Whose Interests?

May 10, 2009

Value or goal-driven versus donor-driven funding of nonprofits is one of the central tensions in the raising of revenues. There is an analogy in the university wherein faculty, in their perpetual search for grant support, sometimes or perhaps often solicit grants outside of, or even extraneous to, their scholarly and educational goals, because the funding may be available. Value-driven funding identifies needs and solicits funding from donors who wish to address those needs. Donor-driven funding means that a donor wants to have their particular interests addressed. When the wishes of the donor and the needs of the organization overlap, a donation satisfies the interests of both parties. The challenge comes when the needs and the wishes don’t completely coincide. When the government also becomes a player, this tension can become exacerbated. How far should an organization compromise with its identified goals, and in some cases values? In the U.S., for example, historically black colleges and other cultural institutions have accepted the largesse of the tobacco industry. These resources make a substantial difference to the performance and perhaps survival of some of these institutions. The donor and the recipient both support education and cultural enrichment. The donor supports death and presumably the recipients support health.

Two of many examples in the Jewish community demonstrate this dilemma. In our community we have had discussions at the Jewish Federation about ways to encourage the participation of young people in tzedakah, contributing money and their energy, to community needs. Cultivating young donors is an important need and reflects the fundamental value of tzedakah. A donor, in this case a foundation in another state, shares this goal, and provides grants to support staff to plan and implement programming to address this interest. The catch is that the grants require a match from the local community. Acknowledging the point that the pool of donations is not fixed, that a local donor may wish to provide this match, the fact is that if we allocate funds to this match, it means that we have to take funds from something else that may be a higher priority need. Do we adhere to the priorities that we have set or do we alter them to meet the needs of the donor? To take an example from Israel, let’s say that one goal is to develop the educational opportunities in the periphery—outside of the Haifa, Tel Aviv, Jerusalem corridor. Classrooms, equipment, and enrichment programs are a substantial need. A donor family wants to contribute $10 million to build a school for at-risk children in Jerusalem, if the government will match the donation. The needs are much greater in the periphery. Should the government (or the Jewish Agency working in partnership with the government) satisfy the donor’s wish? The conflict of interest for the government is, of course, readily apparent. Should the government (or JAFI) say “no thanks,” because the $10 million will be directed at the periphery and won’t be available for this match? Or should the government agree to the match because it will generate much good will in Jerusalem, it will satisfy a generous donor, and the people in the periphery can be ignored politically, when all is said and done?

What is the proper balance between the interests of donors on which nonprofit organizations are ultimately dependent and the identified interests and goals of those organizations? What does “proper” mean?