Tuesday, July 13, 2010

Disaster Fundraising

On NPR this morning Carrie Khan and Marisa Penaloza report that "the charitable outpouring for Haiti has been huge. To date, Americans have phoned, texted and mailed in more than $1.3 billion, according to The Chronicle Of Philanthropy. Much money was spent on immediate relief, but hundreds of millions of dollars remain in the coffers of nonprofit organizations from the American Red Cross to Oxfam."

First of all that is a tremendous outpouring of generosity illustrating once more that Americans are exceedingly generous and compassionate, second modern technology enables a lightning philanthropic response but third it is essentially impossible to move that much money through the turnstiles effectively and efficiently.

The hare's speed of dollar acquisition versus the tortoise's pace of distribution is an old story in philanthropy and it has tripped up the Red Cross - as one example - more than once. When part of the Oakland-San Francisco Bay Bridge collapsed in October 2009 and Katrina in August 4 years ago, the Red Cross was inundated with money. They sat on a lot of it, and in the Oakland case, re-distributed a portion to other disaster relief reserves. In Katrina the public outcry compelled them to assure donors their money would stay in Louisiana. Did it? How could you know?

One can argue that it is better to have it and not spend it than it is not to have it at all. Whether charities are sophisticated and efficient in handling money is not the issue. The end use of charitable funds raised in a disaster setting is always a challenge. Having worked in Haiti, India, the Philipines, Thailand and elsewhere - in non -disaster situations - what I learned is that there are really not enough troops on the ground - either nationals or imports - to oversee the good use of donations, nor enough good management for real oversight and the charities themselves are not held to strict standards of accountability by independent entities.

All that said, and allowing for the enormous challenges Haiti and other disasters pose charities must be held accountable for the stewardship of all funds - those on reserve waiting for distribution, and other funds in their possession. As the NPR report makes clear there is no real oversight of charities' finances. The Form 990 that all non-religious charities have to file annually are not fonts of information. For one thing they are often late (extensions are automatic); they are most easily accessed on Guidestar (forget the IRS directly) but those reports are, on average, at least 2 years old. Charities' annual reports are not required to show finances. Many don't, others offer condensed pie-chart types of reporting, and because there are really no rules trying to compare one charity to another is well nigh impossible. A few private sources like Charity Navigator "rate" charities but neither this group nor the few others I know of can cover all of them.

No one is going to hold out the SEC as a model of government oversight. The technical term is "yuck." But even the SEC has centralized, if weak, enforcement powers. Nothing like it exists for oversight of charities. There are state regulations and registration requirements but often no budget nor person-power to deal with charities effectively. I have long advocated an SEC-type charity, separate from the IRS, an idea that goes back to a guy named Carl Bakal who raided it in his book "Charity USA" a generation or so ago. This is of course a skunk-at-the-picnic sort of thing and I haven't picked up a lot of picnickers!

And when God's in the picture things really get mysterious. I don't mean God works in mysterious ways. I mean religious organizations don't have to file any kind of report. Thus a lot of good and maybe some not-so-good info is simply unavailable to anyone on the outside.

The takeaways are disasters raise money fast, spend it slowly and there is virtually no information on what costs were incurred, the ratio of output to retained funds, or whether they can really do what they claim to do what they say the do.Yet I gave more than once to three Haiti-relief organizations.I suppose I could disable the "send" button the computer and the cell phone. But not quite yet!