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Nonprofits

Donor, Dearest

The philanthropic landscape continues to shift as donors are switching their alliances to for-profit causes.

Times are tough for old-line causes, but let’s be frank. It’s not just the economy that’s beating up today’s traditional charities. Donors are, too.

Truth is, donors have never been so fickle, nor so ambivalent. Now more than ever, they want details about the impact their money is having but don’t want to pay charities to do the analysis that will tell them. They’re loving the instant gratification they’re getting when using new click-and-donate forms of online giving [text-messages during the 9-day campaign by the Red Cross to engage mobile supporters brought in $26 million,] but surveys show that many younger donors, especially, would rather spend $10 a pop now (because they can) versus committing to higher amounts later.  And despite all the talk about collaboration in the sector today, many donors still would much rather give their $10 to a Haitian quake victim than to the middleman charity administering those donations, just to keep the lights on. And that’s not all. As the use of the Net and social networks in fundraising are encouraging micro-giving – donations in smaller increments—it’s getting harder for some organizations to pinpoint who, precisely, their donors really are.  A recent survey of six progressive nonprofits shows that at least one-third of their text-donors unsubscribe from charity text-messaging lists shortly after a campaign, partly due to concerns over the cost of incoming messages.

Governments aren’t helping. According to New York Times journalist Stephanie Strom, there is rising sentiment in the states and on Capitol Hill that maybe charities (perhaps in part due to the chronic pay and charity fraud scandals in recent years) no longer deserve all of the tax breaks they’re getting. “As states and localities contend with dwindling tax receipts,” Strom told a recent NYU philanthropy conference, Charities on Trial, “they are looking at the tax preferences enjoyed by the nonprofit sector and are beginning to ask whether those preferences are good public policy.”

[Not convinced? Pennsylvania recently tried to impose a small payroll tax on nonprofits; Kansas is considering reducing nonprofits’ tax exemption from sales taxes in that state, and many other states are eyeing the property tax exemption.]

But perhaps one of the most unsettling behavioral trends by today’s donors, says Strom, is their willingness to switch alliances to for-profit causes, apparently favoring the end results over the means. Newer forms of philanthropy have been quick to promote the use of for-profit models for social good, and the case they make is persuasive, Strom says.  “Why shouldn’t GE get some sort of tax break for creating a system that better enables the management of health records, a system that would benefit nonprofit hospitals? “ she said. “When Citibank provides mortgage financing to low-income families, why shouldn’t that portion of its operations be eligible for the same tax treatment as a local community loan bank gets?”

Trouble is, Strom told the NYU conference, some of the projects seeking funding on some of the new online giving sites—such as Global Giving, for example—are corporate programs. Donors making gifts to support those projects “are, effectively, underwriting corporate social responsibility,” Strom says. “In other words, companies are using gifts for which a donor has received a tax deduction to finance their corporate philanthropy – something they used to have to fund out of their profit streams.” Meanwhile, she says, the Gates Foundation, among other private grantmakers, are starting to devote a small portion of some of their grants to partnerships with for-profit companies ranging from MTV to JPMorgan Chase and Merck, Strom says. Is this right? Should American taxpayers be co-funding some of these corporate programs?

Charities, in reaction to some of these trends, Strom says, feel like they need to “look more like business in analysis and evaluation of their impact.  … Fundraisers, consultants and experts are now appropriating the language of business to try to explain what nonprofits achieve. What is social investing if it’s not philanthropy? And is SASIX, the South African Social Investment Exchange really a capital marketplace? Its Web site (www.sasix.co.za/) says SASIX ‘makes carefully selected social development projects available as investment opportunities with a social return.’ It sounds a lot like the materials I just got from Charles Schwab.’”

Is Strom correct? As the philanthropic landscape continues to shift and redefine society’s approach to social problem-solving, it’s clear that our notions of philanthropy – and the decades-old regulations that govern it —also need to change. But how much change is too much?  Donors —not just the charities, themselves — need to be a greater part of that conversation.

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