Uncharitable: How Restraints on Nonprofits Undermine Their Potential

Chapter 3: Stop Asking This Question

one line short CHAPTER 3 Stop AskingThis Question Not everything that counts can be counted, and not everything that can be counted counts. —a sign that reportedly hung in albert einstein’s office at princeton Efficiency Measures—The Puritan Guard T he U.S. Supreme Court issued the following decision in May 2003 in support of an earlier decision made by the Illinois Supreme Court: The Illinois Supreme Court in the instant case correctly observed that “the percentage of [fundraising] proceeds turned over to a charity is not an accurate measure of the amount of funds used ‘for’ a charitable purpose.”1 More than thirty years ago, Steven Smallwood and Wilson Levis, writing in the Philanthropy Monthly warned: The summary bottom-line percentage figure in most instances fails to accurately measure fund-raising cost levels and effectiveness, can be misleading, is subject to manipulation, is not a reliable guide to the efficiency or worthiness of an organization, and is likely to be counterproductive to the general need for effective public understanding of the practices of fundraising for charity.2 Nevertheless, the entirety of nonprofit ideology is guarded by this simple question—it has staggering power: “What percentage of my donation goes to the cause?” This is the question we have been trained to ask. We do not even think to ask a different question. We wouldn’t begin to know what other questions are available to us. Similarly, we 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 Pallotta:Uncharitable page 128 Stop AskingThis Question 129 one line short have been taught that the answer to this question is the absolute measure of the real charity being done. Virtually any violation of the ideology will trigger a fall in percentage returns. Pay a new executive director a higher salary, and the percentage will fall. Invest in long-term image advertising, and the percentage will fall. Try something new and fail, and the percentage will fall. Invest in long-term organizational improvements, and the short-term percentage will fall. Low percentage returns will trigger outcries of immorality. Petrified of this, charities are careful not to do anything that will precipitate a fall in the percentage return below watchdog standards. The question of what percentage of one’s donation goes to the cause functions as a kind of coercive, authoritative, life-sucking state that reigns over the whole of nonprofit endeavor. Evolution How did it come to be the only question we ask? By far the most powerful explanation is that it enforces our underlying ideology. Second, although its simplicity is what makes it dangerous, we are addicted to simplicity. In an age of information overload and overwhelm, we want simple dividing lines for deciding right from wrong, and this one seems to fit the bill. However, Richard Steinberg, writing in the Case Western Law Review nearly twenty years ago, noted that the measure “has little to commend itself besides simplicity” (emphasis added).3 Third, we are very interested in weeding out fraud, and this measure would seem on its surface to be an easy way to detect it. Theoretically, if you were going to pocket funds solicited from the public, this measure would expose that. There are two problems with this. The first is that anyone committing fraud would most likely cover her tracks, in which case the measure would not expose the fraud. In restating its 1984 decision in the Munson case, in which a professional fundraiser challenged a Maryland statute that prohibited a charitable organization from paying expenses of more than 25 percent of the amount raised in connection with any fundraising activity, the Supreme Court said that, if a percentage-based test “actually prevented fraud in some cases it would be ‘little more than fortuitous.’” 4 The second problem is the fact that if fraud produces a lower percentage return, that does not in turn mean that a low percentage return is evidence of fraud. In the Munson case, the Supreme Court wrote that the statute “operates on a fundamentally 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41...