21 February 2007

Donating to nonprofits: A recent history

One of the most common reasons people give for not donating is not knowing what organizations are trustworthy. While donating to U.S.-focused agencies surged immediately after September 11th, corruption and mismanagement of funds were discovered in of the United Way and American Red Cross of each of their September 11th funds. In addition, hundreds of false websites for September 11th funds popped up. Since September 11th, major media sources intimated that some non-governmental organizations (NGOs) in the Middle East siphoned money to terrorist organizations.

Many donors are more guarded in what organizations they give to than in the past. This causes several changes:

Donors demand financial reports of nonprofits before donating. Particularly large and donors and those that give year after year spend more time researching nonprofit organizations and expect to be kept updated on their projects. This may include tax filings, annual organizational reports, and project reports. The relationship between nonprofits and donors now resembles the relationship between an investor and his investments

Donors are more likely to give to specific projects or place limitations on the use of their funds. As a result of both a marketing technique of nonprofits and lowered donor confidence, many nonprofits offer the opportunity to sponsor particular projects instead of the organization as a whole. This allows donors to feel like their gift is more personalized, as well as piece of mind that their money isn’t going strictly to administration costs. This allows donors to fund political organizations without funding lobbying, and allow donors to help build a school without funding morally ambiguous programs such as birth control.

Small donors are less likely to donate. A lowered sense of trust has resulted that many people that used to give small amounts without a strong interest or attachment to an issue or organization no longer give anything. Many nonprofits have had to restructure how they acquire funds due to the disappearance of the funds from these donors.

Donors give more to large, well-known organizations such as Oxfam, Red Cross, and The Salvation Army. Regardless of the efficiency of the organization, donors feel more comfortable giving to ‘household names’ than lesser-known organizations.

The new environment for donors has both helped and hurt many nonprofits. While demanding financial reports has made nonprofits look harder at their own books, a general decline in donations has forced many good organizations to cut programs or close doors. As a response to these difficulties, however, nonprofits responded with ways of making it easier to learn about their organizations and finances.

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