July 25, 2002 | Read Time: 5 minutes
The frenzied calls for charitable organizations to do exactly what donors want is undermining the ability of nonprofit groups to make wise choices about how to care for the needy and carry out projects that benefit the common good.
As the nation girds itself for the one-year anniversary of the September 11 attacks, the uproar over how the American Red Cross handled the outpouring of donations is likely to bring up again the question of how much say donors should have had in the way the $967-million they donated after the attacks would be used.
Anger over the Red Cross’s initial plan to channel surplus donations into efforts to prepare for future disasters — rather than give it all to those who suffered because of the attacks — continues to reverberate across the country, and has caused many donors to want to designate their gifts for particular projects and causes. Red Cross donors rightly feel betrayed. After all, they were led to believe their money would be used to help victims of September 11; they should have been told in advance that once those needs had been met, their money would be better used for other victims or to prepare for future crises.
Donor backlash has been fed by past scandal, as well as by situations like the Red Cross controversy. United Ways have faced challenges from donors for more than a decade, and many have given contributors freedom to earmark their funds, a move that was accelerated after William Aramony’s conviction for embezzling funds from United Way of America. United Ways across the country are still at pains to reassure donors that their money is not being used to finance lavish trips and other personal expenses of top officials.
Because the calls for donor control so often come at a time of great conflict, they tend to be an overreaction. Still, they reflect a serious decline in the public’s trust in the nonprofit world. And nonprofit groups are only the latest victims of a skepticism that has swept over all of our public institutions in the past half century. In an era when many people feel they can’t trust anyone anymore, donors conclude they have to go it alone, shouldering full responsibility for holding charities accountable for what is done with every dollar donated.
Unfortunately, the public’s righteous indignation is often channeled in such a way that donors accomplish the opposite of what they intend and end up shackling the effectiveness of the very relief efforts they intend to promote. While excessive donor designation of use of funds is unwise, what we donors rightfully deserve is respect for our charitable intention and nonprofit accountability for our donations.
What we want above all is for our charitable dollars to be effective. That means placing them in the hands of proven professionals who are on the ground making minute-to-minute decisions as to their best use. If we overprescribe the use of our dollars, they will sit idly in oversubscribed accounts while real need goes wanting elsewhere.
The mantra of donor sovereignty disregards the basic fact that often donors earmark gifts in response to some immediate, emotional appeal. Donor desires will modify with time and more complete information. Most donors would respond positively if they were told clearly and openly that their money is needed not only to help respond to a particular traumatizing event, but to help others who have an array of needs. What donors rightly view as unethical is being asked for money for one thing and then seeing it used for something else.
The desire donors have to control where their donations go has not been lost on Wall Street. Once, community foundations sprouted across the country to pool the resources of wealthy donors to collectively meet the needs of a city or region in a way that went beyond what people acting on their own were able to achieve. But in the last decade, Fidelity Investments, followed by a growing number of other for-profit financial companies, have established donor-advised charitable funds to give people an easy way to channel donations to causes they care about.
The funds run by Fidelity and others have captured the imagination of donors, in part because they assure contributors that not a penny will go to any activity that they have not expressly chosen. Trying to keep up, community foundations and local United Ways alike have jumped on this bandwagon, effectively abandoning their special role in pooling resources to solve local problems and instead offering to donors nothing more than the equivalent of a charitable checkbook.
Those appeals to individual donor sovereignty are terribly shortsighted. They preclude new, untried efforts, favor major institutions well-known to donors over groups struggling to get started, allow for no donor education to increase awareness and sophistication, and give little opportunity to encourage local philanthropy through donor collaboration. Worse yet, they underscore the growing skepticism that “all men are islands, complete unto themselves,” which erodes our public life and our essential interdependence on one another.
America does not need to encourage more and more donors to instruct charities what to do with their donations. Instead, charities must do much more to prove that they can be trusted to do the right thing. They must tell donors explicitly what will happen to their donations, and provide follow-up information about exactly what was accomplished with charitable gifts. Doing so will help restore the proper balance between donors and charities, ensuring that charities have the flexibility they need without sacrificing donor accountability. It is also the only way we can rebuild the trust and participation in a collective purpose that has been the hallmark of philanthropy in the United States.
Mark M. Murphy is executive director of the Fund for New Jersey, in New Brunswick.
