Donors at a Distance
A recent flurry of press reports criticizes Greg Mortenson’s book Three Cups of Tea and the non-profit organization he co-founded supporting girls’ education in Afghanistan called the Central Asian Institute (“CAI”). The criticisms fall into two categories: the veracity of the book’s account and the management of CAI’s funds. Then a flurry of critical articles critiqued the criticisms. The point of this blog is neither to assess the claims nor to repeat the myriad criticisms of Mr. Mortenson, CAI, or their critics. Rather, the aim is to distil from this debate a key evolving issue with international charitable organizations: donor distance from the work they fund.
The practical upshot: donors to international organizations have a greater issue of trust than donors to local organizations because they cannot verify personally the use of their donations. A New York City donor to the New York Philharmonic can attend a concert, meet the musicians, see the new concert hall (in some cases with their name on a plaque or other such personal recognition), and receive the season’s program. Similarly, donors easily verify the use of gifts from hospital building campaigns or programs for patients. Medical or humanitarian aid delivered in the Sudan or girls’ schools in remote areas of Afghanistan are another matter. Or are they in today’s technology-driven world?
The key questions: In today’s technology and social media-driven world, are long- distance gifts to charitable organizations different from local donations? Should they be? Three key corollary questions: (1) What methods of communication instil donor trust? (2) Where does the ultimate responsibility for accountability to long-distance donors lie? (3) How far can technology take us?
First, several different strategies for communicating with long-distance donors are common, but none seem to use technology as effectively or creatively as we might imagine:
- Written reports such as annual reports appearing on web sites (in the US the annual Form 990 filed with the Internal Revenue Service (the US tax authorities) available on-line). In Mr. Mortenson’s case, the Form 990, and the process of preparing and reviewing it, apparently failed to protect donors. Is the combination of heightened regulatory and best practice standards of transparency with internet access adequate? 
- Highly accountable and diligent international volunteer or professional fund-raisers and local management: example: Marefat High School, Kabul, Afghanistan. Marefat raises funds in the UK. School founder and director Aziz Royesh travels to London annually. Baroness Frances d’Souza (Cross-Bench Convenor at the House of Lords) and her daughter Christa d’Souza (well-known journalist) visit Marefat in Kabul and report back to donors at an annual event and in-between. They have a personal relationship with a trusted local leader who knows the local community needs, the political issues, the risks, and the most effective route to the outcomes sought. In addition, the impact is measured by objective criteria: exam results and university entrance success of Marefat students.
- Reputation: example: Nobel Peace Prize. The renown of organizations such as the Red Cross, UNICEF, Doctors Without Borders/Médecins Sans Frontières, the Campaign to Ban Landmines, and others helps attract donors, particularly in unanticipated emergencies such as the 2004 tsunami and the 2010 Haiti earthquake. A Nobel Peace Prize or internationally recognized name, barring scandal, can make a significant difference.
- Rating agencies and accreditation organizations: I have not seen research to show the impact of positive or negative ratings from rating agencies such as Charity Navigator or Guidestar of international organizations on protecting and/or incentivizing donors. Similarly, I am not aware of broad international research on the efficacy of seals of accreditation from accountability organizations such as the Comité de la Charte or IDEAS in France or Better Business Bureau in the US as a device for generating donor response. This is not a judgement on the efficacy of these ratings and seals in verifying compliance with specified, often heightened, standards of accountability. That is, there may be benefit to donors irrespective of the efficacy of the seal in communicating the benefit. Please chime in if you know of relevant research.
- Donor heart strings: Some donors simply disregard or are unaware of the potential additional risk of giving from a distance and “give from their hearts.” Again, I am not aware of research on the follow-up to first time “heart donors” – i.e., whether and how they verify the use of funds and the extent to which post-first gift verification influences subsequent giving decisions. The relationship between this question and the size of gift would seem a relevant consideration as well, with major donors more likely to have the capacity and incentive for independent verification.
- Faith in an individual or commitment to a place: examples: Greg Mortenson, the Dalai Llama or other religious leaders, or a historic site such as Angkor Wat. As we see, this can be dangerous. As Marefat High School shows, the faith in the individual needs to be combined with verification and objective evaluation criteria
- Field or site visits: In rare cases, most often involving major donors, certain NGOs allow donors to visit the field. I will not address this here except to say that case-by-case assessment is required, and there are often serious security, ethical, and logistical issues. In certain cases, it may be a helpful approach; however, it is not available to most donors and/or appropriate or possible for most organizations and therefore not, in my view, a key baseline strategy.
- The media: The use of the media to communicate an organization’s work may seem a highly effective, broad-reaching and even necessary approach. However, the degree of journalistic integrity, the range of thorny ethical questions raised by the relationships between NGOs and the media, and the often skewed perspective due to short air time or column space requires caution and a forward-thinking strategy. The details of media-NGO interaction are beyond the scope of this blog.
Second, who is responsible, and how can similar incidents be prevented? While again I do not speak to the facts of the Greg Mortenson/CAI situation, the key question is usually: where was the Board of Directors? A fully functioning board of directors (and a more focused Chief Financial Officer) should closely supervise the budget, engage in detailed discussions with the auditors, and at the very least check questionable numbers at the time of the filing of the Form 990 annual report.  In addition, the board should be diligent about verifying overseas activities. If technology is not an option for donors at more modest giving levels, it certainly is in many cases for the organizations internally for purposes of the board’s verification of activities. If not technology, then travel. Finally, the board needs to define objective criteria for assessment.
Third, as a confessed technologically inept blogger, the final question is: are we under-using technology? Skype, Twitter, Facebook, You Tube…..? If so, what opportunities are we missing? What are the ethical issues of photos, interviews with beneficiaries of services overseas, social media, and other such communications? What are potential security issues (e.g. exposing students or medical patients to groups potentially seeking to punish individuals not respecting restrictions on conduct)?
Please share! What are your views on and experience with (i) how to communicate the trustworthiness of an organization pre-giving to long-distance donors and steward gifts at a distance; (ii) governance strategies related to long-distance donor giving; and (iii) the use of technology to mitigate the impact of the distance and the related ethical issues.
Copyright 2011 Susan Liautaud. All rights reserved
 The problem of the distance between donors and the location of delivery of an organization’s services using donor funds was identified in the economic literature going back to the early 1980s by such pillars of non-profit scholarship as Yale economist Henry Hansmann in his seminal article on donor trust. See Hansmann, Henry. “The Role of Nonprofit Enterprise”. The Yale Law Journal, Volume 89, Number 5 (1980): 835-902.
 Please note that this blog does not address in detail various governance and accountability measures that should be taken to further donor trust but rather more specifically comments on communication methods for long-distance donors. Future blogs will address accountability, governance, and ethics points.
 The Form 990 is a US form filed annually with the US Internal Revenue Service (tax authorities) for non-profit organizations above relatively modest revenue thresholds. It contains detailed information about financial, accountability and governance matters, including a box to tick to confirm that all board members have been given the form for review. For reference, a copy CAI’s Form 990 for 2008 fiscal year can be found at https://www.ikat.org/wp-includes/documents/Financials/990FYE9-30-09.pdf, downloaded May 4, 2011.
 See e.g. Chronicle of Philanthropy, “A Roundup of Haiti Fund Raising as of January 29, 2010”, http://philanthropy.com/article/A-Roundup-of-Haiti-Fund/63823, downloaded on May 4, 2011. This article shows organizations such as the American Red Cross, US Fund for UNICEF, Catholic Relief Services, World Vision US operations, Doctors Without Borders USA, and Save the Children US operations as among the highest US recipients within approximately the first two weeks of the 2010 Haiti earthquake. I am Co-Chair of the US Advisory Board for Doctors Without Borders/Médecins Sans Frontières USA; however, this blog does not reflect the views of that organization or in any way reflect my speaking in that capacity or my views on behalf of that organization. This listing is entirely factual, limited to the specific factual information regarding donor reaction to the 2010 Haiti earthquake based on the source cited. See also the blog Disclaimer.
 I am a member of the Board of Directors of the Comité de la Charte; however, this blog does not reflect the views of that organization or in any way reflect my speaking in that capacity or my views on behalf of that organization. See also the blog Disclaimer.
 The CAI Form 990 Notes that the board was given the Form 990 to review.