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Are Charitable Dollars Really Getting Where They’re Needed Most?

By Tom Watson on December 11, 2008No Comment

Melissa Berman, President and CEO of Rockefeller Philanthropy Advisors, moderated the spirited conversation among panelists Pablo Eisenberg, Senior Fellow, Center for Public & Nonprofit Leadership, Georgetown University;  Peter Goldberg, President and CEO, Alliance for Children and Families; Susan Raymond, PhD, Executive Vice President, Research, Evaluation and Strategy, Changing Our World, Inc., and William A. Schambra, Director, Bradley Center for Philanthropy & Civic Renewal, Hudson Institute.

Are Charitable Dollars Getting Where They’re Needed Most?  The question posed to the panel and the audience sought to provoke deeper thinking about the social contract that nonprofit organizations share with society, especially during this period of significant economic uncertainty in the U.S.  Is the contract working? Should it continue?

  • Peter Goldberg kicked off the panel discussion by making a case for increased government spending on social services.  Goldberg argued that the provision of safety-net services has shifted over time from the charitable to the public sector.  He believes that private funding sources cannot cover the current costs of providing basic human requirements, such as food, clothing and other necessities. 

    Further, Goldberg contended, the capacity of the philanthropic sector must be calibrated by society’s needs. Human service organizations, which receive a relatively small piece of the philanthropic pie, cannot compete with institutions with naturally defined constituencies, such as schools and hospitals.  He believes that after years of relying on the United Way, human service organizations have, in general, not developed sophisticated development efforts. Or they’ve become too dependent on large government contracts and, therefore, either don’t know how to compete for private funding or don’t have an appreciation for the need to diversify revenue streams.  The result is that human service organizations are no longer “independent advocates for human welfare concerns.” Goldberg concluded by stating that the field, as a whole, must make the case to the public that more money must go into social services. “It is government, not charity, that is the 800 lb. gorilla in service delivery.”

  • While Susan Raymond agreed with the importance of raising this question, her answer was dependent on clarification of the question itself. Raymond began by arguing that the definitions of “need” and “philanthropy” must be determined before a decision can be made. What is the threshold of need? To illustrate her point, she posed the question, does “a dollar to meet the need for survival (food for the hungry) justify the existence of philanthropy because food is ‘needed most’ but a dollar for, let us say, music or scholarships for minority engineering students does not? That answer is actually quite insulting to the ‘needy’ because it assumes that ‘where it is most needed’ is only immediate physical well being.”

    The complexity and nuance surrounding the definition of “need,” she argued, is compounded by the lack of definition around what is counted toward “philanthropy.” In particular, if we expand the definition of “need,” then we may need to attribute a portion of what is allocated to arts, higher education, civil society, etc. to the money that is spent on addressing need.  Further, we cannot count in complete confidence all that is currently being spent on addressing need because there are large amounts of missing data such as the amount donated to religious institutions (because they are not required to file IRS Form 990s), inaccuracies in filed Form 990s, the amount spent on corporate cause marketing programs which do not come from philanthropic budgets, and new philanthropy approaches that utilize equity-like approaches to serve those “in need.”

    Raymond also stated that time must be calculated into the equation. “Philanthropic investment in resolving root causes of problems over time will often not show up on measures of services to the needy today.  We must look up from traditional definitions, and take in with a wide angle lens the new movements of philanthropy on the societal commons if we are to make a judgment about adequacy.” 

  • Pablo Eisenberg opened his remarks by claiming that foundations don’t ask the question about where charitable dollars go often enough.  Like Goldberg, Eisenberg discussed how nonprofit organizations that directly service or advocate for marginalized communities receive a disproportionate amount of funding. With foundation dollars likely to decrease (due to the economic downturn) and competition for those precious dollars likely to increase, we will probably see some organizations gain and some lose. This will amount to “shuffling deck chairs on the Titanic.”

    The projected decrease in foundation giving will leave little or no room for increased funding for programs that serve the needy. One solution, Eisenberg argued, is to raise the legally defined minimum that foundations have to spend each year from 5% (including administrative fees) to 6% on grants. This would flow an extra $7B (2.5%) into the sector next year. He believes that taxpayers are getting cheated.  In exchange for substantial tax breaks, foundations do not give enough in charitable return.  “It’s time for nonprofits to display leadership and courage to take the steps to reform foundations. Philanthropic change will not come easily or from within. If change is to come, it will be a result of pressure from grantees, nonprofits and elected officials.”

  • Bill Schambra countered his fellow panelists. He indicated surprise that as much as 1/3 of charitable giving goes to the disadvantaged. He drew a distinction between charity (a band-aid) and philanthropy (getting to the root of the problem). Schambra believes that, in the predominant philanthropy model in the U.S., we work under the assumption that suffering is not something to be alleviated; rather something to be step-by-step and systematically addressed. He questioned the efficacy of this approach. “Have the billions of dollars we’ve spent over many years really gotten to the root cause of poverty?” If anything, he argues, it has created a new class of professionals and lobbies.

    To be sure, the questions raised at the Gurin Forum cannot be answered easily.  But a healthy debate over the efficacy of charitable dollars and the ways these dollars should be used is an important piece of the inquiry.

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