Encouraging Charitable Efficiencies More Charitable Than Discouraging Nonprofits
Filed by: Guest Blogger
December 23, 2009 10:30 AM
Editors' Note: Guest blogger Tod Hill is the Vice President of Marketing & Business Development for the Tides Center
In a recent article entitled Charities Rise, Costing U.S. Billions in Tax Breaks, Stephanie Strom of the New York Times raises concerns about an out of control nonprofit sector that is flooding the IRS with frivolous new applications to establish new public charities that will deprive the federal budget of billions of dollars.
She demonstrates her point by citing new groups such as Save Your Ass Long Ear Rescue, working to save donkeys from cruelty; new chapters of the Sisters of Perpetual Indulgence, a group of cross-dressing nuns raising money for AIDS treatment, and the Red Nose Institute, a group of trained clowns trying to bring relief to US troops abroad by distributing clown noses.
While I can't speak to donkey cruelty or clown humor, one of Strom's examples - Sisters of Perpetual Indulgence - is a misguided target. Back in the 80s when the federal government was notoriously silent on AIDS, the Sisters of Perpetual Indulgence, through humor and street theater, were at the cutting edge of AIDS prevention efforts and literally saved lives. As such, it's a wholly positive move that their efforts are spreading to the heartland and their progress should be applauded, even if their methods seem less conventional to the average New York Times reporter.
Is Strom suggesting that playful and entertaining nonprofits ought not receive 501(c)(3) status, even though they are providing a well-demonstrated public service? Just like for-profits, (think: Apple), the Sisters of Perpetual Indulgence are successful because they are great marketers, and it's puzzling to suggest that nonprofits can't be both effective and light-hearted at the same time.
To Strom's point, there is surely potential waste in creating thousands of new nonprofits every year. But the problem is not people's motivations - it's that not nearly enough people know about the alternatives to establishing nonprofit organizations. Alternatives like fiscal sponsorship and donor advised funds are two highly effective ways to make your charitable activities more cost-efficient and less time-consuming.
If you're raising funds for your favorite cause, for example, you don't have to go through the hassle of establishing and managing a brand-new nonprofit. Instead, talk to your local community foundation or a grant making intermediary to create a donor advised fund or a collective giving fund.
And if you're looking to fill a need in your community, look to fiscal sponsorship as a solution instead of creating a brand-new nonprofit. Fiscal sponsors provide their projects with all of the financial, human resources and governance infrastructure of a well-managed nonprofit, allowing activists and social entrepreneurs to focus their attention on the content and mission of their work, not the administrative and regulatory details.
The nonprofit sector is a sector of innovation, creativity, and people for the common good. If we want to create greater capacity for the IRS to monitor nonprofit activity, improve efficiency in the charitable sector, and continue to support the social innovation and dedication of the American people, raising the visibility - and availability - of alternative structures like fiscal sponsorship and donor advised funds will go a long way towards helping those with passion, ideas, creativity and access to resources achieve their charitable goals most effectively.
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There's a reason why what you term the nonprofit sector is often referred to as the non-profit industrial complex - even by those who work in it. Originally meant to provide an alternative form of funding AND meant to make itself disappear once we achieved a more equitable society that would not require its existence, it has since become a fiscal behemoth and is as exploitative (ask anyone who works for one and who isn't in the top tier of management) and cumbersome as the for-profit sector.
There's an entire book on the subject, and you can see my review of it here:
http://www.windycitymediagroup.com/ARTICLE.php?AID=17715
I think we are finally reaching a stage when we realise that attaching the word "non-profit" to an organisation does not guarantee that its aims are actually different from a for-profit. And that increasing charity might make us feel good about ourselves, but it also means that we're multiplying the reasons why we need charities in the first place - and that's never a good sign.
As for the Sisters, my understanding is that they are no longer what they once set out to be. Mattilda Bernstein Sycamore wrote about in her blog, cross-posted here at Bilerico:
http://www.bilerico.com/2009/06/pink_saturday_party_or_police_state.php
Interestingly, the commenters there affirmed what she had to say and there were no cries of indignation from the Sisters. Perhaps you could shed more light on the issue, given that you have spotlighted them in your blog above? I'd be curious to know more.
Yasmin Nair | December 23, 2009 11:11 AM
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Yes, a "non-profit" is merely a corporation whose stated purpose is something other than to make money for its stockholders. They can pay enormous salaries and perks to their administrators, and within limits, they can retain incoming donations without disbursing them to further the cause the organization was intended to address.
My elderly mother recently has been the target of a charity scam. She unwittingly gave her credit card number to a charity that supposedly feeds impoverished children living on Indian reservations. She authorized a small one-time donation, but shortly thereafter she had three different Indian groups, each charging her credit card every month for up to $125 a pop! When we called the 800 number for the organization in an attempt to cancel whatever charge authorization they might claim to have from my mother, we were told that the accounting system was not maintained at this number, and the representative gave us ten different numbers that we should call, claiming that the right number was one of them but she didn't know exactly which number was the right one.
I researched one of these supposed Indian charities on the Internet, and found an auditing statement filed with a state attorney general's office showing that they had a "cash reserve" of about $27 million!
Needless to say, I helped my Mom change the account number on her credit card account.
A. J. Lopp | December 23, 2009 12:09 PM
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I think we need much more accountability for non-profits. Too many people donate without an understanding of the effectiveness or efficiency of an organization, or an honest appraisal of their strategies/plans.
The Writer's employer, Tides Center scores only a 59.78 (out of 100), with high administration and fundraising costs at CharityNavigator.com
Many of the LGBT Non-profits score poorly. It is time to re-evaluate our organizations and make sure our resources are used wisely and efficiently. An actual strategy to achieve our full equality would be nice, too.
AndrewW | December 23, 2009 11:55 AM
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In fact, Tides Center earned 59.78 out of 70, or 3 out of 4 stars overall, on Charity Navigator, with 4 out of 4 stars on fundraising efficiency. That took about 2 seconds to research. Get your facts straight or don't post.
Enid D | January 5, 2010 6:42 PM
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The Right will take this and run with it, pushing for restriction of tax exemptions to evangelical causes. Watch and see...
MauraHennessey | December 23, 2009 12:39 PM
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Maybe I'm missing something, but it seems like donor advised funds just add a layer of administration. Paying an outside agency to do what a good board should be doing seems counter productive.
Along the lines of what both Matilda and Yasmin are saying, the first thing I learned in a grant writing class was that the goal of a non-profit is to put itself out of business. Mission creep and ego are what lead to the non-profit industrial complex.
Greg | December 23, 2009 12:45 PM
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