With Charity for All, by Ken Stern

After a decade at National Public Radio, Ken Stern learned a few things about the weird world of the American nonprofit sector.  In his new book, With Charity for All: Why Charities Are Failing and a Better Way to Give, Stern bemoans the state of charitable activity today, arguing that most of the nonprofit sector is financially inept at best, and downright unsavory at worst.

Some charities obviously are fraudulent.  Every now and then we read about them.  When the salary of the CEO and money spent on phone banks dwarf the tiny percentage of revenues, if any, that go to the supposed beneficiaries of a charity, it's easy to call foul.  But it's not always so easy to identify this type of non-charity.  Getting charitable status from the IRS is a breeze, state oversight is weak to non-existent, and plenty of donors are swayed by words like "veteran," "children," "hope," "beneficial," "cancer," and other key words.  Investigating the financials of charities can be time-consuming, frustrating, and near impossible.

Other charities, while more above-board about their financials and activities, probably should not be classified as charities.  Two examples Stern explores are non-profit hospitals and college football bowl games.  In terms of treating needy patients, non-profit hospitals as a whole are no more charitable, and in some cases less, than their for-profit competitors.  Yet they enjoy a variety of tax benefits that give them a competitive advantage.  With the bowl games, it's even harder to say that they are "charities" with the money they spend on golf outings, high salaries, travel, and entertainment.  Similarly, Stern points the finger at opera companies, charities which exist primarily for the benefit of--their donors!  Wealthy people donate to the opera so that wealthy people can go to the opera.  Hmmm . . . . Stern makes a good argument with these examples that the very concept of charity has been stretched.

The greatest concern is not for flagrantly fake or unethical charities, or for non-charitable charities. It is the matter of effectiveness.  Like any other enterprise, charities are market driven, with the donor as customer. Whether they accomplish what they set out to do becomes secondary; they know a good anecdote brings in more contributions than a spreadsheet of results. "Charities know that they at rewarded not for finding cost-effective solutions to problems at all--but for finding ways to personalize, humanize, and convey needs." Stern calls for the charitable sector to "shift from a donor mentality to a charitable investment mind-set" by creating systems that distinguish among charities, even something like charitable mutual funds, in which analysts measure and evaluate the effectiveness of charities.

Stern has some great ideas which I anticipate will be met with mixed reviews by fund raisers and charity professionals. I can see many thinking they are the exception to Stern's thesis. It's always easier to see others' shortcomings than one's own.

Two things I wish Stern had spent more time on: religious charities and the effectiveness of government versus private work. Religious charities and their donors are driven more by conviction than by effective measures. That is not to say they are exempt from the requirement that they remain fiscally sound and prudent in their programming. But a comparison of religious and nonreligious charities and the way the solicit donations, measure results, and spend their resources would have been interesting.

Stern also shows a rosy view of government's role in the charitable sector. He points out that as a result of President Johnson's Great Society, "the federal government had become the largest single funder of the charitable sector." Given Mr. Stern's previous experience at NPR and his involvement in Democratic politics, it would come as no surprise that he when he envisions a more effective charitable sector, the federal governed plays a large part I'm his vision. I'll buy his call for results-oriented evaluation of charities, but to centralize such evaluation in the hands of government is self-defeating. He points out that the private sector was more effective than government or charities in responding to Hurricane Katrina, and gives examples of private groups that evaluate charities, but he seems too eager to jump to the federal government.

All in all, Stern's arguments should be a clarion call for the entire charitable sector.



Thanks to Edelweiss and the publisher for the complimentary electronic copy!