Philanthropy 2.0: Making a Difference Not a Donation

Charitable giving is quickly transforming into philanthropic investment. Donors (especially major donors and foundations) no longer want to give because their heart breaks over the severity of a problem. They want to invest in a solution that will solve the problem. This shift in philanthropy has been described in technological terms as a shift from Philanthropy 1.0 to 2.0.

If philanthropy 1.0 focused on the need, then philanthropy 2.0 focuses on a sustainable solution that is making a verifiable difference. It is no longer good enough for a nonprofit to ask for support by stirring our emotions. With over 1 million 501(c)3 organizations, we now have to discern which program model can comfort our broken hearts with sound solutions.

Donor fatigue in the face of ever-growing “asks” is pushing this investment approach to charitable giving. One new gold standard in giving is project sustainability. A donor wants to know that at least part of their donation is “seed money” that funds a partially self-sustaining and locally adapted program. They do not want to be asked for the same donation next year to support the same activity. There is simply not enough money to go around. So donors are demanding nonprofits to more creatively design and sustain their important work.

To capture this transition in philanthropy, I have created a presentation and have begun delivering it to different audiences in the past month. You can check out the pdf version posted on the Excellence in Giving website by clicking here. I hope it motivates you to give more wisely and to comfort your broken heart with investments in proven or promising solutions. Read more!

Millions of Dollars Designated for Poor Families Are Trapped in Washington D.C.

A relatively unknown section of the February 2009 Stimulus Package contains a $5 billion Emergency Fund for poor families. The fund allows states to receive millions of dollars to help their poor families during the economic recession. However, the funds will not necessarily be distributed to needy families across the U.S. unless certain requirements are met by each state.

What requirements? They basically include increased expenditures from the same quarter in 2007-2008 on eligible TANF programs like subsidized employment, rent and utility assistance, or back-to-school money for poor families. Since states are struggling to balance budgets, many cannot increase their spending to draw down federal stimulus funds. But the law gives the state an alternative for accessing the money. Third party private donors can give to the poor on behalf of the state. In essence, if a state spends $10 million to help poor families, 20% can be covered by private donations and 80% will be reimbursed by the federal government. So why does it look like millions and maybe even billions of dollars will never leave washington before the program fund expires on September 30, 2010?

At first, it seems like no strategic donor who wanted to provide humanitarian aid to the U.S. poor would pass up the opportunity to in essence quintuple their donation. The most notable example of one such philanthropist is George Soros. Founder of the Open Society Institute, George Soros, made headlines in August 2009 with a $35 million donation to poor families in New York State. The gift covered back-to-school expenses for poor families struggling in hard economic times. Families that qualified received deposits of $200 per child into their state public assistance EBT accounts.

George Soros’s $35 million gift released an additional $140 million from the federal government. So in total George Soros directed $175 million to help over 850,000 children in poverty prepare for the 2009-2010 school year. Why aren't more philanthropists following suit?

At Excellence in Giving we had a group of client philanthropists that wanted to recreate the gift to the poor in Texas. According to the stimulus bill, Texas has $243 million that it could receive from the federal government, and the State only plans to draw down around $12 million. So we spent a couple months speaking with State officials, community organizations serving the Texas poor, and representatives from the CBPP and HHS. Our clients decided that providing rent and/or utility vouchers to low-income families who completed a course on financial and family management would be ideal. So we submitted our proposal to the state and federal officials for review.

Unfortunately, the plan was rejected. Requiring a representative from a poor family to attend or to graduate from a financial management or life skills course before receiving the free money was deemed unlawful. The only program that would be approved is the free distribution of money to low-income families in a designated zip code, region, or state. Our donors, our research, and the local community organizations that operate life skills development courses all questioned the lasting impact of giving out money without an educational component and ongoing support from a local community organization. So our efforts came to a halt.

It is unfortunate that $5 billion has been designated to help poor families, but many families will not receive it. Generous donors are being prevented from drawing down the federal funds for their state's poor if they want to increase its impact with attendant educational programs. Literally millions of dollars are trapped in Washington D.C., and the fund will expire in 10 months. Our submitted plans to inject millions for rent and utility assistance, financial and relational management courses, subsidized employment and vocational skills training have all been denied. Yet, I would imagine that the tens of thousands of low-income families concentrated in West Dallas neighborhoods and Houston wards would have gladly taken the courses or completed the training to receive the financial assistance during this great recession. We can do better. We must do better.

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Is Your Giving Actually About You? A New Heart Test with Impact.

Generous giving might be a sign of a selfless heart. Jesus once said, “Where you put your money is the same place you’ll find your heart.” It makes sense. If all my money goes to fund youth mentoring programs in downtown, I may have a selfless heart. The same could be said if I sponsored a Chilean child, funded a rural clinic in Cambodia, and significantly contributed to HIV/AIDS reduction in Zambia.

Giving does say something about my (metaphorical) heart. However, the story better not start and end as a tale all about me. Think about it. If generosity is just a test of the heart that determines how selfish or selfless I am, then philanthropy (love of humanity) becomes philegy (love of myself)--a much less impressive word I made up from its Greek origins. In that scenario I give primarily to prove my selfless heart regardless of the impact. The fact I give proves the quality of my compassionate heart.

Many people have heard the adage that God loves a cheerful giver. Personally I have no qualms with the notion of having joy in one’s generosity. After all it is the slogan of my philanthropic advisory firm, and I think it’s essential that we experience the joy of loving and empowering people rather than simply the compulsion of tax code benefits. However, we must beware of focusing too singularly on the state of the heart. We must not let giving become limited to an exercise in legacy-building. The impact we make or miss because of our giving decisions must be added to the equation.

Here is the bottom line. If giving is only about you proving your character, it’s actually about you. That is not something most of us want to discover if it’s true. But if our giving is about strategically creating credible solutions to social, spiritual, and physical problems that plague humanity, then I think we pass a more important heart test. Our heart moves beyond philegy to philanthropy.

In true philanthropy we are not satisfied with good intentions or generous amounts. Rather the measure of our generosity has become meaningful and lasting impact. Our hearts yearn to change the lived experience of people in need, and nothing less will do. We educate ourselves, seek advice, analyze past giving, and strategize for the next move to ensure that our hearts’ desire to transform lives is realized.

As a philanthropic advisor I have listened to foundations report their giving successes. Sometimes it inspires me, and sometimes I am left hanging. When a Montana funder demonstrates how a few million strategically placed dollars significantly lowered the use of Meth in their state, I get pumped. When some other foundation announces that they have now distributed over $100 million in grants, I have no reaction. The amount of money going out the door passes no test for success in my book. It is the quality of giving not the quantity of giving that makes a real difference in the life of those you seek to support.

In a recent article in the Financial Times, columnist and philanthropic blogger Sean Stannard-Stockton called this concern “the vanguard of philanthropy.” He applauds “individuals who have recognized that philanthropy is not defined by the act of giving but by the achievement of impact. It is both an emotional act of love by the giver as well as a strategic investment in our social fabric” (Read Sean’s full article). So giving generously is only the first step in demonstrating compassionate character. The second step is taking the time and effort to give wisely.

In the end, if having a verifiable impact is the new “heart test” for giving, then that is a test I hope to pass. I do not want to be remembered for making donations. I want to be remembered for making a difference--by the people who experienced the impact of my giving. Read more!

2009 Financial Outlook for Faith-based NonProfits

How has the Great Recession affected the financial stability of faith-based nonprofits? In 2009 faith-based nonprofits are 2.5 times more likely to be facing declines in cash contributions than in 2007. In fact, only 28% of faith-based nonprofits are expected to avoid a decrease in cash contributions during the span of 2008-2009. These statistics have been pulled from a recent survey and analysis that I completed as the Senior Research Analyst at Excellence in Giving.

So what is the financial landscape for faith-based nonprofits and how are organizations adjusting their budget? In sum, organizations facing financial shortfalls are cutting back program services significantly (74% surveyed). The organizations finding a way to increase cash contributions in 2009 are streamlining operations through reduction in administrative costs (38%). The decrease in administrative costs is being matched 2:1 by the increases to fundraising expenses (80% increasing fundraising budgets).

If an organization has maintained increasing cash contributions in FY07 and FY08, the statistics show that they still only have a 53% chance of continued growth. This financial crunch is forcing many organizations to place strategic plans on hold. Hopefully, the financial restrictions will force faith-based nonprofits to identify their most important programs while cutting ineffective ones.

To read the full report, click on the following link: EIG 2009 Financial Outlook for Faith-based Nonprofits. Read more!

10 Simple Giving Ideas

Do you feel the pain of those less fortunate and wonder what you have to give? Often the average person who wants to help has trouble figuring out a feasible action plan. The following 10 ideas should provide anyone with plenty of simple paths towards giving within your means.

1. Give a goat to African poor.

For $20 you can provide a goat that will produce about three-quarts of milk each day for purposes of drinking or making cheese. Go to www.ihfonline.org to pay the actual cost of a goat for a Kenyan family in need.

2. Buy a GOOD gift card for a friend.

Purchase this tax-deductible gift card and empower one of your friends to support one of the 1.5 million participating public charities. To purchase the card, go to www1.networkforgood.org/good-card.

3. Surf the internet to benefit the world.

GoodSearch allows you to designate a charity that will receive proceeds from the money made by each one of your searches. Go to www.goodsearch.com to begin creating revenue for your preferred organization with each one of your clicks.

4. Be a low-cost monthly donor.

For $38/month you can provide education, food, and a loving context for a child through Compassion International (www.compassion.com/sponsor_a_child). For $40/month you can fund a loan to a poor South African entrepeneur who will use it and the required business training to start and/or grow their business to sustain their families (www.your40story.com).

5. Blog for orphans.

You can provide the personal connection between orphans around the world and their sponsors in the U.S. as a blogging advocate or a leader of a group of Facebook friends. Go to http://fiftyfriendsforswaziland.blogspot.com to see how one blogger enables 50 orphans in Swaziland to receive care.

6. Give your time locally.

Find an opportunity to volunteer at a local organization you respect. Go to www.christianvolunteering.org or www.volunteermatch.org.

7. Take advantage of a corporate gift matching plan.

If you own or operate a business, start a corporate gift matching plan for your employees to encourage giving. If you work for a corporation, use your company’s gift matching plan to increase the amount you give for free. Check company gift matching plan availability online at www.matchinggifts.com/coloradocollege.

8. Create a charity badge to raise money for your favorite cause.

Customize a banner that promotes your favorite charity and allows visitors to your personal webpages to learn about and donate to the cause. Go to www.sixdegrees.org to get started.

9. Purchase products that benefit the world.

Shop at www.worldofgood.com or buy RED products at www.joinred.com to economically empower small businesses around the world, support charitable causes, and promote eco-friendly consumerism.

10. Recycle cell phones, ipods, and cameras for charity.

Recycling for Charities is a nonprofit recycling company committed to protecting the earth and supporting causes that benefit humanity. Collect your old electronics or have a recycling drive to benefit your charity of choice. Go to www.recyclingforcharities.com. Read more!

Solving Problems that Concern You: Diversified Giving Portfolios

Do you give for the good feeling you get or for specific results you want to achieve? To be honest, most of us land somewhere in-between. We see a need and want to help. But, what if we see a big problem and actually want to solve it?

If you want to start solving problems that concern you instead of just supporting projects you admire, then I recommend a diversified giving portfolio that addresses the problem's short-term and long-term effects and provides credible solutions to the root causes. Because you can't stop AIDS in Africa with more meds. You can't stop the pain in the lives of orphans with orphanages. You can't stop the cycle of urban poverty with more affordable housing. Any viable plan to change the direction of a community's downward spiral must take a more comprehensive approach.

What does that look like? Take, for example, the plight of an increasing number of orphans in Swaziland. To truly solve the problem of their increased suffering, you can devise a diversified giving portfolio that addresses causes and symptoms. Specifically you can identify organizations that are "best-in-class" for each of the following areas:

Abstinence Instruction
Relationship/Parent Coaching
Parent Attrition Prevention: HIV/AIDS prevention, Substance Abuse Counseling, Employment Opportunities for Impoverished Heads of Household, etc.
Orphanage/Group Home
Foster/Village Member Care
Adoption

Why is it necessary to support effective programs in all these areas to solve the problem? Think about it. The majority of orphans in Swaziland are a direct result of the AIDS pandemic that has reduced the national population over the course of 10 years from its projected 1.2 million people to 912,000 in 2007. Children do not have parents because over 16,000 adults die every year from AIDS. To mitigate the suffering from the HIV/AIDS pandemic medication would help, and to prevent the spread of the HIV virus abstinence education could also contribute. So a strategically crafted giving portfolio that intends to solve the increasing orphan problem in Swaziland would provide medication and abstinence education.

For those children whose parents do not die from the disease, many struggle to care for children because of lack of economic opportunity. So microenterprise initiatives are also critical to keeping children in independent family contexts. If such employment opportunities could be combined with parental training and adult counseling programs, the root causes for increasing orphans in Swaziland could be addressed to ensure long-term change.

However, short-term symptoms still need attention. That is the reason for supporting orphanages and a culturally fitting foster care program. For example, Children's HopeChest employs village grandmothers who oversee multiple child-headed households in a village to ensure their health and development without having to place them in an orphanage. Adoption programs with local orphanages also contribute to solving the short-term symptoms of this deeply rooted problem. In all of these programs, the solution to the problem remains the same: reduce the number of children without parents and promote the return of displaced children to a healthy family context.

We do not necessarily need more giving, but we do need smarter giving. So the next time you go to give, consider solving a problem with a comprehensive solution: a diversified giving portfolio. If you do it right, you can track real change on a large scale through appropriate post-grant impact analysis. The results of your giving to multiple programs in one geographic area can be tested against the government, UN, or World Health Organization numbers. Over a 5 or 10 year period you could actually watch the percentage of child-headed households and unclaimed children drop. You would truly be solving the problem.

If you need help evaluating organizations, understanding cultural dynamics, or analyzing root causes and short-term symptoms, call 719-329-1515 and speak to one of our philanthropy advisors at Excellence in Giving about becoming a short-term or long-term client that solves the problems that concern you most.
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