To the best of my knowledge, Judaism, Christianity and even plain-old, agnostic ethics advocates giving someone a second chance.  But is this true with nonprofit organizations? Does a charity that has made mistakes and lost our trust deserve our donations in the future?

This question was inspired by an article in CNN Money by Allan Chernoff entitled, “Is the American Cross Worthy of our Donations?”

Haiti’s catastrophe has triggered an outpouring of support for the American Red Cross, which has raised more than $203 million for its Haiti Relief and Development fund in just three weeks, far more than any other charitable organization.

But, is the American Red Cross worthy of such generosity given its mixed record of performance during the past decade?

In short, the article explains that recent years have seen local American Red Cross chapters victims of embezzlement, the organization attempt to defer donations earmarked for a Word Trade Center Relief Fund for other purposes, and the charity blamed for poor coordination of relief efforts after Hurricane Katrina.

With the millions rolling into The American Red Cross, I’m forced to wonder exactly at what stage a charity washes itself clean of previous wrong doing? When is a rehabilitated nonprofit worthy of our donations?

My answer: It depends (so sue me for being non-committal).  The following are my thoughts on the subject:

Trust

“American philanthropy is built on trust,” said Kathleen McCarthy, director of the City University of New York Center on Philanthropy (the quote was taken from the above Chernoff article).  Charity is like every other relationship on the planet, its all about the trust.  A nonprofit that ruins this trust might just have burnt their bridge – permanently and with no questions asked.  However…

Change

Has the organization undergone real change?  Beauty is skin deep, but mismanagement can seep into the core.  It is a definite red flag if the charity still has the same practices and oversight in place that led to previous disasters.  However, if a nonprofit has undergone change – including but not limited to changing directors, board of directors, procedures, transparency – than maybe a re-examining of the embargo is warranted.

Case in Point: The Red Cross hired a new CEO, Gail McGovern, in 2008.  She promises that “we are [The Red Cross] excellent stewards of every single dollar that we raise” and that 91% of a donation goes to supporting programs with only 9% covering various  overhead.  This last fact is confirmed by Charity Navigator (again, check the above article).

Connections/Experience

Charities (specifically those that support causes abroad) spend much time and effort developing contacts and perfecting methods to deliver their support in the most efficient way possible.  It is quite possible that a new or different charity might lack the experience and contacts to properly render a particular charitable service.  Lack of options could, conceivably, thrust a donor back into the arms of an institution he or she once abandoned.

Case in Point: I have opened bank accounts for wronged donors who were convinced they could do it better than the charity that they just stopped supporting.  It has killed me seeing these same donors squander resources as they fumble around trying to build new infrastructure and reinvent the wheel.  Many in this last category have eventually closed shop realizing their mistake to go at it on their own (A better choice might be to try to change the organization from within).

Bureaucracy

It could be that despite the change in management or sworn promises, an institution’s murky organizational structure and red tape cannot guarantee a true change. If so, the best option is to run, and run fast.

Case in Point: A colleague of mine was hired by a large institution as their fundraiser, a new position created at the behest of one of the board members.  The CEO/Founder refused to change his M.O. and did not allow this new employee access to the information that was necessary to do his job.   Needless to say, after some time on the job, the person quit.  And this is one example of many, which I know of first hand.

To Err is Human, To Forgive is Divine

Maybe everyone does deserve of second chance, if for no other reason than because each one of us has made mistakes in the past; mistakes that we have probably taken to heart and earnestly tried to correct.

When feeling Christian enough to take this leap, I would only suggest that a donor require the organization in question to earn back his or her trust, maybe starting with a smaller donation and increasing the amount as the charity proves itself worthy.

So where does that leave us?

1. I’m not a believer that one mistake should condemn a nonprofit forever. If the need arises and the opportunity presents itself, a donor should consider giving again under some of the guidelines mentioned above.
2. I’m also a firm believer that witnessing a problem, you can either sit on the sidelines or become part of the solution. If a donor honestly feels that this organization is the right man for the job, then it might be incumbent upon him or her to try to change the direction/policy/behavior of a particular charity be becoming involved. Yes, sometimes doing good or doing the right thing actually requires more effort than writing a check (scary, but true).
3. Charities need to realize that giving charity, for many people, is a way to make donors feel better about themselves. This feeling can be easily be gotten from simply donating to another charity. A nonprofit that makes it harder for someone to donate (from either a moral, strategic or technical point of view) can quickly lose out – and they shouldn’t be surprised.
4. Charities that have undergone true change should have the guts to let people know. Being honest and letting potential donors know that the organization is under new management is one of the best hopes of luring back previous supports.

So what do you think?

Tizku Lemitzvot, [May you continue to merit doing good deeds]

Shuey