A March for Charity Reform is Afoot

Original post date: August, 28, 2014

Posted by: Matt Kelly

By June of next year, hundreds, perhaps thousands will be marching 60 miles through New England to Salem, Massachusetts, the site where the Pilgrims first landed at Plymouth Rock. For three days, these passionate activists will trudge a path to change the world. They will come from many diverse backgrounds, but they will all be marching for a common cause:causes.

Causes? Sounds paradoxical, doesn’t it? Broad at the very least. Many reading this have probably participated in a 5K walk for breast cancer or autism, but marching for causes themselves? Just why is there a need for this meta-march?

Members of The Charity Defense Council say the need is dire. They claim that charities in America are beholden to an unrealistic ideal that’s kept them locked in the dark ages. They argue that without a change in public policy and public perception, we will never be able to change the world for the better.

Charities are uniquely handicapped in their ability to take risks and spend revenues. Like a business, a charity must take risks to innovate and receive rewards, yet donors discourage such behavior. Could Apple have created the iPhone with costs below 20% of revenues? Not a chance! Could Netflix have brought itscustomers the unprecedented access to entertainment they now enjoy without first taking the risk that it might not work? No way! Charities with high staffing and marketing costs can be done for if they get a bad rap from watchdog groups. Yet for-profit businesses take such risks on a daily basis, reaping the rewards for their customers. The Charity Defense Council suggests the social sector must do likewise if they are to solve the world’s monumental social problems and help those in need.

The Charity Defense Council is headed by its charismatic leader, Dan Pallotta. In previous blogs (read here) I’ve discussed Pallotta’s for-profit charity fundraising model, which raised over half a billion dollars to fights AIDS and breast cancer during the 1990s. Pallotta has been a champion of the social sector, pointing out this flawed double standardand its detrimental effect on those in need. Governments and private donors tend to emphasize the percentage of revenues that charities spends on overhead costs, while ignoring their actual impact. Further exacerbating this problem are the onerous government grant conditions that can keep nonprofits’ administrative costs high. This is a recipe for stagnation in the social sector, Pallotta says.

Yet many donors are still wary to give their money to an organization that spends too much on overhead. At first glance this can make sense. If your donation to a charity simply enriches its CEO, then you might reasonably consider that a waste. However, charities, like businesses, must attract talent if they wish to be effective in solving social problems. Dan Pallotta and the Charity Defense Council are forcing people to ask tough questions, challenging our long held beliefs about charity. With a stated mission to “change the way people think about changing the world,” they certainly have their work cut out for them.

The Charity Defense Council hopes to raise $1 million with this march so they can act as an anti-defamation organization. Already, many nonprofit employees are registering in a show of support from the social sector. Though the Charity Defense Council’s mission is of national relevance, its efforts give Floridians reason to reexamine our state’s policies with regard to nonprofit regulation and charitable giving. In future blogs, I’ll be talking about just that.

About DeVoe Moore Center

The DeVoe L. Moore Center is conducts economic research and policy analysis focused on state and local policy issues and is located in the College of Social Sciences and Public Policy at Florida State University in Tallahassee. As an educational institution the DMC provides professional research experience to undergraduate and master’s students through an extensive program of internships and independent study, preparing them for a future in public policy, economic development, public sector accountability and entrepreneurship.
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