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Madoff: Rethinking Jewish Fundraising

The Madoff scandal has exposed the bare underbelly of the Jewish non-profit world: most of its money comes from foundations or very significant private donors. It’s a top-down world that’s now going belly-up. Look just at the non-profit Jewish magazine … Read More

By / December 19, 2008

The Madoff scandal has exposed the bare underbelly of the Jewish non-profit world: most of its money comes from foundations or very significant private donors. It’s a top-down world that’s now going belly-up. Look just at the non-profit Jewish magazine world: The magazine I edit, Zeek, gets approximately 80% of its operating revenue from foundation grants; Guilt and Pleasure is a program of Reboot, which is in turn a program of the Andrea and Charles Bronfman Philanthropies. Nextbook was founded with money from the Keren Keshet foundation. And so on. The same is true for much of the rest of the Jewish non-profit world. Money comes either directly from very large donors or foundation, or is funneled through JCCs and "granting" foundations like the excellent Foundation for Jewish Culture (Zeek’s fiscal sponsor). We are all grateful for foundations and major donors. Tzedakah is a mitzvah, and the Jewish community is remarkable for the generosity of its major donors. The donors are not the problem. The problem is that we Jewish non-profits rely on them too much. We underestimate the risks to our bottom line-and, more importantly, to our mission-that can come from relying solely on top-down foundation support.

At the Top From a strictly financial point of view, funding a nonprofit solely through foundations and major donors has risks. Often, a foundation with years of giving will do a strategic reassessment and discover a more powerful way to give its money (the Gates Foundation underwent this reassessment recently). Sometimes, a foundation will radically change direction based on a change in the life or interest of its founder-the Kirsch Foundation, for example, suddenly decided to redirect all its resources to Waldenstrom’s Macroglobulinemia, a rare form of cancer that struck its founder, Steve Kirsch; previously, the foundation had given grants to organizations as diverse as the California League of Conservation Voters, the Global Security Institute, Rocket Dog Rescue. The Madoff scandal gives another reason why relying on a just a few large funders is not fiscally healthy for nonprofits. Foundations can shut off the money spigot suddenly as a result of poor investment strategies. As the large funders that invested in Madoff cut back or close their doors–including the Chais Family Foundation, the Mortimer B. Zuckerman Trust, the Los Angeles Jewish Community Foundation, the United Jewish Endowment Fund, and the Robert I. Lappin Charitable Foundation–the non-profits they fund directly will likewise have to cut back or close. And that’s not the end of the bleeding. Many more Jewish non-profits will be left in the red as remaining foundations try to support those non-profits hit hardest. Family foundations that might have given to a small Jewish non-profit may well want to instead give their money to Yeshiva University, the Technion, or the Gift of Life Foundation which all suffered serious, multi-million dollar losses in the Madoff scandal. We are in a situation now where foundations will have to consider taking support away from one non-profit to support another that might fail otherwise. An Ethical Choice
There is an even larger issue here, however, than the current crisis caused by the Madoff blowout or the strategic question of how non-profits can survive and thrive. When a non-profit takes its money from foundations, and particularly when it relies upon one foundation, its mission can be compromised. The reason is that money from foundations and major donors is "top-down" money. Typically, when a foundation makes a significant gift, an officer of the foundation is asked to sit on the non-profit’s board. Whether there is that kind of direct input or not, it makes sense that foundations and major donors would want to have a significant say in the non-profit’s strategic direction-after all, it is their money running the operation. In the best cases, there is a real synergy between donor and donee–the organization has a clear mission, and the donor embraces that mission. Too often, however, organizations twist themselves into pretzels to get foundation grants, stretching their missions to get money rather than vice versa. And occasionally, funders make their grants dependent on an organization changing what it is or how it works, using their money to prod the donee in a particular direction. Whether these changes are good for an organization or not, the point is that they all come from the top down. Instead of an organization responding to the needs and desires of its customers and clients, it is responding to the needs and desires of its owners. That’s not a good model for a successful business, and it’s not a good model for a successful nonprofit. For example, in the Jewish world, foundations have been rather taken with the issue of what they call "Jewish continuity" (google the phrase and you’ll get 201,000 hits). Studies began showing a while back that younger Jews in particular were not all that tightly connected to the organized Jewish world, and raised the specter that "North American Jews are disappearing into a fog of assimilation." As a result, major donors began choosing to fund projects that were all about connecting Jews to the Jewish community. Many good projects have been funded this way–not least of them my own, Zeek. Yet what I hear from the "at risk" generation of twenty-to-thirty-year-olds is that they do feel connected to the Jewish community, but in their own way. They don’t necessarily want to join synagogues or JCCs, but that doesn’t mean they eat pork on Yom Kippur. Jews growing up in American want to explore what Jewish identity means, rather than being told what Jewish affiliation is. Funders are starting to get that message, but it’s taken a long time. Top-down organizations are slow to change. It’s the nature of the beast. Another example: many younger American Jews want to see Israel survive and thrive, but they also want to ensure that Palestinians gain a homeland. For far too long, funders and donors believed that if only young people were surrounded with positive images of Israel, they would fully embrace the country, border fence and all. It didn’t work. Now, finally, funders are starting to understand that the best way to build "ahavat Israel" is to bring American Jews the same Israel the Israelis see, a Jewish homeland still struggling with internal and external issues. Building Community
Manuals on non-profit development (i.e. fundraising) always stress the importance of diversification. The best way to diversify a funding base is to have lots of small donors. It may surprise some of us in the Jewish community that in the larger non-profit world, individuals–not foundations–are the largest single source of revenue. In 2005, the Giving USA Foundation reported that of the $260 billion dollars given to non-profits, $200 billion or 76.5% came from individuals. Just 30% came from foundations. These numbers may be skewed by the very largest organizations–Red Cross, Habitat for Humanity, and local arts organizations like symphonies and museums that have cultivated thousands of donors over a long period of time. Yet the Jewish Council on Urban Affairs, which is an established but not very large Jewish nonprofit, gets approximately 70% of its funding from individual donors. A relatively new Jewish organization, American Jewish World Service, has succeeded in beating the average, raising 81% of its funds from individual donors. A caveat: not every non-profit should raise money from small donors or members. Some Jewish nonprofits have missions that are narrowly defined and cannot be based on membership or on a base of small donors–they require other kinds of funding. But for non-profits whose mission is about building a movement, strengthening Jewish community, creating dialogue, educating the public and, in general, reaching out to the community at large, building a membership and/or small donor base should be part of the mix.

Building a donor base takes resources: direct mail, events, and personal phone calls are just some of the forms of outreach necessary to make donors feel connected enough to an organization to want to give. How much easier it is to have a dinner with one large donor! Who wouldn’t rather write one grant application than a number of direct mails or email newsletters? For AJWS, reaching out to individual donors is not just a financial necessity, but a critical part of their mission. Vice President for Development Phyllis Teicher Goldman told me,"We believe that our work is about building a movement committeed to global social justice. We want as many people as possible to be committed to this work. So we value and include as our supporters donors, but also… people who have taken action [via an email ask], and people who have volunteered or come to our service program-they are all part of our family."
The emphasis on community-building is critical. Even if organizations, whether because of the nature of their mission or because they lack resources, cannot cultivate a high percent of small donors, they still can make a commitment to reaching out to their constituents. I talked with Lynn Wickwire, Director of Development at the very successful Massachusett’s Health Care for All organization. They brought in just 13% of their revenue from individual donors, but that’s because their constituents don’t have much to give. "We help people navigate the health care system," Lynn told me. "We ask those people if they’d like to join [us]. We get an incredible response from these people who have to decide if they are going to pay for food or rent-we get our envelopes back with cash in them, $5 or $10 dollars. It’s amazing to me. It shows the kind of organization we are."

 Yes We Can The alternative to relying on foundation and federation funding is funding from individual donors. It’s the Obama campaign model, the grassroots model. Such a model does not preclude major donors and foundations. We still need their tzedakah. But the Jewish non-profit world would be so much healthier if our organizations could run as much (or more) on the biodiesel of the grassroots as on the richer petroleum diesel of major funder support. If at least a quarter of our funding came from our customers/members, then we would be much more receptive to their needs and desires. We would be able to move more nimbly, reacting to changes in the zeitgeist quickly, using their money to move forward on grassroots-originated initiatives. Funders would benefit too, by being more connected to the groups they ultimately hope their charitable funds will reach. I don’t think changing our funding models will be easy. This is not a great time, economically, to start asking middle class individuals for even small amounts of money. And we have a particular problem in the Jewish world, in that younger Jews especially have grown up getting their Jewish experiences for free, from their first Birthright trip to the free High Holiday services at Hillel. We will have to do what is the hardest part of the sell, convincing Jews who don’t have a lot of money to spare that our organizations are valuable–that a Jewish magazine is worth the price of a Starbucks frappuccino, or that if they can buy five songs a month for their iPod, they can afford to give $5 a month to a Jewish organization that fights for human rights. I’ll be blunt: if we, the non-profit Jewish community, can’t raise at least 15% of our operating funds from individual members and small donors, then, frankly, we probably shouldn’t exist. We are not serving a need, or are not well-enough organized enough to communicate about-and meet-that need. I do not make this claim as a successful organizer of the grassroots. To the contrary, Zeek has relied heavily on foundation and major donor funding. I know, however, that we have to do better. I am willing to pledge, in print, that I will do everything in my power to ensure that by this time next year, at least 25% of our support comes from subscribers and donors. So I’ll end with a pitch. If you want to be a part of a deep, intelligent conversation about the Jewish tomorrow subscribe to Zeek, and if you already subscribe, become a donor. Or give elsewhere. Make a commitment this year to give a significant amount–for you–to at least one Jewish organization or charity. This is our chance to turn an upside-down Jewish world rightside-up.

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