More than $1.5 trillion flow through more than one million charities, employing 13 million people in the United States. The charitable sector is one of the pillars of American quality of life, yet remarkably, we don’t think much about causes.
Even more surprising is in our results-driven world, the general public rarely presses nonprofits for accountability to results and measures.
Former National Public Radio CEO Ken Stern has written a book to tell the story of charitable failures, misguided incentives and ineffective market structures. With Charity for All is a call to action for the social sector to look at its framework and identify ways in which it can make corrective measures one person, one nonprofit at a time.
Some of the problems Stern challenges us to face include:
Tolerance of low- or no-impact outcomes like water charities that build wells but fail to maintain them or programs like D.A.R.E. (Drug Abuse Resistance Education) that actually stimulated drug use.
Acceptance of the government’s 99.5 percent approval of all charitable applications: The IRS’ low requirement threshold for nonprofit status further crowds the social sector with charities that don’t always meet two important criteria: 1) charitable tax exemption to “relieve the government of having to provide and pay for certain services” and 2) public benefit: “the charity cannot operate for private benefit; its value must be felt broadly within the community.”
Lack of sector scrutiny: “Ineffective supervision, unclear legal standards, and enormous consumer confusion all create a situation where it is astonishingly easy to set up, operate, and maintain charities that principally benefit their fund-raisers and managers.” Stern gives examples such as donations not going to programs but instead, to fundraising and administrative expenses. For example, the Association for Firefighters and Paramedics (AFP) designate only three percent of the funds to the programs that assist burn victims.
Solutions: a path to a better charitable marketplace
In the final chapter, Stern discusses what we, as a society, need to do to combat the real dangers of the charitable sector as it stands today. Many charities believe the sector does not “lend itself to empirical measurement” because it is difficult to measure social good. Also, people that work for social good should not be evaluated. This belief results in being more fair to the charities than the beneficiaries of their work. Donors’ lack of research and their donations to good stories rather than legitimate impact are exacerbating the problem.
Stern’s paths to a better charitable marketplace include:
- “Resist the old ways” by focusing on social impact to beneficiaries based on objective evidence. People must look past charismatic leaders and fundraisers and enticing marketing strategies to real impact.
- “Look for indicia of quality”: clarity of targets, transparency with goals and research, real growth. Be wary of claims of low overhead because they may be “managing their books for public display or shortchanging their potential, or both.”
- “Do the work” by researching the charities thoroughly, not just the charities’ websites, but also public reports and other websites. Share the information you find.
- “Follow the leaders,” or signalers, that have done the research (GiveWell, New Profit and Robin Hood Foundations). These organizations are still small and limited in scope, but it’s a start.
- “Reconsider what constitutes a charity: Businesses that look, act, and feel like for-profit operations, like [some] hospitals, … should be treated as for-profit businesses, both out of notions of competitive fairness and out of the belief that such operations neither need nor deserve public support.” What organizations really should receive tax-exempt status?
We must open our eyes if we’re to make a change
Given the extent to which our society and government increasingly depend on the social sector to deliver critical support to the underserved as well as augment our quality of life, it’s understandable that former nonprofit CEOs like Ken Stern who’ve witnessed the challenges we face feel compelled to give readers an unvarnished look in front of and behind the curtain. With so much riding on our sector’s ability to deliver impact, Stern challenges us to open our eyes and take a closer look at what seemingly has gone unnoticed for too long.
Image credits: snipview.com, anchor publishing