Wednesday, September 23, 2009

Charities and Disaster Relief

With the attacks on the United States on 11 September 2001, followed by the December 2004 Indian Ocean tsunami, the earthquakes in Pakistan, Hurricane Katrina in the Gulf Coast of the United States, and the earthquake in China in May 2008, almost all the arguments in the debates concerning nonprofits were joined. The numbers of deaths and injured were simply staggering. How do we comprehend the number of people killed in the earthquakes and resulting tsunamis in Asia and Africa for example? In just six days after the December 2004 tsunami, for example, the reported dead exceeded 150,000 with the numbers climbing. Two weeks later, the estimated total was 280,000 dead and more than 5 million rendered homeless by the tsunami.

These events stirred the charitable impulses of millions of people all over the world. With television and other forms of public media, and with the Internet, the reports of the damage and loss of life were numbing. Almost immediately people from around the world dug deep into their pockets and seemingly spontaneously and generously began giving to the victims of the disaster and to charitable organizations carrying out rescue operations and relief efforts. Very soon thereafter, movie stars and musical celebrities rushed to hold concerts and television marathons to raise money for the rescue and relief efforts. What were the controls on transparency, tracking of funds, and accountability for the monies raised and distributed or used in the relief operations? How were the donors satisfied with the giving experience other than by feeling happy that they thought that gave something to a cause?

Within several weeks, governments from around the world began to be involved in relief efforts. But, by that time, charitable organizations from many corners of the world had already swung into action. Two former American presidents were enlisted to appear on television and to spearhead efforts urging people to open up their hearts and bank accounts to help the poor victims of this natural disaster, just as they had done in the Hurricane Katrina that hit the American Gulf Coast several months earlier. And billions of donations flowed in. Again, was there transparency and accountability of these charities and of their activities upon which thoughtful and responsible donors could rely? Or, was it just a good feeling that the donor had subjectively for doing something, anything?

One example of the extent of generosity was experienced by Medecins Sans Frontieres (Doctors without Borders) based in Geneva, Switzerland. According to press reports, and my contacts in France and Switzerland who monitor charitable operations and cooperated in an international level with similar organizations that are members of the International Committee on Fundraising Organizations (ICFO) based in Berlin, Doctors Without Borders raised approximately four times the amount needed for its relief operations. So great was the public response to the appeal of Doctors Without Borders that it closed its appeal only one week after the tsunami. It then set about tracking down thousands of people that had given to the tsunami appeal in order to get their approval to allow Doctors Without Borders to redirect or refund the monies given by these people. Less than one percent refused to let the money be directed elsewhere to other projects. Amazing!

At the time of the tsunami, Doctors Without Borders had its biggest operation in Darfur, Sudan, and needed money there for the one and a half million people that were in desperate need of aid. And this was only one project in which Doctors Without Borders was providing relief. A spokesman for one of the affiliates of Doctors Without Borders speculated that people gave so much money because of size of the disaster and the media coverage, especially with celebrities advancing the cause for giving, and because in some way people could relate to this kind of natural disaster. But how about other humanitarian disasters, such as man-made disasters relating to conflicts and civil wars?

According to published reports and testimony before a U.S. Congressional Committee, the experience of the American Red Cross in connection with the attacks on 11 September 2001 was quite different. As a result, the American Red Cross was criticized and its president was forced to resign. The American Red Cross is a financially efficient organization and is highly rated for spending 90 percent of its total expenses on program services.

However, the Red Cross got caught up in its zeal to raise funds immediately after the attacks with the result that it raised significantly more money than it needed for what it would ordinarily do in a disaster. It was reported that it behaved opportunistically by using this crisis to raise money for programs that were not identified in its fundraising appeals. These included upgrading telephones and computers, promoting humanitarian principles, and building up the strategic blood reserves, probably all legitimate needs of the Red Cross, just not part of the 9/11 crisis need and appeal. Many of its operations in connection with rescue and relief work in New York, Pennsylvania, and Washington, D.C. and Virginia, could have been better performed by many other nonprofits. The result was a tarnished reputation to the high standing of the American Red Cross and distrust and skepticism to the entire sector.

For victims of man-made disasters, such as Iraqis, Afghans, Rwandans, Congolese, Timorese, or Haitians, there are few world-wide fundraising efforts. There are no celebrity concerts, no celebrities on television in marathon fundraising appeals, no former presidents urging people to give, and little or no media attention. Yes, there may have been protests against the war, or against some government action that either exacerbated the damage, or failed to take steps to stop the war or conflict. But, protests, even if important as voices in a democracy, are not the same as the relief efforts needed to relieve suffering. Or are they? Can political action and protest activity for a cause that may or may not turn into a humanitarian disaster be properly equated with the kind of charitable efforts providing relief in the case of earthquakes, tsunamis, hurricane and typhoon storms, massive fires, volcano eruptions, and the like, or the charitable activities dealing with the relief in the cases of killing and suffering resulting from conflict or war?

And, what about long-term calamities, like AIDS, malaria, diarrhea, trachoma, and other epidemic and infectious diseases that kill and maim more people than those that died in the 2005 tsunami? Many of these are preventable, and may be avoidable calamities if properly addressed. Are the needs represented in the situations needs that can only be addressed by governments, either in the location of the disease or world-wide? Or, is there a role for charitable organizations and operations that are specially equipped to deal with these formidable challenges?

Unanswered is the question: why should I give to a cause on the other side of the world that has nothing to do with me personally or with my immediate community? For the most part, this question is not clearly answered in all the literature regarding the nonprofit sector. As one writer put it, there is a moral confusion on the part of donors. Another writer suggested that the lack of consistency between giving for relief for victims of natural disasters, such as the tsunami, and giving for relief for the victims of man-made disasters and preventable or infectious diseases, has nothing to do with a failure on the part of the people that could give. Rather, this writer suggests that it is a result of the failure of political leaders and societal models. And my only response is “really?” That case has not been sufficiently made to be persuasive.

But, central to many of these debates are the questions concerning the roles of government. One question asked is why should non-government organizations even be involved in disaster relief at all? This question may be phrased a little differently, such as, should not governments be responsible for providing all the required assistance in the case of man-caused disasters, such as in the attacks on 9/11 as well as natural disasters, such as the tsunamis and earthquakes and hurricanes? The question seems to be a little more relevant in the case of the national government in the geographic place of the disaster but it still does not answer the fundamental questions of how government, any government could step in and do what the third sector is doing, even if hampered by obstacles that are present no matter the situation.

A second set of questions relates to the general subject of the recognition of a charitable sector, and particularly, of specific charities, the nature of fundraising and distribution of relief, and the monitoring of those activities. For, example, is the mere tax exempt status or recognition granted by the government sufficient to provide legitimacy to the fundraising and charitable activities of particular non-government organizations? With so many possible tax exempt and charitable organizations, how is the government to effectively and credibly monitor these organizations in a free and democratic society? Indeed, can a broad range of charities with a variety of public benefit purposes be monitored at all with any degree of assurance concerning their legitimacy and the legitimacy of their activities?

A third set of questions pertain the moral obligation, if any, with respect to a charity’s responsibility to the public in terms of transparency and accountability about the funding of its charitable purposes. Is there a moral obligation apart from some regulatory scheme imposed on the sector by government or by independent monitoring or some form of self-regulation?

Closely related are the questions about how the public and the potential donors and donors, are to protect themselves from fraudulent schemes and improper allocations of funds received. Perhaps, this includes the need to protect one’s self from one’s own impulses when faced with such needs. With the vast resources of public media outlets, and the vastness of the Internet, all with images of damage and destruction and loss of life and security in far-away places, one’s resistance to hasty decisions is reduced. At the same time, we may be so overwhelmed with the magnitude of it all and by our own natural tendency toward skepticism common to our post-modern culture, that we are simply immobilized from doing anything, and certainly to do the due diligence required for making sound giving decisions. Ken Berger, President of Charity Navigator, in his recent blog post in discussing the roles of the boards in insuring that the governance, transparency, and accountability of charities implied that how these roles were effective could give confidence to donors making these kinds of decisions.

Now, while I have introduced these issues in the context of disaster relief, I think that they also apply to the simple daily routine work of charities, large and small, operating in an environment of need, no matter what responsibilities governments may assume to meet these needs. Over the next few months I hope to explore some of these questions in future posts.

During the weeks following the tsunami in the Indian Ocean, concerts were organized around the world to raise money for relief efforts. Presumably these concerts and similar events were supposed to be a testament to the solidarity and generosity of ordinary people toward fellow human beings struck by the disaster. But, that may not actually have been the case if we believe reports of comparative studies on donations received from private individuals in 12 countries to the victims of the Indian Ocean tsunami. For example, according to one study, Norwegians donated the most at $13.20 per person, followed by the Swedes who donated in absolute terms, $12.04 per person, with the Dutch donating $9.16 per person. The Americans donated $1.08 per person, and the French donated $.80 per person. An interesting note and aside to this listing of donations received from individuals in different countries is, that unlike the other countries mentioned, Sweden allows no tax deduction for gifts to charities.

However, ranking individuals’ generosity in this way is not very helpful, nor does it answer the basic moral questions about giving. Nor does it answer the questions about the roles of government and charity in addressing the social, welfare, and disaster victim needs of people in the affected areas. If two people donated $1,000 to charity, but one of these had an annual income of $50,000 whereas the other had an annual income of $100,000, it would appear that the former would be twice as generous as the latter in terms of percentage given out of differing annual incomes. Interestingly, the pattern that less wealthy people tend to give a larger percentage of their income to the church and charity than the rich is mirrored in the patterns of domestic giving in the United States, a well documented fact.

But, this is not simply a story about individuals giving to charity. In testimony before the U.S. Congressional Committee on Ways and Means, the American Institute of Philanthropy said that Americans have been too hazy when it comes to making charitable giving decisions and for following up on their responses to appeals.. According to this testimony, charities tend to make appeals for certain aspects of their work that produce greater results in terms of giving, failing to notify potential donors of other uses for the funds received. As a result, the advertised need may represent only a small percentage of the charities’ total spending. Moreover, missing from many, if not most disclosures after the funds have been solicited, is any report on the effectiveness of the use of those funds, or the impact that the project had on the needs that were being addressed by the charity.

As a general rule, nonprofit organizations find a need that they feel must be addressed, develop a plan for meeting that need, approve a budget to execute its plan addressing that need, and then solicit funds for accomplishing its purpose or goals. In disaster situations, such as the attacks on the United States on 9/11, the tsunami in the Indian Ocean in December 2005, or hurricanes or typhoons, the process may be reversed. The money pours in and the nonprofit organization then tries to determine how to spend or distribute it.

In the case of the attacks on the United States in September 2001, the situation was more complicated because it involved layers of the federal government, state governments, and municipal governments, insurance companies, and approximately 200 charities and church groups. Although within two months, over $1 billion was raised by charities, a significant sum. However, according to the testimony before the Congressional Committee, approximately $100 billion was to be provided by the government and insurance companies. The victims’ compensation fund had not yet been designed and established, and the rules had not been written for that fund. One role of some charities was to help victims’ families until the federal pay out was available. As a result, there was the possibility of a risk that charity-provided funds to victims would be subtracted from the Federal government pay out.

What has been missing in all of these major disasters has been sharing of data and failure of coordination between charitable organizations, and between the sector and governments. As a result, if donors are going to be making wise decisions concerning their donations, and rely less on impulse, transparency and accountability are absolutely essential. The problem here is that we really are not sure what that means and how they are to be achieved. That is part of the debate surrounding the sector.

In an online electronic version of an American Bar Association publication, the author addressed problems that charities experience in disaster relief cases, and hence, problems donors have. This discussion related more specifically to the efforts following the 11 September 2001 attacks, although it could apply to any disaster situation. Further, the discussion in the publication related specifically to the regimes under the tax laws and regulations in the United States, and therefore, might not be applicable in other countries.

Nevertheless, “every lawyer who has worked with a charity proposing to provide disaster relief knows the difficult questions that can arise in advising a client on what can and cannot be done within the bounds of the Internal Revenue Code.” There are numerous restrictions on charities that mark “the outer boundaries of what can and cannot be done.”

"These restrictions vary depending upon on the context. There is one set of rules applicable to all charities providing disaster relief. There a second, new set of rules applicable only to charities providing relief in connection with September 11 and certain anthrax attacks. And there is a third set of rules governing the special case of a charity controlled by a company and providing relief to the company’s employees."

Well, these are just a few thoughts to prompt some discussion and reflection on the important roles of government and the third sector in addressing the needs arising out of disasters.

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