Opinion

Are Rich Charities Getting Richer, While Poor Charities Become Poorer?

By | Aug 13, 2012

Full Money Jar Next to Empty Money JarI am no longer surprised when I receive an email from a nonprofit group announcing their dissolution of operations. More and more charity groups are going out of business. Typically, these organizations are small, with little capacity to weather this current economic storm.

Here in Los Angeles, a coalition that fought for the rights of our impoverished neighbors is now gone. A decades-old group that helped runaway youth, a homeless shelter for adults, a group that supported LGBT youth…they all closed their doors in the past few years.

Of course, everyone has been hit hard by this economy. From middle-class families who own homes, to people struggling to survive on public benefits. From cities filing for bankruptcy, to human services agencies barely making payroll.

The fight to survive is in full force everywhere. Except for within one specific group of charities.

Large charities are, actually, thriving. In fact, bigger, mostly nation-wide, organizations are seeing an increase in donations, up to 5% in the past year.

When you think about it, this makes sense. National charities with larger budgets have the capacity to hire fundraising and marketing professionals who spend all of their time increasing the organization’s revenue. Smaller local organizations can often barely pay their existing program staff, let alone hire additional people to focus solely on fundraising.

Add to this the “bigger is better” phenomenon, in which most large philanthropic foundations provide grants for the programs that serve people but not for administrative costs. In other words, foundations like to pay for social workers and program staff, but not for human resources or, worse, fundraising staff.

Larger agencies have the capacity to raise funds elsewhere to cover administration and overhead. Smaller agencies are able to raise money for their programs and services, but go out of business because they cannot afford the bookkeeper, the director, or the electricity bill.

Is this simply a sick Darwinian syndrome that kills off small, local charities because they are not strong enough to survive?

Sadly, that small homeless shelter around the corner, with its few dozen beds and compassionate staff that knows all of their clients’ names, is far better at empowering hurting people than the national organization with no direct connection to the front lines of homelessness other than what local agencies and policymakers tell them.

The Darwinian message from good-hearted donors is simple: I’ll help you pay for food and case workers to help the people sleeping in your shelter beds, but please do not use my donation to pay for electricity, the clerk who writes that case worker’s paycheck, or the Director who is trying to raise unrestricted funds.

On the surface, the message sounds compassionate. But it is killing off small compassionate agencies that have the most street-cred and the best opportunities to change lives.

Foundations continue to embrace this Darwinian message. The United Way in Washington, D.C.  has created a new policy where smaller organizations will not be funded unless they are above a certain minimum threshold of revenue. The threshold is low, but this policy is just another way of directing donations to larger agencies instead. In Washington, D.C., 100 to 150 small charities could lose desperately-needed funding.

Are rich charities getting richer? When the competition for limited funds is won by those with the best fundraising and marketing savvy, the answer is often “yes.”

Are the poorer charities getting poorer? Not only that, they are going out of business.

The sad fact is that not only are smaller charities struggling to survive, but the people they serve are adversely affected as a result. With this in mind, it is safe to say: The poor are getting poorer.

One Comment

  1. Posted Sep 8, 2016 at 8:07 am | Permalink

    Thanks for Sharing !! that small homeless shelter around the corner, with its few dozen beds and compassionate staff that knows all of their clients’ names, is far better at empowering hurting people than the national organization with no direct connection to the front lines of homelessness other than what local agencies and policymakers tell them.