Facing contradictions
Date: January 2, 2012
Type: Commentary

Twenty years or so ago, as a novice international co-operant, I can remember at my in-country orientation, being told of the need to “learn to live with the contradictions”. Perhaps that was a fitting message for a bunch of gung-ho international development workers itching to change the world. But, as I have learned since, accepting “the contradictions” is all too often a defining feature of working in the voluntary sector.

By Peter Broder

Twenty years or so ago, as a novice international co-operant, I can remember at my in-country orientation, being told of the need to “learn to live with the contradictions”.  Perhaps that was a fitting message for a bunch of gung-ho international development workers itching to change the world.  But, as I have learned since, accepting “the contradictions” is all too often a defining feature of working in the voluntary sector.

Hearing that message two decades ago was brought to mind again by some of the press coverage of the sector this past summer.  Most glaringly, stories about two different health charities – one dealing with the inclusiveness of an organization in its fundraising and the other critiquing the resources devoted by a group to its fundraising and suggesting that spending on raising donations was diverting money from its other operations – highlighted the often conflicting expectations of the public of charities.

Reconciling these mixed messages presents a quandary for both those who work in the sector and politicians and administrators trying to regulate it.  Unhappily, the temptation for lawmakers to jump on a populist bandwagon and impose one-size-fits-all solutions on complex situations can trump a more measured approach – witness C-470, the effort in the last Parliament to cap the compensation of charity workers.

Salary constraints are just one aspect of the frequently-expressed concern that charities operate “efficiently”.  There is little doubt that there is a large public appetite for organizations spending as much of their revenues as possible on direct charitable services.  But, as the press coverage last summer highlighted, the public wants other things from charities as well.

They want inclusivity.  One of the groups that faced adverse publicity in June was an Alberta health charity mounting a fundraising event where participants were required to obtain a minimum amount of pledges before they could take part.  The controversy stemmed from a woman, whose circumstances prevented her from gaining enough support to reach the minimum pledge amount, being told she wouldn’t be able to participate.  In the end, the publicity around the incident generated sufficient pledges for her to qualify, but the organization was painted in a very negative light.

Although this situation relates to a fundraising effort, charities face similar calls for inclusivity in their work all the time.  In the public’s eyes, it usually isn’t an acceptable answer when a charity suggests that providing services or allowing participation isn’t economically justifiable.  It is the nature of charities that they frequently address market failures, and deal with situations that aren’t economically tenable in themselves. That needs to be kept in mind when looking at a charity’s financial record to see if it is operating “efficiently”.

A second thing the public is frequently said to want is fewer charities.  Many people argue against what they see as a proliferation of charities: they don’t see the need for one organization to support research to cure a disease, another group to educate the public on prevention of it and a third body to provide support services for those suffering from it.  In part, no doubt, this is because they would prefer to deal with fewer solicitations for donations.

But this can play out differently when you get down to specifics.  A number of broadcast and newspaper reports last summer took aim at supposed erosion of spending on research of another health organization.  The reports detailed increased fundraising and administrative costs and described the organization as having diversified its mandate, so it no longer focused solely on research, but was now worked on prevention and treatment as well.  Given this change in focus the differences in fundraising and administrative costs may have been quite reasonable, but the reports looked at historical data rather than comparing the group to other organizations operating with a complex mandate.  Adoption of this integrated approach by the organization was seen as tangential to the main story of cost increases.

This brings us back to “high” salaries.  Aside from the fact that the public expects sophisticated and multi-faceted charities, which may entail more professional – and more expensive – management, administration and fundraising, organizational costs can be driven by a little remarked on (though presumably broadly supported by the public) policy choice to use a mixed public sector/private market model to generate the resources to support health and other public benefit activities in Canadian society.  Again, different public expectations are at odds with each other here.

Perhaps because private philanthropy was historically so closely associated with faith-based groups, an expectation endures that the giving and use of funds to charity will occur outside the economic marketplace.  But over the last few decades the growth of fundraising as an industry – and to a lesser extent the professionalization of management and administration within the charitable sector – has been on a market-driven model.  And, like most markets, the one the charitable sector deals with has its structural and information imperfections – and the cost distortions associated with those imperfections.

Though it is not widely appreciated by the public, there is a cost – and a fairly steep one at that – in relying on the private sector to underwrite an increasing portion of the work of charities. The freedom of letting people make their own giving decisions, as opposed to making them pay for things through taxes is often touted these days as a rationale for curtailing government support for sector groups.  But growth in fundraising costs is, at least in part, a function of increasingly counting on individual donations, rather than on the tax base to fund the charitable sector. With stagnant giving in recent years, many groups have had to invest more and work harder just to maintain their past revenue levels.

But it is rarely, if ever, mentioned that it might well be more cost-effective to raise and administer at least some of the amounts currently generated through private fundraising through government than through the marketplace.  While it is appropriate to balance the cost of privatizing this activity against the impact of compelling everyone to pay for these activities through their taxes, unless we can find a way to return to a model where religious values are again the primary driver of giving and of running charities, the costs associated with relying on the market can’t be ignored.

As my international development colleague recognized back in the early 1990s, we ought not to be paralysed by contradictions.  But that is a different thing than unthinking acceptance.  Success in raising attention to these inconsistencies among lawmakers, regulators and the public will be hugely important if the charitable sector is not to be hobbled by ill-considered legislation like C-470.  Learning to live with the contradictions need not just apply to those of us working within the sector.

Peter Broder is Executive Director of The Pemsel Case Foundation.  A version of this article was first published in LawNowmagazine, and can be found at http://www.lawnow.org/ . The views expressed do not necessarily reflect those of the Foundation.