Natural Disasters, Aid Groups, and Donor Questions (Special Podcast)

NPQ is very proud to feature Tiny Spark this morning, an independent, nonprofit news program and podcast that reports on philanthropy, nonprofits, and international aid. We hope and plan to have this podcast be the first of many.

Founded in 2011 by former Africa correspondent Amy Costello, Tiny Spark stories have investigated TOMS Shoes and exposed the harm caused by medical volunteers in post-quake Haiti. The program also features in-depth interviews with leading voices from the world of philanthropy, international aid, and development.


In the wake of several natural disasters, from hurricanes to wildfires, many of you have tried to help by giving to aid organizations. It’s easier than ever to do, with companies like Google and Facebook providing donate buttons that link to a number of different charities and both companies have matched donations to certain aid groups. In August, NFL star JJ Watt used the crowdfunding platform YouCaring to single-handedly raise more than $37 million for Hurricane Harvey.

Of course, even if giving is easy to do, it’s much harder to ensure our charitable dollars have impact. So we put some of your questions about disaster giving to Ohio State University professor Brian Mittendorf, who specializes in nonprofit accounting, and Bob Ottenhoff, CEO of the nonprofit Center for Disaster Philanthropy. In this podcast, they tackle recent criticisms about the American Red Cross, explain how nonprofits spend the dollars you give, and discuss the importance of giving long-term aid and not just immediate relief. “You might also consider, as you’re planning how to respond to disasters, to save some of your dollars for the next month or the next year when the really difficult work begins,” Ottenhoff advises. “People are going to really need our dollars then because they’re scarcer to get.”


Transcript

Welcome to Tiny Spark, where we take a close look at nonprofits, international aid, and philanthropy. I’m Amy Costello.

In the wake of several natural disasters, from hurricanes to wildfires, many of you have given to aid organizations, hoping to provide some relief to those who have been impacted. And in the past few months, lots of questions about charity have been raised.

Like, what’s the deal with the American Red Cross? Aren’t they wasteful?

In fact, when Hurricane Harvey hit south Texas, The New York Times’ editorial board advised donors to ask for “greater accountability from trusted charities like the American Red Cross.” On Twitter, hashtags like #boycottredcross cropped up in the wake of the storm.

But Ohio State University professor Brian Mittendorf, who specializes in nonprofit accounting, says for starters, the fact that in the wake of natural disasters…people are even asking questions about the Red Cross is new.

BRIAN MITTENDORF, ACCOUNTING PROF, OSU: In the past, any time something like this came up, the default was everyone just donates to the Red Cross. End of story. And that didn’t put much pressure on the Red Cross.

But lately, the American Red Cross has been under all kinds of pressure from the public and from donors, big and small. The criticism reached a crescendo after investigations by NPR, ProPublica, and others revealed wasteful spending and failure to deliver on promises after the 2010 earthquake in Haiti and hurricane Sandy, among other disasters. The Red Cross declined a request for an interview, but they did send a statement that said in part, “Disasters by their nature are chaotic, and that means that things sometimes don’t go as planned, so we readjust accordingly to meet the mission.”

Mittendorf says there has been an upside for nonprofits in the wake of these revelations about the Red Cross.

BRIAN MITTENDORF, ACCOUNTING PROF, OSU: Some of the investigations into the Red Cross and their decisions have helped open the door to other organizations, so I see a positive development is that people see there being more options.

Indeed, as a growing number of donors have grown wary of the Red Cross, there have been calls to give to small, local organizations, or to nonprofits that do one specific thing, like diaper banks or animal rescue groups. And new nonprofits are cropping up all the time.

BRIAN MITTENDORF, ACCOUNTING PROF, OSU: The concern is that there’s so much variety, there are so many ways to donate at this point. You now have ways where you can do GoFundMe campaigns. And you know in terms of how vetted things are, we’ve covered the extremes. The Red Cross gets substantial amount of scrutiny, in part because of its size. But as you go to the pendulum of the other extreme, some of these GoFundMe campaigns have no vetting and no scrutiny.

GoFundMe is a popular crowdfunding platform that lets individuals raise money for their own personal causes. So does a site called YouCaring, which bills itself as “compassionate crowdfunding for humanitarian causes.” NFL star JJ Watt chose YouCaring to raise money after Hurricane Harvey hit Houston, his adopted hometown. Watt posted this video online soon after.

JJ WATT, YOUCARING VIDEO: You can donate something small. You can donate something big. Whatever you can donate, please donate to help these people out.

And boy, did they. Less than three weeks later, Watt had raised more than $37 million dollars from more than 200,000 donors. A publicist for the Houston Texans would not make anyone available for an interview, but said Watt has not yet distributed any of the money he’s raised and will announce plans “in the coming weeks”.

Meantime, Google and Facebook have helped raise millions of charitable dollars from the public, too. And they have sought advice from The Center for Disaster Philanthropy, a nonprofit based in Washington, D.C.

BOB OTTENHOFF, CENTER FOR DISASTER PHILANTHROPY: We’ve been working with both of them for a while.

Bob Ottenhoff is the Center’s President and CEO.

BOB OTTENHOFF, CENTER FOR DISASTER PHILANTHROPY: Both of them are looking for ways to be more strategic and more effective in their disaster giving. So we’ve been working together to think about that.

When Hurricane Harvey struck, Facebook and Google pointed donors to Ottenhoff’s organization, which pulled in about $12 million for Hurricane Harvey alone. That’s four times the amount of the organization’s 2015 budget, according to GuideStar.

And for lots of nonprofits working in disasters, that’s the way it tends to go after a big storm. At first, there is a windfall of money and interest from the public. Ottenhoff says 70 to 80 percent of all donor dollars that go toward a disaster arrive within the first couple of months.

BOB OTTENHOFF, CENTER FOR DISASTER PHILANTHROPY: Once those couple of months have passed, contributions drop off precipitously.

And when the next disaster strikes, many donors will feel compelled to reach into their pockets again. And when they do, they will still be wondering: Which charity should I give to? Who’s doing good work? And one of the ways they’ll try to answer that is by asking nonprofits a seemingly simple question: How many cents of every dollar that I give goes to overhead, and how much goes to actually helping people?

BRIAN MITTENDORF, ACCOUNTING PROF, OSU: Yeah, that’s a good question. I think it’s a legitimate question for donors to ask.

Again, Brian Mittendorf:

BRIAN MITTENDORF, ACCOUNTING PROF, OSU: I get why donors want to know the answer, but I also think the most honest answer is to say we don’t know for sure, because it’s not so straightforward, especially when you’re an organization like the Red Cross that’s operating in a variety of different venues. To be able to say the precise amount that’s going directly to those in need, it’s not so straightforward. But that doesn’t escape the question that donors might want to know, and so in that case I would say providing an appropriate range and making that part of your budget and sticking to that is a fair thing to ask.

Mittendorf says that when donors demand that the bulk of their donation goes to direct relief and not to overhead, that pressure can have unintended consequences for nonprofits you give to.

BRIAN MITTENDORF, ACCOUNTING PROF, OSU: If donors come and say, “We want 90 cents on the dollar to go towards the cause,” the simplest way for a charity to accomplish that is to take the dollar that was given to them and grant it to some other charity and let some other charity deal with the administrative costs. And we see that often. Some of the highest-rated organizations are ones that just pass the money onto someone else and that’s not exactly what the donor wants. If you focus just on that number, it creates some perverse incentives for organizations to instead of doing direct hands on work—for example, like the Red Cross does—it creates an incentive for the organizations to say we’re just going to pass it on to someone else and let them figure out how to do that.

Presumably, when we give to a charity after a disaster, we want the organization to actually help people. Directly. We want them to have the organizational capacity that will enable them to respond when tens of thousands or hundreds of thousands of people suddenly find themselves in utter crisis.

BRIAN MITTENDORF, ACCOUNTING PROF, OSU: In the end, we ultimately want organizations that don’t just say “I gave it to the cause” but operate—do the actual hands-on work. That’s the area where I think the Red Cross is facing some unfair criticism. They’re doing the hands-on work, and, sure they’ve made some mistakes along the way. But they’re doing the hands-on work, and so we would expect them to have more administrative costs when they do that. They need offices in multiple locations. They need to train staff. Now, if they spent 90 cents on the dollar on administrative costs, everyone should be concerned. It’s just this notion of the incremental dollar, that I need the absolute maximum amount of that dollar to be spent on what people would refer to as a program. It does create this incentive for an organization to be so lean that it’s not able to accomplish anything.

The Red Cross says it worked across eight states, Puerto Rico, and the US Virgin Islands responding to the recent hurricanes. They went to California, too, where they say they gave shelter to almost five thousand people escaping the wildfires.

But a nonprofit like the Center for Disaster Philanthropy is not focused on that kind of direct relief work. Their funding targets long-term recovery work. So right now, Ottenhoff says his organization is in the process of vetting groups they’re going to give their $12 million to.

BOB OTTENHOFF, CENTER FOR DISASTER PHILANTHROPY: We want to know about the capabilities and the capacities of these organizations. You know it’s one thing to have the desire to do it. We want to make sure they’ve actually got the ability to get done what is going to be needed.

Ottenhoff says it will take months to figure that out. And given how seriously and methodically he treats the task of distributing donor dollars, I asked Ottenhoff whether he had concerns about the $37 million raised by football star JJ Watt. He was reluctant to weigh in at first…but I pressed him a little bit.

BOB OTTENHOFF, CENTER FOR DISASTER PHILANTHROPY: By raising this much money and by raising expectations in the way he has, he now also has some enormous responsibilities to the people of the Houston area. And I do hope he’ll find professional support, professional advice, because it is an enormous task he’s undertaking for himself. You know, I usually say, when it comes to organizations that disaster is not the time to support brand new startup organizations because they don’t understand the difficulties of working in an environment where transportation is a problem, housing’s a problem, warehousing is a problem. And, so probably to some degree, that is the case with brand new funder organizations as well.

Watt’s money will be doled out through the foundation that bears his name, which, over the five years since its founding, has provided around three-and-a-half million dollars to afterschool sports programs in Texas, and across the US.

Even as Ottenhoff prepares to allocate his organization’s donor dollars to victims of hurricanes Harvey, Irma and other disasters, he also has one eye focused on the storms that have yet to strike—because we’re still not funding projects that would better prepare us for those. Ottenhoff says just ten percent of disaster-related contributions go to preparation and planning for storms. Another 10 percent goes to long-term recovery.  Ottenhoff would like to see funding go to more proactive, preventative approaches.

BOB OTTENHOFF, CENTER FOR DISASTER PHILANTHROPY: What we have in this country is a dramatic imbalance in how we’re dealing with disasters. We think them about them as these isolated events which aren’t going to occur again, and if we make a contribution, that’ll solve the problem. And this kind of short-term thinking means we continue to repeat the same issues, time after time. You can’t continue to have these outpourings of support for every disaster, if all you’re going to do is put it into immediate relief. There aren’t enough dollars around. I don’t think there’s enough emotional energy to do it that way. There aren’t enough foundations or corporations who can make those big contributions.”

That’s why The Center for Disaster Philanthropy has always focused on strategic disaster planning and long-term recovery efforts. And while Ottenhoff says that immediate aid is always needed, of course…

BOB OTTENHOFF, CENTER FOR DISASTER PHILANTHROPY: You might also consider as you’re planning how to respond to disasters, to save some of your dollars for the next month, or the next year, when the really difficult work is taking place and those people are going to really need our dollars, because they’re scarcer to get.

And that’s Tiny Spark. Let us know what you thought on today’s program. You can leave a comment on our website, TinySpark.org. We also post interesting stuff about philanthropy and nonprofits between podcasts on our Facebook page. And I’m on Twitter; tweet me at @tinyspark_org. Brian Mittendorf was recorded at Ohio State University’s studio. Bob Ottenhoff was recorded at his office in Washington, D.C. by John O’Leary. Today’s program was produced by Freddie Boswell. Thank you so much for listening.