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The International Journal
of Not-for-Profit Law

Volume 8, Issue 2, November 2005

A publication of the International Center for Not-for-Profit Law

Table of Contents

Letter from the Editor

Public Benefit Commissions

The Public Benefit Commission: A Comparative Overview
David Moore

Charity Commission for England and Wales
Richard Fries

Moldovan Certification Commission
Ilya Trombitsky

Armenian Governmental Commission Regulating Charitable Programs
Tatshat Stepanyan

Articles

From Elections to Democracy in Central Europe: Public Participation and the Role of Civil Society
Susan Rose-Ackerman

Reinventing Liberia: Civil Society, Governance, and a Nation's Post-War Recovery
J. Peter Pham

The Law of Zakat Management and Non-Governmental Zakat Collectors in Indonesia
Alfitri

The Power Shift and the NGO Credibility Crisis
James McGann and Mary Johnstone

Annus Horribilis for Smaller Nonprofits: Restoring Hope Through Building Donor Resiliency
Charles Maclean and Jim Moore

Review

Understanding Organizational Sustainability Through African Proverbs: Insights for Leaders and Facilitators
By Chiku Malunga, with Charles Banda
Reviewed by Emeka Iheme

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Annus Horribilis for Smaller Nonprofits: Restoring Hope Through Building Donor Resiliency

By Charles B. Maclean and Jim Moore1

The record-breaking string of natural disasters made 2005 a challenging year for many American nonprofit organizations, especially small and medium-sized ones. Moved by the horrific images on television, donors rushed to support relief efforts, typically by diverting precious dollars away from the nonprofit missions they traditionally support. As a result, nonprofits have found themselves competing for donors’ attention and a diminished pool of resources. Donor fatigue has become a buzzword. Now it's time to truly understand the dimensions of donor fatigue and focus on how to move beyond it now and prevent it in the future.

The news is full of stories about organizations falling short of fundraising goals. In early December, an anxious Salvation Army representative told a Denver television station that, despite the organization's direct role in disaster relief, donations were down overall from the previous year and the “bell-ringer” campaign was bringing in less than expected. Shelves in many food banks are nearly empty, and many small- to medium-sized organizations have gotten disappointing results from annual donor appeals and new-donor recruitment efforts.

Desperation, unfortunately, produces inundation: donors find themselves awash in appeals for funds. Many donors are growing exasperated. A northwest physician said, "I'm feeling burned and burned out. We get at least 100 appeals to give a month. We're overwhelmed, frustrated over wasted time and paper, and feel betrayed by the nonprofits that sold our name to other charities without our permission. We'll still give, but will start seeking out the charities we want to give to and will put all the rest of the solicitation mail in the circular file unopened."

To measure the dimensions of the problem, we undertook a nationwide on-line pool, seeking the views of some 500 donors and non-donors, nonprofit professionals and board members, foundation officials, and nonprofit consultants. Key data in this poll correlate well with those from other formal and informal surveys, including surveys conducted by GuideStar and the Association of Fundraising Professionals. At the same time, our poll is unique in that more than a quarter of respondents have no affiliation with nonprofit organizations other than giving.

Among our findings:

Overall giving may have risen in 2005, but that's only part of the picture. Our poll demonstrates that disaster-relief fundraising has had a major impact on small to medium-sized nonprofit organizations. The diversion of dollars from one nonprofit segment to another is vitally important. A community's needs remain the same regardless of suffering elsewhere.

And, while it’s true that much of the sector’s overall revenue comes from sources other than individual donations – such as government contracts, ticket sales, fees, foundation grants, and corporate funding – individual donations constitute a “substantial” or “majority” portion of revenue for most organizations with budgets under $2 million per year. These groups rely on individual donations.

History, the post-9/11 period in particular, shows that the nonprofit sector will recover. That’s the good news. Unfortunately, today's revenue shortfalls are, in many cases, hurting the people these smaller, non-disaster related organizations serve. The ones who suffer the most are those who can afford it the least: people who rely on the programs and services of struggling organizations. When a soup kitchen must close, its clients may be pleased to know that a flood zone is being rebuilt – but they're still hungry.

History shows, too, that disasters recur, and a prudent nonprofit manager will take steps to prepare for the unexpected. Just as responsible organizations back up computer databases, lock confidential files, maintain off-site copies of important records, and carry insurance, they must be ready to adapt to events outside their control. Nonprofit boards and executives have a fiduciary responsibility to ensure, to the best of their ability, that a natural disaster elsewhere does not become a financial disaster for their organization.

For instance, boards and executives may believe that they pursue their missions most effectively by living hand-to-mouth and spending every dollar on program activities. In truth, such an approach may seriously jeopardize their mission. Crisis-driven budget cuts inevitably hurt those the organization serves, and no one is served if the organization must close. Instead, nonprofits must develop realistic, long-range fiscal plans that diversify revenue and set aside reasonable strategic reserves during times of relative abundance. By doing so, they, like larger organizations, will be able to survive the next disaster.

In addition, our survey indicates that – in good times and bad alike – nonprofits need to focus on earning and retaining the trust of their donors. Transparency, unambiguous messages, and candid reporting of program performance and organization finances are vital. Renée Beauregard, of CommUlinks of Colorado, suggests that donors and members should expect regular communications from organizations, and that most of these contacts should not include an overt fundraising appeal.

In sum, nonprofit leaders and staff members can take five important actions based on the findings of our poll:

Carpe diem – these actions will determine which nonprofits are goners, mere survivors, and thrivers.

1 Charles B. Maclean, PhD, is the author of a new tool and workshop, “Shifting from Donor Fatigue to Donor Uplift.” Jim Moore is the prime sponsor of the series of surveys available at www.commulinks.com. For the complete report summarized in this article and an opportunity to take part in a “1-Minute Donor Resiliency Poll,” see www.philanthropynow.com. Send feedback to the authors at advocate@philanthropynow.com or info@communlinks.com.

 

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