With Charity For All: Why Charities Are Failing and a Better Way to Give - Softcover
Each year, the average American household donates almost $2700 to charity. Yet, most donors know little about the American charitable sector and the nonprofit organizations they support. In With Charity For All, former NPR CEO Ken Stern exposes a field that few know: 1.1 million organizations, 10% of the national workforce, and $1.5 trillion in annual revenues. He chronicles the many flaws in the charity system, from tax-exempt charities such as bowl games, roller derby leagues, and beer festivals, to charitable hospitals that pay their executives into the millions, to--worst of all--organizations that raise millions of dollars without ever cracking the problem they have pledged to solve.
With Charity For All provides an unflinching look at the philathropic sector but also offers an inspiring prescription for individual giving and widespread reform.
With Charity For All provides an unflinching look at the philathropic sector but also offers an inspiring prescription for individual giving and widespread reform.
"synopsis" may belong to another edition of this title.
About the Author:
Ken Stern is a media and nonprofit executive best known for helping to build National Public Radio into a global news and information power. He is currently the CEO of Palisades Media Ventures, a Washington D.C.-based public affairs company.
Excerpt. © Reprinted by permission. All rights reserved.:
Excerpted from the Hardcover Edition
Introduction
When the Frenchman Pierre L’Enfant laid out his plans for the new District of Columbia in 1791, he designed Sixteenth
Street to be one of the grand avenues of the new capital. Two hundred and twenty years later, his vision has been mostly realized. Sixteenth Street rises from the foot of the White House, runs north past luxury hotels, rows of embassies, the blank façade of the national headquarters of the Freemasons, through parks and the prosperous leafy neighborhoods of Washington’s Gold Coast, up past Walter Reed Hospital, before reaching a tired ending among the down-market strip malls and mini-marts of Silver Spring, Maryland. At key points, it commands sweeping views not only of the White House but of the Washington Monument and the Jefferson Memorial beyond.
Living in the Mount Pleasant section of Washington, I frequent a stretch along this storied street. From my home, it’s a fifteen-minute walk along Sixteenth Street to our local grocery store. Along the way, I pass some of the landmarks of the neighborhood: the All Souls Unitarian Church, the Little Flower Montessori School, the Scottish Rite Temple, a dormitory for Howard University students. In a span of about eight blocks, I pass no fewer than sixteen nonprofit organizations: five churches, four educational institutions, five social service organizations, one credit union, and one fraternal organization.
Most people would be hard-pressed to name sixteen charities, but in fact my little trip is not that unusual. Every day our lives are touched by the charitable sector. To the extent that we think about charities, we tend to associate them with services for the poor and the dispossessed. But the charitable sector is much more than that. It educates our young; it takes care of our old and infirm; it fields the teams that we cheer for on Saturdays and serves up spiritual sustenance on Sundays; it provides much of the intellectual and cultural nourishment for this country. The nonprofit community occupies some of the most sacred real estate in our public square and cushions some of our most important private and intimate moments. We entrust our children and our parents to it, and it is often the first and most important responder in times of crisis—whether those crises are personal in nature or global in reach.
There are approximately 1.1 million charities in this country—not local chapters, but unique, full-fledged organizations. Stop and think about that number for a moment. It means tens of thousands of charities in every state, thousands in every county. And the number grows by more than fifty thousand every year, in good times and in bad. The charitable sector employs approximately thirteen million people. In addition, more than sixty-one million Americans volunteer for charities, adding about eight billion hours of effort to charitable causes—roughly the equivalent of another five million full-time employees. Charities take in over $1.5 trillion each year in revenues and have assets approaching $3 trillion. Charitable activity accounts for 10 percent of the economic life of this country. And this percentage is certain to grow as the challenges of our society multiply and government proves unable to respond in a meaningful way.
Almost all of us are engaged in the charitable sector in direct ways: as employees, as volunteers, as donors, or as customers and clients. And even those few not so involved are indirectly entangled as taxpayers and citizens. While considerable funding for charities comes from purely private sources, our governments—federal, state, and local—provide hundreds of billions of dollars in direct grants each year. A figure for total government support of the nonprofit sector is difficult to calculate, but most estimates put direct charitable revenues from government at roughly $500 billion a year. These same governments also provide an enormous amount in indirect support by exempting charities from income and property taxes and providing deductions for charitable donations. Even in this age of multitrillion-dollar government budgets, that indirect support is significant. If we chose to eliminate or even cap just these exemptions, our public coffers would swell by tens of billions of dollars yearly—in line with the entire federal appropriation for housing and education.
The charitable sector is one of the anchors of American public life. Its vast scope makes any quick catalog of its functions incomplete, but it includes areas as diverse as education, global health services, shelter for the homeless, preservation of public and private land, athletics, arts and culture, and some of our most important scientific research. We support this broad array of services because absent a robust charitable economy, these functions would either cease or devolve to government—an unpalatable option in a time of rising public debt and dwindling faith in the efficacy of government. In effect, we have privatized these public functions in the belief that charities can perform these tasks better and with greater efficiency than government. The public—and private—investment in the social sector is one of the critical elements of the American social compact, yet it is one of the oddities of public life that each year we renew this investment without ever pausing to ask the same questions that we ask of every other public and private investment: What are we getting in return, is the investment structured correctly, is the money going to the right places? Remarkably, we don’t think much about the nonprofit sector at all. Our attention to it is largely scandal-driven (think of the United Way and ACORN) and ephemeral, due to a web of factors including the cloaked nature of the public investment, the fact that the public rarely perceives the millions of disparate charitable businesses to be a unified industry, and the fact that the sector includes sacred institutions of American life such as churches and schools.
We live in a society that is obsessed with results—from businesses, from government, from sporting events. Markets are endlessly debated, scrutinized, reduced to reams of data. Governments rise and fall on issues of accountability and results. Managers are fired, players traded, teams dismantled if a squad falls short of the expectations of ownership or of fans. Yet in this results-obsessed country, the public rarely demands measures of how effective charities are in implementing their services and meeting their service goals. And, as we shall see throughout this book, when the public generally and funders more specifically do not press for results-oriented organizations—and indeed value qualities that are inversely related to effectiveness—charities respond accordingly.
The implications are extensive, not just for the prudent use of resources, but for how we as a society tackle our most challenging problems and how we serve the poor, the infirm, the hungry, the homeless, and others who do not have full voice in our public life. This book’s story of charitable ineffectiveness is not one of greed or incompetence—though there are chapters on that—but one of misguided incentives and failed market structures. And it begins with one of the most venerated names in American charity.
With Hurricane Katrina bearing down on New Orleans in August 2005, the American Red Cross geared up for action. For the Red Cross, born in the blood of the American Civil War and tested through countless disasters, this was its Super Bowl, the biggest challenge of the new century. Contingency plans were activated; shelters opened; tens of thousands of meals, bottles of water, and other necessary supplies pre-positioned; thousands of volunteers drafted. Relief trucks began to roll even before the storm hit. The action, coordinated from the Red Cross’s emergency operations bunker in Washington, D.C., had all the hallmarks of military precision, not surprising given the Red Cross’s propensity to hire retired military supply-chain experts. And the size of its effort has rarely been seen outside a military operation. In many ways, it was the largest peacetime call-up in American history, ultimately activating 250,000 employees and volunteers across a thousand miles of the southern United States.
The Red Cross’s brethren at the International Committee of the Red Cross (ICRC) also sprang into action, dispatching about eighty of its best disaster-recovery experts to support this mobilization. Among them was Thomas Riess, a veteran logistician from Germany. What Riess, used to working with relatively few resources in third-world countries, found upon arriving at the Red Cross site in Mobile, Alabama, astonished him. The human resources and material aid were tremendous, but the system of quality control was in absolute tatters. Volunteers were assigned to tasks without adequate training or any attempt to match their skills to the work. Goods poured into the Mobile warehouse, but often without regard to need. Included in the supply flow were Uno card games, stale Danish pastries, buns marked “perishable” that had to be destroyed, and radios without batteries. Whatever came in was shipped out to the field, regardless of its usefulness to the relief effort. Riess reported a lack of centralized planning and communications and a lack of accountability and record keeping: goods coming into the warehouse were not registered or recorded; pilfering was common. His colleagues observed similar chaos. Mike Goodhand, head of logistics for the British Red Cross, described the American Red Cross efforts in Mississippi as “amateurish.” He noted one case where a Red Cross vehicle manager admitted to him that he had no idea as to the whereabouts of his entire fleet of more than a hundred cars and trucks.
The disorganization Goodhand and Riess witnessed was replicated across the region. Shelters were under- or incorrectly supplied, goods rotted in warehouses, the wrong things went to the wrong places, cash disappeared, supplies walked away. Too many key management positions were occupied by volunteers who were ill prepared and ill equipped to handle the flood of challenges. Rental cars, generators, air mattresses, and computers disappeared. At one point, it was reported that fully half of the goods supplied to the Red Cross could not be traced to confirm that they made it to their intended destination. The Red Cross supply-chain and inventory control management systems cracked. In the end, the British Red Cross and the ICRC characterized the effort as a “dangerous combination of ignorance and arrogance.”
The Red Cross failures during Katrina unfortunately do not stand out in any way. Not only did these failures largely duplicate the Red Cross’s shortcomings after 9/11, they mirror, on a much larger scale, the inefficiencies and ineffectiveness displayed by hundreds of other nonprofits seeking to respond to the disaster. Katrina was a gold rush for the nonprofit community; hundreds of organizations descended on the Gulf Coast, hoping to aid in the relief and rebuilding of the area and share in the billions of dollars washing through. But many of them lacked the capacity and expertise to contribute significantly to the recovery, and their uncoordinated efforts ultimately led to confusion, delay, and the thinning of finite resources. These problems were magnified by the policies of the IRS, which fast-tracked more than four hundred new Katrina-related charities in the wake of the storm, in some cases granting tax-exempt status within hours of receiving an application. Not surprisingly, the vast majority of those new charities, organized during a flood of good intentions, have since failed, disappeared, or been diverted to other purposes.
It was neither the government nor the nonprofit community that reacted most effectively to Katrina. It was the private sector. Private companies were on the ground with disaster relief efforts before the American Red Cross, FEMA, and even the U.S. military. Walmart proved especially effective during Katrina, moving tens of millions of dollars in emergency supplies into the area, creating fast-action distribution centers, and rapidly responding to local conditions and needs. Its advantages were numerous: it had the scale and staffing to quickly mobilize a two-hundred-person emergency response center that could coordinate efforts around the clock; the company had the expertise in supply-chain management to move the right goods to the right places, and it had unrivaled local knowledge from its operations in three thousand communities around the country. In many places, Walmart was the first on the ground with goods and services, and its reports from the field became critical to government responders. At the time, Sheriff Harry Lee of Jefferson Parish in suburban New Orleans said, “If [the] American government would have responded like Walmart has responded, we wouldn’t be in this crisis.”6 Later, reacting to both internal and external criticism, the Red Cross announced its intention to redesign its supply-chain management system, this time to be driven by the expertise of businesses like Walmart.
It’s tempting to shrug off this story as unrepresentative, the product of one unlikely-to-be-rivaled event. Katrina was a flood of biblical proportions that exposed the failings of numerous institutions, both inside and outside the charitable sector. Unfortunately, the modern history of the Red Cross is marked by the same type of organizational breakdown (and post-event confession of failures) across many major disasters. Those breakdowns have not affected every part of the enterprise, however; its fund-raising ability, especially during crises, has been nothing short of spectacular. Within weeks of the 2010 Haiti earthquake, for example, the Red Cross raised more than $450 million in the United States and more than $1 billion in total across its worldwide network.
But the more difficult task for the Red Cross in Haiti has been spending. Two years after the Haiti earthquake, the Red Cross was still sitting on more than $150 million in unspent and unallocated donations, a surprisingly large amount given the acuteness of Haiti’s needs and the fact that most of the distributed funds went to intermediate organizations such as the United Nations, Habitat for Humanity, and the International Organization for Migration.
On the surface, it is hard to figure out why the Red Cross fails so consistently. It is among the most storied and best resourced charities in this country. The organization’s staff is handpicked from the top levels of business, government, and the military, and though slow-footed and devoutly bureaucratic, it has avoided many of the pitfalls and scandals that have tripped up other charities. Rather, the roots of the Red Cross’s failures during Katrina and other crises lie in its inability—a failing shared by virtually all charities—to make the necessary internal investments that are the hallmark of all good organizations, be they for-profit businesses, charities, or government agencies.
This inability was clearly illustrated in the days after 9/11. As in Katrina, the Red Cross during 9/11 proved unable ...
Introduction
When the Frenchman Pierre L’Enfant laid out his plans for the new District of Columbia in 1791, he designed Sixteenth
Street to be one of the grand avenues of the new capital. Two hundred and twenty years later, his vision has been mostly realized. Sixteenth Street rises from the foot of the White House, runs north past luxury hotels, rows of embassies, the blank façade of the national headquarters of the Freemasons, through parks and the prosperous leafy neighborhoods of Washington’s Gold Coast, up past Walter Reed Hospital, before reaching a tired ending among the down-market strip malls and mini-marts of Silver Spring, Maryland. At key points, it commands sweeping views not only of the White House but of the Washington Monument and the Jefferson Memorial beyond.
Living in the Mount Pleasant section of Washington, I frequent a stretch along this storied street. From my home, it’s a fifteen-minute walk along Sixteenth Street to our local grocery store. Along the way, I pass some of the landmarks of the neighborhood: the All Souls Unitarian Church, the Little Flower Montessori School, the Scottish Rite Temple, a dormitory for Howard University students. In a span of about eight blocks, I pass no fewer than sixteen nonprofit organizations: five churches, four educational institutions, five social service organizations, one credit union, and one fraternal organization.
Most people would be hard-pressed to name sixteen charities, but in fact my little trip is not that unusual. Every day our lives are touched by the charitable sector. To the extent that we think about charities, we tend to associate them with services for the poor and the dispossessed. But the charitable sector is much more than that. It educates our young; it takes care of our old and infirm; it fields the teams that we cheer for on Saturdays and serves up spiritual sustenance on Sundays; it provides much of the intellectual and cultural nourishment for this country. The nonprofit community occupies some of the most sacred real estate in our public square and cushions some of our most important private and intimate moments. We entrust our children and our parents to it, and it is often the first and most important responder in times of crisis—whether those crises are personal in nature or global in reach.
There are approximately 1.1 million charities in this country—not local chapters, but unique, full-fledged organizations. Stop and think about that number for a moment. It means tens of thousands of charities in every state, thousands in every county. And the number grows by more than fifty thousand every year, in good times and in bad. The charitable sector employs approximately thirteen million people. In addition, more than sixty-one million Americans volunteer for charities, adding about eight billion hours of effort to charitable causes—roughly the equivalent of another five million full-time employees. Charities take in over $1.5 trillion each year in revenues and have assets approaching $3 trillion. Charitable activity accounts for 10 percent of the economic life of this country. And this percentage is certain to grow as the challenges of our society multiply and government proves unable to respond in a meaningful way.
Almost all of us are engaged in the charitable sector in direct ways: as employees, as volunteers, as donors, or as customers and clients. And even those few not so involved are indirectly entangled as taxpayers and citizens. While considerable funding for charities comes from purely private sources, our governments—federal, state, and local—provide hundreds of billions of dollars in direct grants each year. A figure for total government support of the nonprofit sector is difficult to calculate, but most estimates put direct charitable revenues from government at roughly $500 billion a year. These same governments also provide an enormous amount in indirect support by exempting charities from income and property taxes and providing deductions for charitable donations. Even in this age of multitrillion-dollar government budgets, that indirect support is significant. If we chose to eliminate or even cap just these exemptions, our public coffers would swell by tens of billions of dollars yearly—in line with the entire federal appropriation for housing and education.
The charitable sector is one of the anchors of American public life. Its vast scope makes any quick catalog of its functions incomplete, but it includes areas as diverse as education, global health services, shelter for the homeless, preservation of public and private land, athletics, arts and culture, and some of our most important scientific research. We support this broad array of services because absent a robust charitable economy, these functions would either cease or devolve to government—an unpalatable option in a time of rising public debt and dwindling faith in the efficacy of government. In effect, we have privatized these public functions in the belief that charities can perform these tasks better and with greater efficiency than government. The public—and private—investment in the social sector is one of the critical elements of the American social compact, yet it is one of the oddities of public life that each year we renew this investment without ever pausing to ask the same questions that we ask of every other public and private investment: What are we getting in return, is the investment structured correctly, is the money going to the right places? Remarkably, we don’t think much about the nonprofit sector at all. Our attention to it is largely scandal-driven (think of the United Way and ACORN) and ephemeral, due to a web of factors including the cloaked nature of the public investment, the fact that the public rarely perceives the millions of disparate charitable businesses to be a unified industry, and the fact that the sector includes sacred institutions of American life such as churches and schools.
We live in a society that is obsessed with results—from businesses, from government, from sporting events. Markets are endlessly debated, scrutinized, reduced to reams of data. Governments rise and fall on issues of accountability and results. Managers are fired, players traded, teams dismantled if a squad falls short of the expectations of ownership or of fans. Yet in this results-obsessed country, the public rarely demands measures of how effective charities are in implementing their services and meeting their service goals. And, as we shall see throughout this book, when the public generally and funders more specifically do not press for results-oriented organizations—and indeed value qualities that are inversely related to effectiveness—charities respond accordingly.
The implications are extensive, not just for the prudent use of resources, but for how we as a society tackle our most challenging problems and how we serve the poor, the infirm, the hungry, the homeless, and others who do not have full voice in our public life. This book’s story of charitable ineffectiveness is not one of greed or incompetence—though there are chapters on that—but one of misguided incentives and failed market structures. And it begins with one of the most venerated names in American charity.
With Hurricane Katrina bearing down on New Orleans in August 2005, the American Red Cross geared up for action. For the Red Cross, born in the blood of the American Civil War and tested through countless disasters, this was its Super Bowl, the biggest challenge of the new century. Contingency plans were activated; shelters opened; tens of thousands of meals, bottles of water, and other necessary supplies pre-positioned; thousands of volunteers drafted. Relief trucks began to roll even before the storm hit. The action, coordinated from the Red Cross’s emergency operations bunker in Washington, D.C., had all the hallmarks of military precision, not surprising given the Red Cross’s propensity to hire retired military supply-chain experts. And the size of its effort has rarely been seen outside a military operation. In many ways, it was the largest peacetime call-up in American history, ultimately activating 250,000 employees and volunteers across a thousand miles of the southern United States.
The Red Cross’s brethren at the International Committee of the Red Cross (ICRC) also sprang into action, dispatching about eighty of its best disaster-recovery experts to support this mobilization. Among them was Thomas Riess, a veteran logistician from Germany. What Riess, used to working with relatively few resources in third-world countries, found upon arriving at the Red Cross site in Mobile, Alabama, astonished him. The human resources and material aid were tremendous, but the system of quality control was in absolute tatters. Volunteers were assigned to tasks without adequate training or any attempt to match their skills to the work. Goods poured into the Mobile warehouse, but often without regard to need. Included in the supply flow were Uno card games, stale Danish pastries, buns marked “perishable” that had to be destroyed, and radios without batteries. Whatever came in was shipped out to the field, regardless of its usefulness to the relief effort. Riess reported a lack of centralized planning and communications and a lack of accountability and record keeping: goods coming into the warehouse were not registered or recorded; pilfering was common. His colleagues observed similar chaos. Mike Goodhand, head of logistics for the British Red Cross, described the American Red Cross efforts in Mississippi as “amateurish.” He noted one case where a Red Cross vehicle manager admitted to him that he had no idea as to the whereabouts of his entire fleet of more than a hundred cars and trucks.
The disorganization Goodhand and Riess witnessed was replicated across the region. Shelters were under- or incorrectly supplied, goods rotted in warehouses, the wrong things went to the wrong places, cash disappeared, supplies walked away. Too many key management positions were occupied by volunteers who were ill prepared and ill equipped to handle the flood of challenges. Rental cars, generators, air mattresses, and computers disappeared. At one point, it was reported that fully half of the goods supplied to the Red Cross could not be traced to confirm that they made it to their intended destination. The Red Cross supply-chain and inventory control management systems cracked. In the end, the British Red Cross and the ICRC characterized the effort as a “dangerous combination of ignorance and arrogance.”
The Red Cross failures during Katrina unfortunately do not stand out in any way. Not only did these failures largely duplicate the Red Cross’s shortcomings after 9/11, they mirror, on a much larger scale, the inefficiencies and ineffectiveness displayed by hundreds of other nonprofits seeking to respond to the disaster. Katrina was a gold rush for the nonprofit community; hundreds of organizations descended on the Gulf Coast, hoping to aid in the relief and rebuilding of the area and share in the billions of dollars washing through. But many of them lacked the capacity and expertise to contribute significantly to the recovery, and their uncoordinated efforts ultimately led to confusion, delay, and the thinning of finite resources. These problems were magnified by the policies of the IRS, which fast-tracked more than four hundred new Katrina-related charities in the wake of the storm, in some cases granting tax-exempt status within hours of receiving an application. Not surprisingly, the vast majority of those new charities, organized during a flood of good intentions, have since failed, disappeared, or been diverted to other purposes.
It was neither the government nor the nonprofit community that reacted most effectively to Katrina. It was the private sector. Private companies were on the ground with disaster relief efforts before the American Red Cross, FEMA, and even the U.S. military. Walmart proved especially effective during Katrina, moving tens of millions of dollars in emergency supplies into the area, creating fast-action distribution centers, and rapidly responding to local conditions and needs. Its advantages were numerous: it had the scale and staffing to quickly mobilize a two-hundred-person emergency response center that could coordinate efforts around the clock; the company had the expertise in supply-chain management to move the right goods to the right places, and it had unrivaled local knowledge from its operations in three thousand communities around the country. In many places, Walmart was the first on the ground with goods and services, and its reports from the field became critical to government responders. At the time, Sheriff Harry Lee of Jefferson Parish in suburban New Orleans said, “If [the] American government would have responded like Walmart has responded, we wouldn’t be in this crisis.”6 Later, reacting to both internal and external criticism, the Red Cross announced its intention to redesign its supply-chain management system, this time to be driven by the expertise of businesses like Walmart.
It’s tempting to shrug off this story as unrepresentative, the product of one unlikely-to-be-rivaled event. Katrina was a flood of biblical proportions that exposed the failings of numerous institutions, both inside and outside the charitable sector. Unfortunately, the modern history of the Red Cross is marked by the same type of organizational breakdown (and post-event confession of failures) across many major disasters. Those breakdowns have not affected every part of the enterprise, however; its fund-raising ability, especially during crises, has been nothing short of spectacular. Within weeks of the 2010 Haiti earthquake, for example, the Red Cross raised more than $450 million in the United States and more than $1 billion in total across its worldwide network.
But the more difficult task for the Red Cross in Haiti has been spending. Two years after the Haiti earthquake, the Red Cross was still sitting on more than $150 million in unspent and unallocated donations, a surprisingly large amount given the acuteness of Haiti’s needs and the fact that most of the distributed funds went to intermediate organizations such as the United Nations, Habitat for Humanity, and the International Organization for Migration.
On the surface, it is hard to figure out why the Red Cross fails so consistently. It is among the most storied and best resourced charities in this country. The organization’s staff is handpicked from the top levels of business, government, and the military, and though slow-footed and devoutly bureaucratic, it has avoided many of the pitfalls and scandals that have tripped up other charities. Rather, the roots of the Red Cross’s failures during Katrina and other crises lie in its inability—a failing shared by virtually all charities—to make the necessary internal investments that are the hallmark of all good organizations, be they for-profit businesses, charities, or government agencies.
This inability was clearly illustrated in the days after 9/11. As in Katrina, the Red Cross during 9/11 proved unable ...
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