This week’s “Daily Journal” guest columnist is Jana Dunkley, Program Assistant for the John Locke Foundation.
I am a strong advocate, past and current employee, and volunteer for nonprofit organizations. However, as I learn more about philanthropy I have become skeptical, if not cynical, when it comes to accountability and effective donor oversight of the industry.
One of the biggest challenges nonprofit organizations face is the ability, or rather the inability, to measure the success or impact of the services they provide. Most internal evaluations of nonprofit programs lack critical insight into their operation, lack the expertise to evaluate the economic costs and benefits of their services, and reveal information only about how many clients were served and what was learned during the process. As a result, nonprofits and their donors are facing a predicament. Without an accurate method of measuring the success of a program, how can a donor be assured his or her dollars are spent on effective services that are benefiting the community?
Philanthropy, originally the Greek word for love of mankind, is becoming a leading industry in our society. Recent statistics indicate more than 84 percent of American individuals contribute to charitable causes and organizations each year. In 2004 the nonprofit sector employed more than 12.5 million people (pdf link) in more than 1.4 million nonprofit organizations in America, with revenues of more than $1.4 trillion.
As the industry grows, nonprofit fraud is increasing — often as a result of donors who blindly contribute to causes. Roger Chapin, founder of the Coalition to Salute America’s Heroes and Help Hospitalized Veterans, was recently exposed for the unethical spending of donor dollars. His nonprofit organization raised more than $168 million in a two-year period to help injured veterans, mostly through direct mail solicitation. However, nearly 75 percent of the funds were used for large salaries ($1.5 million for Mr. Chapin) and special perks. Mr. Chapin spent more than $400,000 of donor dollars on a condominium and purchased a luxurious golf-club membership worth $17,000.
When the donors contributed their dollars to the cause, I highly doubt they knew more than $18 million would be used to ship the injured veterans phone cards, which report the latest sports scores for American baseball, hockey, and basketball. How is that supposed to help an injured soldier? I have to wonder why these donors did not research the organization more before giving away their cash.
While it is the responsibility of the board of directors, presidents, managers, and other staff to maintain ethical standards, distribute donor contributions, and deliver effective services, I would argue that donors can and should play a larger, more active role when it comes to accountability. After all, inefficient nonprofits are able to continue operations largely because of uninformed donors who do not seek to understand fully the mission or the effectiveness of the services provided by the organization.
When we make large, or even small, purchases we evaluate the quality of the product compared to the amount of money we must spend. There are magazines like Consumer Reports and thousands of Web sites devoted to reviewing and analyzing customer products. They use the product, evaluate its performance, and then decide if it is a reasonable purchase for you and me. We purchase the product and form our own opinions. If we are unhappy with the product, the customer service we received, or the amount of money we spend, chances are we will not waste our dollars on that product again.
In comparison, donors should do the same when contributing to charitable causes and nonprofit organizations by evaluating their performance firsthand. Any organization to which you donate money should be committed to the Donor Bill of Rights, which grants donors the rights to review financial information, to know where dollars will be contributed, and to ask questions about their donations or the organization and receive honest answers. If a donor is unsatisfied with a nonprofit’s services, distribution of funds, or efficiency he or she can halt their donations.
I have found that volunteering with an organization before making a donation helps determine if the organization is worthy of receiving my dollars. Volunteering allows one to work directly with the staff, to measure her own capabilities and commitment, and to examine the process and results of the services the nonprofit delivers. Through volunteering I occasionally notice some organizations lack proper staff leadership to execute important tasks or that some nonprofit educational programs have serious ethical flaws. I quickly decided through volunteering which organizations were not worthy of my time, and most importantly, my money.
Donors should seek to learn about the accomplishments, goals, and challenges of an organization by talking to staff members. If the staff or organization is unwilling to participate in the conversation, then donors should be prepared to walk away. Savvy donors do not respond to every organization that seeks their help; they spend time researching the one or few organizations devoted to causes important to them and their families. Once savvy donors make their decision and contribute to their cause, they should follow up with donor intent to ensure their dollars are being allocated as they wished.
Our society has lost philanthropy’s original meaning — love of mankind — and replaced it with nonprofit fraud. The industry needs to restore its meaning, and we need savvy donors who can help. Whatever your cause, before whipping out the checkbook with an eagerness to serve the public good I urge you to become a well-informed donor. Research your causes, read up on programs the nonprofits are providing, talk with the staff, volunteer to help with special events, and play a larger role in nonprofit accountability. Unethical nonprofit leaders are wasting charitable dollars. Informed donors can help eliminate fraud, minimize the amount of dollars contributed to inefficient nonprofits, and restore the original meaning of philanthropy.