I am somehow on the email list for Jeffrey Seglin's Right Thing column. Today's "Sound Off" question was one I had to respond to:

SOUND OFF: RESTRICTED DONATIONS

The outpouring of millions of dollars in contributions from individuals to help victims of the tsunami in southern Asia has reflected incredible generosity. But many people have made donations to relief organizations specifying that the money be used only for tsunami victims, rather than leaving the use of the money up to the agency's discretion.

There's some concern that such restrictions may hurt relief efforts in other crisis areas. After receiving $50 million in contributions, Doctors Without Borders said that it had enough money for its work with tsunami victims and asked that donors contribute to other areas where the relief organization works.

The issue raises the questions: Once you've found a relief group you trust to do good work, is it right to restrict where a donation can be used? Or is it better to leave the use of the money to the discretion of the aid group?

Here's my reply:

The Power of the Unrestricted Gift

As a fundraising professional, I believe that giving free of restrictions is more effective than earmarking gifts. When you invest in a for-profit corporation, you are putting your money behind the company's management and their strategy. Equity investors don't demand that their particular funds be placed into R&D, or advertising, or into a particular product. Nonprofit investors should act the same. You are investing in us, our mission, and our strategy. As a donor, you should of course do your due diligence. Is the strategy sound? Does the organization get results? Is the money being spent wisely? But second-guessing the management of nonprofits can lead to unintended consequences.

For instance, it can lead to the "special projects" trap. Many major donors, both institutional and individual, want to give to special projects. It is of course worthy to help a nonprofit launch a new initiative, and donors are right to be proud that their dollars built a building, or created a program. But if too many donors demand that their funds go to special projects, then managers are left scrambling for funding to pay for core programs -- not to mention the light bill. The capital market of contributions all too often rewards novelty over results.

Finally, Maimonides reminds us that the penultimate level of charity is "one who gives tzedaka to the poor, but does not know to whom he gives, nor does the recipient know his benefactor."

M E-L posted this on January 28, 2005
It is filed under Business & Economy

It is also indexed with the following tags: Social Enterprise | Charity | Nonprofit Management |