March 2008 Archives

March 31, 2008

Nonprofit Finance Fraud: What's Behind It?

For any fundraiser, the idea that your hard-won grant and donation money might be eaten away by employee theft is, if not unthinkable, demoralizing at many levels. And, if discovered, it will make future fundraising a lot harder.

Dollar billBut if we're to believe a recent analysis in the Nonprofit and Voluntary Sector Quarterly (December 2007 issue), around 13% of the roughly $300 billion given to charity in 2006 was stolen by organization insiders. (I confess upfront, I didn't pay to read the actual report, but read an excellent analysis of it by Stephanie Strom in the March 29 issue of The New York Times).

My first reaction is disbelief -- which may be justified since, as Strom notes, they arrived at that figure by simply applying the same assumption to nonprofits as to government and for-profit organizations, namely that they lose 6% of revenue to fraud each year.

That's a pretty broad assumption. And I'd like to believe that nonprofit employees are "above" the rest, since most of them are working for a cause they believe in.

But the most disturbing part of the report may be the finding -- which does appear to have been nonprofit-specific -- that the typical thief was an employee, usually female, who earned less than $50,000 a year and had worked for the nonprofit at least three years. She wasn't going for million-dollar temptations, but took less than $40,000.

I'm projecting here, but doesn't that sound like someone who's frustrated by how little she's earning for a lot of hard work? Who perhaps doesn't even think of what she's doing as stealing, but just getting back a little of what she deserves?

If that's true, then this is a classic "no free lunch" illustration: Underpaying nonprofit employees will come back to hurt the group eventually. So my concluding pitch would be, in every grant proposal or other project budget, to try and give the hardworking employees a raise. Even a small amount can go a long way toward showing appreciation and preventing employee disgruntlement.

March 24, 2008

Direct Mail Fundraising: To Enclose or Not to Enclose?

I'm trying to get back to my self-appointed task of reading academic papers on fundraising so that you don't have to, and summarizing any of interest. So, here's the first, starting with the conclusions:

Those stickers, return address stamps, or other goodies you've been tucking into your direct mail enclosures? They might catch some people's eyes, but turn others off. And the colorful stories that we're all schooled to start off appeal letters with? They help only a little.

Now, for a few details.

The study was laid out in the Journal of Nonprofit & Public Sector Marketing's Fall 2007 edition (Volume 18), in an article called "Creating Effective Direct Mail Charitable Solicitations: The Effects of Enclosures and Different Appeals," by William D. Diamond and Easwar S. Iyer.

What the authors did was to send different versions of a wildlife-related appeal letters to different lists of donors. One list contained people who already donate to wildlife causes and another list contained people who donate to medical causes. Some letters started with a colorful vignette, and some included a sticker saying "Save the Buffalo."

Essentially, the sticker seems to have served as a clue to the readers about whether this was a cause they were interested in and should read any further. Many of the wildlife-donor types kept reading, while the medical-donor types tended to say, "Nope, not for me."

As for the story that opened some of the appeal letters, I wish we could have read it to judge for ourselves whether it should have raised the readers' interest significantly. But the authors' conclusion (which I'm paraphrasing hugely) seems pretty logical: That, for people already interested in a topic, hard information is also quite important, especially given that they're savvy consumers who've probably read a million of these stories.

There's just no getting around the fact that direct-mail recipients are, more and more, looking for an excuse to drop nonprofit appeal letters into the circular file. The study's authors also pulled together some telling statistics, namely that Americans receive around 14 billion direct-mail solicitations per year, and a substantial number of people receive over 1,000 solicitations per year. Gulp.

The bigger conclusion here seems to be that people are either going to donate to your cause or not, for reasons that have little to do with the appeal letter's contents. (Not a reason to do a bad letter, but nor is it a reason to sweat the small stuff.) I'm not ready to get on the "direct mail is dead" bandwagon -- it's obviously still a way to let donors know you're there, working hard -- but the stats also suggest that finding other ways to raise that awareness would be wise, too.

March 15, 2008

Can Any Nonprofit Donors Really Spare the Cash?

This is apparently my week for picking up on interesting tidbits in The New York Times. The latest, from the March 9, 2008 magazine (in an article called "Watching the Rich Give," by Dave Denison), is this:

Sociologist Paul Schervish, as part of his ongoing studies of wealthy people and what motivates them to give, asked people with a net worth of at least $25 million how much money they'd need to feel extremely secure. The answer: (wait a minute -- what amount would you need?)

$20 million! Last I looked, that's a big load of clams. Even if the person is 40 years old Mussels and clamsand expects to live another 40 years until age 80, that's $500,000 a year to live on. (I could handle that.)

But I don't mean to beat up on the rich. There's obviously some fundamental psychology at work here. It jibes with what a financial adviser once told me about his clients -- that no matter how rich they are, they say they live "quite simply" (despite the boat, vacation home, regular meals out and such), and can't imagine living on anything less.

So, should we get depressed and give up on raising money from the wealthy -- or from anyone with less than a cool $20 mil in pocket change? I don't think so. It's perfectly obvious that many people with less than that amount give, and even give generously. That should tell us that philanthropic giving isn't just something people do with their spare cash -- "Gosh, I've got an extra million, wonder where I should put it?" -- but something that they consider more akin to a necessity.

It's the job of the fundraiser to show potential donors how their nonprofit's cause is as close to the donor's heart as say, a sick relative or a leak in their own roof. Then you'll find they can give without waiting on that $20 million.

March 11, 2008

Words From a Willing Donor

You've got to love today's quote from Wall Street financier Stephen A. Schwarzman, commenting on how he came to pledge $100 million to the New York Public Library:

"They said, 'We'd like you to be the lead gift and give us $100 million and we'd like to rename the main branch after you... I said, 'That sounds pretty good.'"

NY Public LIbrary And you thought asking for major gifts was going to be hard! For more on the story, see "A $100 Million Donation to the N.Y. Public Library," by Robin Pogrebin in the Tuesday, March 11th edition of The New York Times.

March 6, 2008

Social Entrepreneurship Idea Source

Anyone who has read my book, Effective Fundraising for Nonprofits, knows that I advise massive amounts of caution when it comes to launching into small-business, entrepreneurial efforts at raising money.

Cash registerBut I hate to be a doom-sayer -- an original idea can be a powerful thing, and some ideas do lead to real profits! So if you're trawling for ideas right now, a fun place to start is the Springwise site, which has a whole section devoted to nonprofit entrepreneurial efforts. Even if a lightbulb doesn't go off over your head, you might resolve to buy your next tube of lip gloss at Peacekeeper Cause-Metics.

March 3, 2008

Moment of Awww - Meet Boston

I've had some inquiries about whether I'm still walking dogs for the Berkeley-East Bay Humane Society. The answer is yes, though they've been able to take in fewer dogs lately due to a fabulous remodeling project. (The dogs are getting new enclosures, and the whole place got a new paint job.)

But here's Boston, a nine-year-old black lab whose owner had to give him up because of medical problems. He's facing the camera because there's nothing he likes better than to press the top of his head against your stomach for a hug. Sigh.

Boston, a black lab