Dear Nonprofiteer, How can I be sure that he who needs, gets?

Dear Nonprofiteer,

I am wondering if you can help.  I recently made a film about the efforts of a group of villagers in the developing world to find a means of support after their livelihoods were taken away by misguided government actions.

I am getting requests from people who want to donate money to the village after seeing the film, but there are currently no charities that specifically cater to the village and I know it takes a long time to start one.   Are there any charities where you can specifically earmark donations for a purpose and manage how that money is used? Kind of as a sub charity?

I just don’t want the money going to some big non-profit organization where by the time it gets to the village it has been depleted by other things.  There is a very big church in the village which might want donations to go to them, but I don’t believe that’s what’s best for the village, either. What do you advise?

Signed,

Avenue for Aid

Dear Avenue:

Though you’ve described a very particular set of circumstances, you’re asking a question of general interest: how to make sure that donated money gets to its intended beneficiaries. Often the correct answer to that question is, you can’t–and that’s a good thing. People gave oodles of money to relieve the suffering of the victims of September 11, but once that suffering was relieved and there was still a ton of money left over, the Nonprofiteer approves of its being used by the Red Cross to relieve other kinds of suffering, rather than its being used to enrich the intended beneficiaries. In any event, the price we pay for having experienced professional suffering-relievers on the ground when we need them is to pay their salaries and the light bills and rent of the people who send them there–and to pay all those overhead expenses year-round, not just when disaster strikes.

But you’ve described a case where very tightly targeted aid is available and makes sense, yet there’s no recognized pipeline from donors to recipients. Each country has its own unique way of handling charity, and even if you set up a recognized US charity it might not meet the necessary requirements for transmission and distribution of funds in Africa or Asia.

So your first step should be to get the lay of the land from the aid groups that know it best. Start with UNICEF or CARE: they’re certainly the least corrupt and most able people on the ground.  UNICEF has a presence in virtually every country on the globe, working closely with local groups, and its office staff should be able to get to the in-country people and find out what systems would work for targeting your aid. Yes, of course, they’re likely to say, “Give to UNICEF [or CARE] and we’ll guarantee the aid will go to your country of choice,” and they actually will–but that won’t increase the total money allocated to that country by the agency. It will just substitute your money for some other money that hasn’t been so designated, with no net increase in welfare for the country. Nor would an increase in country funding help you support this particular group of villagers.

So you probably need to suck it up and tell people you’re happy to accept their contributions, but that they’re NOT tax deductible. They can send the money to you (or to a bank fund you set up, if that makes them more comfortable: establish the Village Rescue Fund at First National Bank, and the bank has a fiduciary obligation to keep the money separate and to remit it in accordance with the purpose you describe when you set up the account), and then you can send it to your contact(s) in the village for distribution as they see fit. 

You won’t get to oversee it once it’s in the hands of people in the village, but you wouldn’t really want to: the point is to assist them in restoring their economic self-sufficiency, right? So concede them their autonomy. The last decision you get to make is to send it to your friend John instead of to the head of the local church; it’s hands-off from there.

If people are very moved by the film, the lack of a tax deduction (which is all that you lose by giving money to someone or -thing that isn’t a nonprofit) shouldn’t deter them from giving. Best of luck, and let us know if you find a better mechanism than the ones described here.

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3 Responses to “Dear Nonprofiteer, How can I be sure that he who needs, gets?”

  1. Anne Willmore Says:

    One question came to mind, regarding the following:

    “…the lack of a tax deduction (which is all that you lose by giving money to someone or -thing that isn’t a nonprofit)…”

    I think another issue that comes up in this case is that the recipient of the gift may have to pay income tax on it. I think the fictional John would have to pay income tax on the money he’s given, unless he does some further non-profit status wrangling (or writing off business expenses, or some such thing). Of course that assumes that the country the money is going to has an income tax. I only know for certain-sure about the IRS. 🙂

    • Nonprofiteer Says:

      You’re absolutely right–I wasn’t thinking about the impact on the beneficiary. But in most developing countries, and certainly among unemployed villagers, income taxes are the least of their worries. And (once again taking the perspective of the donor rather than the recipient) individuals are permitted to give up to $10,000 to other individuals without having to pay gift taxes on the transfer, while at the same time reducing their income and thus their income tax liability. So the donation may be a slightly better deal for the donors than the original answer suggested.

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