by Nick Jacobs

Last week in the New York Times, a very creative depiction of the Red Cross flag took it in three shots from a + (plus sign) to a - (minus) as it described the challenges faced by this prominent organization and its recent announcement of its $200+ M deficit. Interestingly, as the Chairman of a local Chapter of the American Red Cross, we have had the same challenges. As the public donates specifically to a disaster, and the monies flow past the operational needs of the organization and directly toward the actual disaster, there is no cash to pay salaries, overhead and operations. The article by Stehanie Strom, tells of the challenges of this leaderless organization that has been a revolving door for prominent CEO's since 9-11. She stresses the complaints generated by the tyranny of donors as they designate the target of their gifts. They are requiring the recipients of their gifts to spend their monies exactly where they want it spent.

As a former philanthropy executive for over 10 years, it is clear that this trend of giving only to the donor's designated project completely hamstrings the charity that is the pass through for the gift. Last year 92% of the 77,000 disasters to which the Red Cross responded were house fires, which, as quoted by the writer, were not exactly "the stuff of national headlines." The Red Cross is being held captive by their own policy called, "Donor Direct," which commits to sending funds only to the donor designated areas.

What's the point of this blog? We are about to enter the largest and greatest pass through of wealth ever conceived of in this country as the 78 M Boomers begin to make plans for their personal estates. It has been suggested that Donor Direct be replaced with donation limits, i.e., if the donation is less then one to five, the moneys will be used by the charity as needed.

Bottom line? "Nonprofits need to do a better job of educating their donors about the cost of running their organizations." For every $100 that we bring in from hospital operations, we sustain about $98.50 in overhead expenses. In our philanthropy department, for every $100 generated, we are faced with, on a bad day, approximately ten dollars in overhead. Clearly, philanthropy is certainly a piece of the possible solution to the enormous, unmet needs of our health system, but exclusively "Donor Direct" is a limiting solution that attacks the very fiber of the charity.