March 29, 2011

The Dirty Truth About Disaster Fund Raising

Each high-profile disaster of the past few years—including the Haiti earthquake, Hurricane Katrina, and now the Japan catastrophe—have made it clear that the way charities raise money in response to disasters does not work.

Inevitably, after each disaster a reporter will ask me if enough money or perhaps too much money has been donated. My answer is always the same—some organizations will have too much money and other organizations will have too little money. Often it's not the amount but the distribution that's the problem.

Here's how it works: Charitable donations are the greatest in the first few weeks after a disaster, while it's still making news headlines.

Nonprofits know this, and many of them immediately issue appeals and create advertisements for their disaster response. But this is all done before anybody knows the extent of the disaster, the capacity of the local government and nonprofits to respond, and which other nonprofits are responding and what their capabilities are.

In other words, they raise money in a vacuum.

With each passing disaster, more and more organizations raise money. This leads to intense competition between organizations for donations. Those with the biggest name recognition and the most eye-catching advertising, or those that are on the most lists of "How you can help" or that have the best celebrity endorsers, get the most donations.

The local organizations that are in the midst of the recovery efforts and are working 24 hours a day nonstop have a much harder time raising funds. Many of these groups also have Web sites that are in foreign languages, or they are unable to accept credit-card payments.

In turn, too much money is being raised to support groups that provide things like boats or orphanages, while too little money is raised for help with legal issues or assistance to the elderly. There may be too much money raised by organizations that are incompetent and too little money raised by competent ones.

In the Haiti recovery efforts,  somewhere between 1,000 and 10,000 organizations are responding—no one knows the actual number. This makes coordination extremely difficult, increases the chances for gaps and duplication of aid, and makes it impossible to monitor the work of each organization to ensure that programs are done well and don't do any harm.

The March 23 situation report for Japan from the U.N. Office for the Coordination of Humanitarian Affairs says that 670 nonprofits have offered their assistance to provide help following the recent earthquake and tsunami.

This probably means that all 670 of those groups have already raised money for the recovery efforts. And many of them have done this without a clear request for assistance or without identifying local groups to support.

The most recent situation report makes it very clear that Japan is going to allow only very limited international assistance.

So what are all the international charities that raised millions of dollars going to do with all of the money? Here's a statement from Oxfam Japan:

The Japanese state has the means to reach 99 percent of the population, but there will always be some who need more specific assistance.

And here's a quote from the president of InterAction, a Washington coalition of organizations that work overseas:

When Hurricane Katrina struck America in 2005, many of the victims of that disaster were comforted from the emotional and monetary support that came from abroad. Just as in Hurricane Katrina, there will sadly be thousands of people who will likely fall through the cracks of Japan's social security net. Japanese civil society, with funds from U.S. and other donors, will help fill that gap. That is where the generosity of the American people and many other nations, make a difference.

So it sounds like the 670 nonprofits that have raised millions of dollars in donations for the recovery efforts will have one of three choices.

If they are allowed, they can compete to provide assistance to the 1 percent of the victims who fall through the cracks. They can try to find local organizations to support, which may mean extra layers of unnecessary bureaucracy and extra work for the local organization to please the group providing the money. Or the organizations may decide to use the money on other disasters or to cover general organizational costs. Some of these groups will be very upfront about this, and some of them will hide it in the fine print.

The system is not working. It's far too opportunistic and does not ensure that money arrives where it is needed the most.

Personally, I'd like a centralized system for raising and distributing money. A general fund would be created that people could give to immediately instead of to individual nonprofits. It could operate much like the United Nations Central Emergency Response Fund or the Disasters Emergency Committee appeal, a collaboration of nonprofit groups.

Contributing to a centralized disaster fund would give donors a way to show solidarity with the disaster victims.

Ideally, the money could be distributed by either the government or a coordinating body to ensure that donations go to where they are most needed rather than to whoever can raise the most.

This would potentially help local organizations get the money they need and provide a measure of control over nonprofit work. It would also mean that if all the funds are not needed, they could then be used in disasters that do not get the same media coverage and the same level of financial support.

Some people will argue that the United Nations central fund is too slow or that it favors larger organizations over smaller ones. Both of these are fair criticisms. But then I ask for suggestions on how to create a better system, because this repeated scramble for donor dollars is just not working.