Last night, I was shocked and spellbound to hear NPR devote an entire half hour segment to the special report called: In Search Of The Red Cross' $500 Million In Haiti Relief. NPR and Pro Publica's reporting seems fair, detailed, and well-balanced. Listening to is was like watching a train wreck: fascinating and painful. Years ago, I heard a speaker refer to studies showing that when people see bad things from just two nonprofits - the Red Cross and the United Way - they assume these bad things are true of the entire sector. But our donors don't hear the story as "about them." They hear it as "about nonprofits." And worse, about us.
So this "exposé" affects us all.
It would be really easy for us to shake our heads and point fingers. We could talk about the problems of bureaucracy and management fees, patting ourselves on the back for being more efficient because we're small. We could debate whether the Red Cross experienced mission creep - trying to go beyond their strength of disaster relief and trying to move into the unfamiliar territory of rebuilding.
But ask yourself if your organizaiton would have the guts to do what Doctors Without Borders did: telling people to stop giving to them for Haiti relief since they'd raised enough. That takes both guts, integrity, and a crystal clear understanding of your organizational abilities.
We're living in glass houses
This story needs to be a wake-up call. How would you answer NPR's Laura Sullivan's question to the Red Cross: "Why can’t you tell us where you spent the money and what your expenses were? You obviously have that information. Why can’t the public see it?"
Would you pull out the documentation and show her? Or would you sound like you're trying to hide something like the Red Cross spokesperson did?
In the last couple of weeks, I've spoken with two small nonprofits who are rising to the challenge. They've been subjecting their financials to a rigorous independent audit. Both organizations discovered some issues in their reporting that they needed to clean up. Nothing catastrophic. But it was much better for them to find those themselves than for NPR to find them first. And now, both organizations are much more prepared to answer the "where did the money go" question.
Please resist the urge to throw stones at the Red Cross. Let's be honest, we're all living in glass houses. Even if we're not dealing with hundreds of millions of dollars, very few of our nonprofits would be able to track a donors gift from donation to impact like charity:water does. But if you've been paying attention at all, each new generation of donors increasingly want transparency.
We can get frustrated that donors' expectations are changing and go out of business, eliminating any potential of future good our nonprofit could do. Or we can rise to the challenge and learn to tell the story of our finances.
- If you outsourced your projects to other charities, share the compelling reasons.
- If you charge management fees, explain why management is crucial for responsibly stewarding your donors gifts.
- If you changed your approach, like from building new houses to repairing shacks, be ready to explain why. And to explain it to both your donors and to the residents who were promised the new houses. Especially if you say the project still costs the same $24 million despite the change.
How to prepare your nonprofit today
Block out 30-minutes to listen to NPR's Red Cross story.
- Resist the urge to feel smug or to feel relief that NPR didn't call you.
- Listen to the questions donors are asking. The voice is Laura Sullivan's but the questions are those your donors are asking.
- Then start working now to figure out how you'll answer those questions.
Answering these questions feels like getting naked. Like being exposed. Pay special attention to the places you think, "We can't possibly tell our donors that!" In our increasingly digital world, the things we desperately want to hide are easier than ever for others to find. Once you can you tell your numbers story without cringing, can your board? If we can't stand behind our numbers, we don't have the right to be handling somebody's donations.