the habit of communicating regularly with your constituency - far more frequently than you ever could with newsletters and appeal letters - and is, again, far more cost effective than paper and postage.

It doesn't matter that your blog can be read around the world; target your message to your community and your key audience. They'll appreciate the immediacy and the transparency of these communications and reward you with more loyalty than ever before.

RSS feeds of your blogs, videos, etc., allow the people who care about your organization and your issues to receive, read, and act upon your communications in the manner that works best for them.

In each of these examples, the idea is not how Web 2.0 and new media can suddenly make a local grassroots nonprofit into a global powerhouse, it's about how these tools can be used to better communicate with, and expand, the base that you already have.

Yet more on percentage-based fundraising - AFP ups the ante

Just other day I posted an email exchange I had in which my correspondent argued that, contrary to what AFP (Association of Professional Fundraisers) and others may say, there are times when when contingency or percentage-based fundraising fees may actually be more ethical than flat fee or hourly rates. The argument was essentially that small organizations (indeed, most any nonprofit) can ill afford to pay up front for grant writing or other fundraising services that may or may not result in donations or grants to the organization. The impact of such charging, according to my anonymous letter writer, was detrimental to the sector.

Well, now the AFP has upped the ante in this ongoing discussion, by trying to raise it from being an ethical question, to being a legal one. AFP has now renewed it's call on Congress to officially ban the practice of all percentage-fee based fundraising. This comes on the heals of AFP conducting a survey in which they found that the organizations with the highest fundraising costs were those that paid their fundraisers by percentage.

According to Paulette V. Maehara, CFRE, CAE, president and CEO of AFP:

These are causes that are near and dear to the hearts of all Americans, but the public's generosity is being abused. Congress needs to act to ban percentage-based fundraising so that the public can rest assured that charities and their fundraising firms are putting the needs of donors first.

Now, let me reiterate, that I have always followed the AFP code, and have never charged a contingency fee for grant writing or any other services. But let's take a look at the last few words of that paragraph: "... [put] the needs of donors first.".

Donors first, eh? Not the sustainability of the nonprofit organizations that don't have the cash-flow to pay upfront for fundraising with no guarantee of success? Not ... oh, I don't know ... the clients and communities served by the nonprofit sector?

Again, I still believe that a set fee for services is the proper way to go in most situations, but more and more I'm convinced that a compromise can be reached where nonprofits are not bankrupted by fundraising costs, and contingency fees, with set caps, may be used that meet the needs of everybody involved.

And I also firmly believe that it's about time that donors put the needs of nonprofits ahead of their own.

A different point of view...

One of the most popular posts on this blog is one the earliest. It is also the one that seems to upset the most people. I'm referring, of course, to my posting on nonprofit grant writing fees versus commissions. In that posting, I explained why I follow the AFP Code of Ethics and refuse to write grants on a contingency basis.

Many people have written to me, or commented on the posting, that they don't understand why contingency payment is bad, and I've tried to explain and re-explain the AFP position (see the links for details). It's not that contingency payment is illegal, it's just against the industry standard, considered an ethical violation by many, and (perhaps most important) frowned upon by the very funders that we're applying to.

But, so far, nobody has given me a compelling reason to question that position. Until last week...

Here's an excerpt from an email conversation I've been having (since it involves a potential ethics violation, I'm keeping the author anonymous - if the author wants to take credit in the comments, that's up to them):

I'll add some comments on the "ethics" of contingencies. Standards set up by grantwriting boards and societies are generally self-serving. Many of the ministries that I support cannot afford Ph.D level research and writing but their causes do merit funding. For example, I am working with a group building a rap studio for positive, drug-free support in one of the most crime ridden neighborhoods in Minneapolis. They don't have the money to risk $50-75 per hour on grants that may not get funded.

Our resolution is to bill at $20 per hour which they can afford, and then bill at $75 for time after the award, if and when it comes. Quite frankly, the discussion of ethics that I have researched regarding these issues have all centered around putative issues of the appearance of integrity on behalf of the grantwriter (is it or is it not a kickback) and no dialogue has been forthcoming about the IMPACT our services have on the organizations we help support and the clients they serve.

Clients that can afford to pay full scale on the front end are billed in this manner, but those that cannot should not be ignored in the funding process because of self-serving billing practices developed by "grant writing professionals." If that is the standards developed by these societies then I will take the position of Groucho Marx, "I wouldn't join any club that would have me as a member."

I certainly cannot dispute the self-serving aspect of the AFP code; after-all, I need to pay my mortgage and bills and can ill afford to wait months on payment for my work - a payment that may or may not ever materialize.

But I certainly hear the point about the impact on our clients loud and clear. This is not something I've been blind to, and have felt guilty and shamed in times when my work for a client has not immediately resulted in grants that far exceeded my fees. This frustration is part of why I've lately been trying to minimize the amount of grant writing I do as opposed to other services.

I still feel there are valid points to the AFP prohibition against contingency fees, and until the funder community comes to a consensus to the contrary, the grant writers are not likely to change their practices.

But what about those smaller nonprofits that can ill afford to pay for fundraising upfront? How does a startup start up if they cannot raise those first dollars on a contingency? In a very real way, our insistence on the purity of our image is yet another roadblock that grassroots organizations face in their struggle to serve our communities.

Do healthy neighborhoods require nonprofits?

Wednesday morning I was at a "study session" for grantees of San Jose's "Healthy Neighborhood Venture Fund" (HNVF) to review their new strategic plan. HNVF money is a result of the tobacco settlements, and San Jose has been using the majority of their funds ($10 million) to make grants to nonprofits. Of course, whenever the city's budget comes up, there are those who suggest that the city could better use the HNVF money by adding it to the General Fund and spend it all within city departments.

Back to the study session... part of the agenda was to get together in smaller break-out groups to brainstorm things they may have left out of the implementation plan. The leader of our group asked if we thought that the plan should specify the percentage of HNVF money that would go to nonprofits. Of course, the nonprofit agencies present all thought that would be a great idea. And, of course, the woman in our group from the city library thought it would be a mistake.

My point for putting the percentage into the plan (and taking it out of eternal threat from the General Fund) was not simply self-interest. What I said seemed like common sense to me, but came as a surprise (if a pleasant surprise) to the rest of the group.

My point was this: Putting a commitment to fund nonprofits into the HNVF strategic plan would make a statement that Healthy Neighborhoods require a diverse and vibrant array of community-based nonprofit organizations. And, conversely, that a neighborhood where the providers of needed and desired social services were closing their doors due to lack of funding, is unhealthy.

I would not have made the same statement if the meeting had been for some other city funding source. But it seems to me that supporting local, community-based organizations should be have been a top priority of any "Healthy Neighborhoods" initiative.

Am I asking too much? What do you think?