In the last few days, there have been a confluence of blogs, emails and news stories that got me thinking about the state of donor confidence in the non-profit sector and the increasing importance of practicing stewardship. I’m going to use the rest of this blog post to share with you exactly what has me spooked. I will also end with a link to an awesome blog post by Marc Pitman talking about what you should do about all of this. So, sit back, relax and get ready to roll up your sleeves!
The Nightly Show with Larry Wilmore
I am currently on the road visiting a client and couldn’t sleep a few nights ago. Whenever this happens, I’m usually dialed into Comedy Central watching late night shows like The Daily Show and The Nightly Show.
I was jolted awake when Larry Wilmore cut into the Red Cross for its $500 million Haiti earthquake relief fundraising efforts, which allegedly resulted in very little relief. If you missed the show, you might want to click-through to hulu and view this segment.
I know your organization isn’t the Red Cross, but you should still be concerned. Donor confidence is kinda/sorta like consumer confidence. When consumer confidence sinks, every business suffers and the economy slumps. Similarly, when donor confidence wanes, all of our organizations are put under the spotlight and questioned by donors.
Charleston massacre
As I’ve already explained, I couldn’t sleep, and the Red Cross story by Larry Wilmore rattled me to my non-profit core.
So, I flipped over to a cable news channel only to discover somebody walked into the Emanuel African Methodist Episcopal Church in Charleston, South Carolina and opened fire with a gun killing nine Bible study participants.
It didn’t take 24 hours before the online fundraising solicitations started arriving in my inbox. The first one was a friend forwarding me U.S. Senator Bernie Sanders’ request to make a contribution directly to the Emanuel African Methodist Episcopal Church in their time of need. It really was a nice appeal.
However, no sooner did I open the forwarded email from Sen. Sanders, when I received another email from Jasmine Turner at the Better Business Bureau (BBB) Wise Giving Alliance. Here is what the bulk of her email advised me to do with regards to funding requests pertaining to the “Charleston Massacre“:
BBB Wise Giving Alliance urges donors to give thoughtfully and avoid those seeking to take advantage of the generosity of others. Here are BBB WGA’s tips for trusted giving:
1. Thoughtful Giving: Take the time to check out the charity to avoid wasting your generosity by donating to a questionable or poorly managed effort. The first request for a donation may not be the best choice. Be proactive and find trusted charities that are providing assistance.
2. State Government Registration: About 40 of the 50 states require charities to register with a state government agency (usually a division of the State Attorney General’s office) before they solicit for charitable gifts. If the charity is not registered, that may be a significant red flag.
3. Respecting Victims and Their Families: Organizations raising funds should get permission from the families to use either the names of the victims and/or any photographs of them. Some charities raising funds for the victims of previous shootings did not do this and were the subject of criticism from victims’ families.
4. How Will Donations Be Used? Watch out for vague appeals that don’t identify the intended use of funds. For example, how will the donations help victims’ families? Also, unless told otherwise, donors will assume that funds collected quickly in the wake of a tragedy will be spent just as quickly. See if the appeal identifies when the collected funds will be used.
5. What if a Family Sets Up Its Own Assistance Fund? Some families may decide to set up their own assistance funds. Be mindful that such funds may not be set up as charities. Also, make sure that collected monies are received and administered by a third party such as a bank, CPA or lawyer. This will help provide oversight and ensure the collected funds are used appropriately (e.g., paying for funeral costs, counseling, and other tragedy-related needs.)
6. Advocacy Organizations: Tragedies that involve violent acts with firearms can also generate requests from a variety of advocacy organizations that address gun use. Donors can support these efforts as well but note that some of these advocacy groups are not tax exempt as charities. Also, watch out for newly created advocacy groups that will be difficult to check out.
7. Online Cautions: Never click on links to charities on unfamiliar websites or in texts or emails. These may take you to a lookalike website where you will be asked to provide personal financial information or to click on something that downloads harmful malware into your computer. Don’t assume that charity recommendations on Facebook, blogs or other social media have already been vetted.
8. Financial Transparency: After funds are raised for a tragedy, it is even more important for organizations to provide an accounting of how funds were spent. Transparent organizations will post this information on their websites so that anyone can find out and not have to wait until the audited financial statements are available sometime in the future.
9. Newly Created or Established Organizations: This is a personal giving choice, but an established charity will more likely have the experience to quickly address the circumstances and have a track record that can be evaluated. A newly formed organization may be well-meaning but will be difficult to check out and may not be well managed.
10. Tax Deductibility: Not all organizations collecting funds to assist this tragedy are tax exempt as charities under section 501(c)(3) of the Internal Revenue Code. Donors can support these other entities but keep this in mind if they want to take a deduction for federal income tax purposes. In addition, contributions that are donor-restricted to help a specific individual/family are not deductible as charitable donations, even if the recipient organization is a charity.
An email like this is surely proof that donor confidence is on the decline.
If I were on the front line running a non-profit, I’d be looking for ways to be proactive and inoculate my organization from this problem.
Invest in stewardship
Recently, I’ve become frustrated by the word “stewardship” because every time I say it, the conversation immediately veers in the direction of gift acknowledgement letters, annual reports, thank-a-thon events, etc. While these things are important and necessary, the fact of the matter is that recognition is only a part of stewardship.
So, I went digging in my toolbox and pulled out an old (and very dusty) training curriculum I previously used when I was an internal consultant working for Boys & Girls Clubs of America (BGCA). In only the very first few PowerPoint slides, I came across the following definition of “stewardship“:
“Stewardship is process whereby a non-profit cares for and protects its philanthropic support – its gifts and the donors who give them – in a way that responds to the donor’s expectations and respects the act of giving.”
In addition to acknowledgement and recognition, the training curriculum went into other stewardship concepts like:
- legal compliance (e.g. state registration, etc)
- pledge/gift recordkeeping (including donor intent)
- transparency & communication (e.g. demonstrating how gifts are used and if impact is being achieved)
- policy development & organizational capacity (e.g. board engagement and governance)
The benefits of doing “stewardship” in its entirety, thoroughly and correctly are:
- ensuring future support (aka maintaining high donor loyalty)
- remaining in good legal standing (aka not running aground with the government)
- supporting volunteers (aka no surprises builds confidence, improves solicitation and retains volunteers)
- it is the morally and ethically right thing to do
Organizational exercise
I went looking online for other non-profit consultants and bloggers with ideas to share. So, I wasn’t surprised when I came across a similar post from Marc Pitman (otherwise known as The Fundraising Coach). He also talks about Haiti and the Red Cross, and at the end of his blog post he lays out an awesome 30 minute exercise you can facilitate in your boardroom or with your resource development committee.
Marc’s post is titled “The Red Cross and Glass Houses,” and it is definitely worth the click. Don’t just read it . . . DO THE EXERCISE!
Have you recently had an uncomfortable conversation with a donor or supporter? Are you getting questioned a little more about how you’re spending money and whether or not you’re getting the results you promised? If so, please scroll down and tell us what your organization is doing about it. We can all learn from each other.
On a somber note, I would be remiss if I didn’t end this post by expressing my condolences and sympathies to those families and friends who lost loved ones in yet another senseless act of domestic terrorism inspired by racism.
Here’s to your health!
Erik Anderson
Founder & President, The Healthy Non-Profit LLC
www.thehealthynonprofit.com
erik@thehealthynonprofit.com
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