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MONTH: October 2007

Editorial feature: Why animal charities need to learn to pass the hat

Among the outcomes of sending ANIMAL PEOPLE to nearly 11,000 animal protection organizations worldwide, as often as we can afford the postage, is that we receive constant inquiries from people who hope we can help fund proposed projects, or provide introductions to others who might, or at least publicize a proposed project in hopes of attracting funders, even though more than 80% of our readers are themselves trying to raise funds for their own worthwhile pro-animal projects.

Probably every reader of ANIMAL PEOPLE has at least one brilliant idea about things that could and should be done to help animals, if only the money was available.

Some of the ideas we hear about are impractical, ill-conceived, or have already been tried in other times and places with disappointing results. Yet many other ideas presented to us are eminently practical, and could succeed with adequate investment. The only obstacle is that the necessary funding is not easily or immediately available. Someone needs to go out and raise the funds, by persuading donors to put their contributions into this particular project, rather than any of the myriad others that the typical donor will hear about between now and the next time the person has money to give.

Failing to identify and develop a specific fundraising base is by far the most frequent reason why worthwhile projects fail, or do not even get started. People who care about animals tend to see opportunities for direct intervention on behalf of suffering animals much more easily than opportunities for building the institutional capacity to intervene-or even the necessity of developing a support base.

This often leads to counterproductive behavior, both by donors and by struggling animal charities who hope to court donors through doing as the donors ask.

Donors, typically, will view the charities that spend the least on fundraising and administration, relative to program service, as the best and most efficient.

Bluntly put, this is just plain wrong.

It is true that charities spending more than 35% of their revenues on fundraising and administration tend to be bloated, inefficient, and sometimes overtly corrupt.

It is also true, however, that the average cost of operating an animal charity during the past 18 years has held steady at 28%.

Charities spending less than 20% of their revenues on fundraising and administration, especially fundraising, tend to be starving themselves at the expense of expanding their program service to meet the needs they are hoping to fulfill--unless they already have so much money in the bank that they can coast along on the interest. A mere dozen or so of the largest animal charities in the world are mostly coasting along on old money. All the rest need to learn to invest from 20% to 30% of their income and working time, every day, in self-sustenance and growth--and donors who really care about animals need to learn to demand that they do.

Unfortunately, a common quirk of animal charity donor behavior is to demand that all of the money the donor contributes be spent directly "on the animals," usually meaning actual animal care. This leaves many of the most dedicated charities feeling unable to invest in attracting more donors, lest they alienate the donors they already have, and encourages some charities to try to camouflage fundraising expense as "program service." Certainly a charity should put at least two thirds to three quarters or more of its revenue and working time into direct mission fulfillment. However, a charity that is dedicating most of its resources to mission fulfillment is not more virtuous for not also building the capacity to do more, by putting more effort into asking the public to support good works and giving more people the opportunity to invest in beneficial projects.

Neither is there any virtue in giving charities an incentive to conceal the actual costs of raising the wherewithal to do their work. Every donor who asks charities to spend less than the normal and reasonable percentage of income on fundraising and administration is in effect inviting them to cheat, because if they fairly and accurately disclose their overhead costs, they might not get deserved support.

On the contrary, there might be considerable virtue in large donors and grant makers making some contributions on a matching basis, so that if a recipient charity uses a reasonable percentage of a sum to attract more support, it will get a bonus. For example, a large donor or grantmaker might give $10,000 to help start a good project, with the proviso that $7,500 is for the project itself, and $2,500 to seek additional funding, which the funder will match up to $10,000. If the charity manages to use the $2,500 to raise $10,000 from other sources, it will collect a total of $30,000, netting $27,500.

Very few donors actually have the opportunity to give away money that generously, but those who can are uniquely positioned to help not just the particular projects they favor, but the growth of the entire animal cause.

Foundation basics

Of course almost every ANIMAL PEOPLE reader also has opinions about what big donors and grant makers should be funding, but are not, including about what the dozen or so charities and foundations with huge cash reserves and investment portfolios ought to be doing besides sitting on their assets.

U.S. law requires tax-exempt foundations to disburse at least 5% of their net worth each year toward fulfilling their charitable purposes. Most, unfortunately, behave as if the 5% requirement is not only the minimum they should give out in the form of grants, but also the maximum. Rarely has ANIMAL PEOPLE examined the IRS Form 990-PF filing of a pro-animal foundation and seen grants made that total even as much as 6% of assets. Yet well-managed foundation investment portfolios often grow at the rate of 10% or more in good years--and ANIMAL PEOPLE has seldom seen large foundations lose money. The only year since ANIMAL PEOPLE started in 1992 in which the largest pro-animal foundations took significant losses was 2001.

Except in 2001, hundreds of thousands and perhaps millions more dollars could have been invested in the animal protection work that the people whose estates created most of the foundations meant to assist, without in the least jeopardizing the perpetuity of the foundations.

Several other mega-foundations that were established in part to help animals have actually granted little or nothing to pro-animal projects over the years, or at least in recent years. In each case, the management of the money either was placed or somehow fell into the control of bankers, lawyers, accountants, stockbrokers, and other appointed trustees who have had little if any interest in educating themselves about animal issues, seriously reviewing animal-related grant proposals, and making a sustained, conscientious effort to realize the founders' wishes.

Unfortunately, despite occasional noise made in Congress about the need to reform the laws governing foundation management, the likelihood of it happening in a manner that benefits animals is slim to none.

For that reason, ANIMAL PEOPLE advises estate planners to avoid creating trusts. The surest way to ensure that the bulk of an estate will benefit animals is to disburse it immediately to active animal charities.

Active animal charities should be knocking on the doors of foundations created to help animals as often as possible, making every reasonable effort to shake loose as much of the money as possible before it is all diverted to other purposes, such as making more money for the portfolio managers.

Usually pro-animal foundations make most of their useful and significant grants to help animals in their first years of operation, while under supervision by at least some people who had a passing acquaintance with those whose money the foundations possess. The first years of operation are also usually the best and only window of opportunity for grant applicants to cultivate in the trust managers some understanding of the work they are supposed to be assisting.

Yet while ANIMAL PEOPLE strongly recommends knocking on foundation doors, we also must point out several disillusioning realities about what foundations do.

Very rarely, a foundation is created with a "sunset clause," requiring the foundation to disburse all assets and cease operating at a particular time, such as after the death of the last original trustee.
Except in the case of a foundation with a "sunset clause," foundations are managed for self-perpetuation, by people for whom "perpetuity" is a mantra.

Although foundations are typically oriented toward funding special projects, they inherently tend to favor projects that will have material perpetuity, such as building a shelter or clinic, not projects whose results will scatter into invisibility, like sterilizing and vaccinating tens of thousands of street dogs. If tens of thousands of street dogs are sterilized and vaccinated, the shelters and clinics might not be necessary, but money managers rarely think in such terms. What they want to see is something that will have the foundation's name on it in a visible place for decades to come.

Likewise, foundation grant makers tend to favor the charities that have existed the longest, under the most stable management. Dynamic, fast-growing young charities typically stand very little chance of getting genuinely big grants. Instead, the biggest grants tend to go to the applicants whose profiles most nearly match the grant makers' own perception of good management--even though good management in relief of immediate suffering is an entirely different matter from good management of a bank account.

ANIMAL PEOPLE has actually met grant makers who refused to make grants to charities with less than a year's operating expenses in reserve, because in the perception of the grant makers, failure to build reserves--and even an endowment--indicated that a charity might not be stable enough to fulfill the terms of a grant, no matter how urgent the need and how dedicated the charity personnel.

Foundations, in short, are inherently conservative. Even when they do make a sustained, conscientious effort to realize the intent of the funders, it is unrealistic to look toward foundations to underwrite anything innovative or in any other way risky. Foundations want not only safe bets, but no bets; investments, not gambles.

Appealing to the big groups

The other major institutional sources of funding for pro-animal projects are the handful of large, well-supported animal charities, which operate on much the same basis as the needier charities applying to them for help.

A short and by no means complete list of some of the most prominent animal charities that help to fund other animal charities as one of their high-profile missions includes the Royal SPCA of Great Britain, the Humane Society of the U.S. and Humane Society International, the American SPCA, the Best Friends Animal Society, PETA, the North Shore Animal League America and Pet Savers Foundation, Dogs Trust, Vier Pfoten, the World Society for the Protection of Animals, the International Fund for Animal Welfare, the Animals Asia Foundation, In Defense of Animals, and ANIMAL PEOPLE, which over the past two years has routed more than half a million dollars to assist promising humane projects in the developing world.

This list is considerably longer than it would have been 15 years ago. Among the most encouraging trends in animal charity since ANIMAL PEOPLE started in 1992, beginning immediately to show the way by example to the extent of our ability to do so, is that many of the biggest and most economically successful organizations have discovered the value of materially assisting smaller organizations of allied purpose, whose fundraising capacity is less. Best Friends and In Defense of Animals began helping other charities as soon as they gained the capacity to do it, while the Animals Asia Foundation and Vier Pfoten made helping other animal charities an integral component of their own growth.

But big charities help little charities at a price. The money that any charity grants to another must be raised, just like all of the other money a charity obtains to spend or invest. Rarely does a charity assist another at cost to its own program or reserves. Indeed, if a charity does redirect funding at substantial cost to itself, this may flag the organization to charity regulators for investigation of a possible top-level conflict of interest. Further, it is worth noting that the interest from cash and investment reserves often is the source of the funding that big charities use to raise more funds. Reducing their reserves, from their perspective, means not only reducing their institutional stability but also eroding their fundraising capacity.

When big charities help little charities, most often it is at the cost of the big charities claiming credit in their appeals for the work done by the little charities.

Fifteen years ago there was often a blatant discrepancy between the prominence with which some of the biggest and oldest charities claimed credit and the paltry size of the funding they gave to the few little charities they assisted. (The North Shore Animal League was a significant exception, making more than 30 grants of $10,000 or more to smaller animal charities before mentioning anywhere except on IRS Form 990 that it made any.) Many exposés later, all of the big charities that claim or imply that they are significantly assisting smaller charities appear to be genuinely doing it. Only IFAW appears to be doing less for animal welfare relative to resources available than 10 years ago, while shifting its emphasis from promoting animal welfare toward species conservation.

In general, small charities helped by larger charities now appear to be getting a fair cut of the proceeds from appeals based on their work. Yet this is still far from an ideal situation. The work of the funded smaller charities is often proceeding on an extremely insecure footing, heavily dependent on the perceptions of distant grant makers and subject to pressures or changes within the grant-giving charities that may have nothing at all to do with the recipients' missions or mission fulfillment.
Donors are increasingly identifying the smaller charities' work with the larger charities that are raising their funds, so that if anything happens to fracture the fundraising relationship, the recipient charities will have an even harder time building a support base than they did before they attracted big charities' help. The big charities are expanding their already considerable capacity to raise funds, while the small charities are still not learning how to compete for their share.

To their credit, most of the big charities that financially help little charities today are investing heavily in teaching fundraising technique. Some make grants in support of projects meant to help little charities increase their fundraising capacity.

Paying staff is a start

ANIMAL PEOPLE has gone a step beyond that. While most donors and funders focus on special projects, we believe that the most urgent need of animal welfare organizations in the developing world is to for honest and sincere animal advocates to become able to work for animals full-time, instead of being limited to doing what they can do on the side while holding other jobs to support themselves and their families. ANIMAL PEOPLE at present pays salaries to three persons doing animal welfare work in Africa. We would like to expand this program when funding becomes available.

Being able to work for animals full-time is a critical first step toward self-sufficiency for animal advocates in the developing world, since effective fundraising requires not only fulfilling an inspiring program but also finding the time to publicize it, promote it, and go out to seek support for it--all not as easily done in odd hours as feeding dogs and cats and intercepting poachers.

Ultimately, no matter what the big foundations and big animal charities do in support of the more than 10,000 small charities who handle most of the animals and most of the local crisis situations, and no matter what ANIMAL PEOPLE is able to do by way of demonstration, the small charities each have a need and obligation to develop their own independent bases of support, so that their work can grow to meet the need, without having to depend on miracles.

Each local animal charity, even in the poorest parts of the world, has unique and specific access to two potential sources of support that are not readily accessible to anyone else. One is the local community. The other is the people who have left the local community, gone elsewhere, become economically successful, and now may be persuaded to do something to help the animals back home.

These may not appear to be particularly lucrative support bases, but looks can be deceiving. The history of humane work is full of instances of seemingly impoverished small donors bequeathing property that turned out to be worth a fortune to humane societies that befriended them and helped their animals. People who have had nothing at all to donate have often become extremely helpful volunteers. Volunteers who worked in the most menial occupations have occasionally introduced their wealthy and influential employers to humane societies, with extremely beneficial results.

Prudent fundraisers learn to never dismiss a potential source of help based on superficial appearance.
The emigré community in particular is of fast-growing economic significance to all strata of the developing world. The labor outsourcing industry, for instance, was built by people who left poor nations, found fortune abroad, and figured out how to take some of it back home.

The best way to get help from émigrés making good abroad is to develop positive relationships with their families and friends who are still at home. Even if those people can barely donate a dog biscuit, their influence can prove invaluable when the successful son, daughter, cousin, or friend returns to visit, and looks for ways to assist those left behind.

Raising enough money locally to fulfill all local humane needs remains an elusive goal even in many of the most affluent communities. Raising enough to sterilize and vaccinate every street dog and feral cat in the developing world may seem impossible, even tapping international resources to the maximum available.

For the time being, doing much of anything at all in poorer communities may require attracting as much outside help as local charities can find.

In the long run, however, success depends on developing independent fundraising capacity.

Addressing a local crisis may still require e-mailing urgent appeals to foreign donors, as well as passing the hat locally, but local animal charities should not be having to e-mail urgent appeals to foreign donors just to ensure their continued institutional survival. Neither should their continued survival be dependent upon a slow-moving foreign grant making process.

Developing basic day-to-day support locally should be a priority of every charity, recognizing that while building a sound local fundraising base takes much hope and patience to accomplish, it is essential to sustaining progress.

Only with a firm local footing, for example, can a charity consistently accomplish the special projects that outside donors most readily support. And, wish though we do that foundation grant makers had more vision, especially in considering projects in the developing world, reality is that the charities in the developing world which attract the most local support are also the most likely to win foundation support.