How Donald Sterling and Los Angeles NAACP Expose Nonprofit Funder Desperation

by Natasha A. Harrision
Unless you have been off the grid with no connectivity to the outside world, you have heard or seen Donald Sterling, owner of the LA Clippers. In what appears to be a private conversation with his girlfriend, his racist comments provide a glimpse into the mind of a person who has accepted the white supremacy culture. The nation weighed heavily on what should happen to Sterling and the LA Clippers through countless media outlets, tweets, Facebook updates and blogs.

After a wave of companies began to withdraw or suspend sponsorship from the LA Clippers, the NBA handed down his consequence-lifetime NBA ban and $2.5 million dollar fine.

In the midst of this sensational, provocative story, a small footnote appeared. Sterling received a lifetime achievement award from the Los Angeles chapter of the NAACP (LA NAACP) in 2009, and was slated receive the award again in May 2014. I am not surprised by these facts. The nonprofit sector has a culture of funder desperation.

The struggles nonprofits face are not the short-term result of an economic cycle, they are the results of fundamental flaws in the way we finance social good.
-Antony Bugg-Levine, CEO of Nonprofit Finance Fund.

As revealed in Nonprofit Finance Fund’s 2014 State of the Sector Survey results, there are a number of flaws in the ways nonprofits are financed. Local, state and federal government funders are often late with payments causing nonprofits to secure loans or reach into limited cash reserves. Public funders also short change nonprofits on the indirect cost rate (allowable rate for administrative costs). Many nonprofits receive a blanket rate of 9%, which is not adequate for nonprofits.

Moreover, private funders are touted as only supporting “programs,” and not the administrative operations that sustain high quality programming. These same funders often prescribe nonprofits to develop impact studies and reports that are not funded.

To add to the dysfunction, nonprofits are having a hard time meeting the increased community demand for services due to the economic downturn. With the prevailing issues with public and private funders, it is not surprising that nonprofits seek individual donors with deep pockets.

After more than 15 years in the philanthropy and nonprofit sectors, I have witnessed the ongoing haste to identify individual donors, especially those with deep pockets. In small to medium sized nonprofits, the development office (usually a team of 1) send out inquires to leads from media sources, board members, and/or internal staff. These development offices often forgo exhaustive background checks on prospective individual donors. There is no time or capacity. Unrestricted dollars are needed to combat the private and public funder issues, and to fill up the nonprofit’s administrative operations coffer.

After consecutive ‘no’s,’ the development team is all too happy and grateful to receive a donation from a wealthy donor. The feelings of desperation lead to a prompt ‘yes, we accept the donation’ without fully knowing the donor. This is driven home by the comments made by Leon Jenkins, President, LA NAACP highlighted in Karen Grigsby Bates’ article Why Would The NAACP Honor Donald Sterling Anyway.

Los Angeles NAACP president Leon Jenkins says that in hard times, hard decisions have to be made. He told reporters Monday that his chapter had approached several local sports franchises, from baseball to hockey, to get complimentary tickets for the boys and girls in their youth programs. Only Sterling came through with offers to invite low-income kids to see a professional ballgame on his dime.
Sterling’s donation and accolades have lead to scrutiny and attacks directed at LA NAACP. “Let’s just add that up and ask the question ‘Was the total amount of the tickets given, even over a number of years, worth selling your integrity around your core issue?'” argued Callie Crossley, a Boston journalist and host of Under The Radar With Callie Crossley.

It is very easy for bystanders to criticize the nonprofit. Honestly, I did not know Donald Sterling until the story broke by TMZ. I believe LA NAACP, a solely volunteer supported organization, lacked the full details of Sterling’s background as well or ignored it. Either way, the funder desperation of Los Angels NAACP led to a bad ally.

So, how can nonprofits begin to overcome the culture of desperation?
You have value. Believe it.
It is not a coincidence that Sterling willingly supported LA NAACP. In the midst of his discriminatory practices and legal drama, he gave money and in-kind donations to NAACP to bolster his image. Clearly, LA NAACP’s name recognition, community impact and well-communicated mission provided added value to Sterling. To boot, the support given was a nice tax write off for Sterling.

Nonprofits must demonstrate and believe that their community impact, name, and well-communicated mission has value. The development team (or a trusted volunteer/intern) must investigate current and potential wealthy individual donors’ added value to the organization. Here are some quick questions that nonprofits should consider before partnering with an individual donor with deep pockets:

  • Besides money, what is the significance of partnering with this donor?
  • Who knows this donor and what do they have to say about them?
  • What is the donor’s reason for partnering with us?
  • How is our value boosting the funder’s brand?
  • What information does a quick Google search yield on the donor?

Say ‘thank you but we cannot accept.’ Tell them why. Connect with their network.
CBS News reported:

Leon Jenkins, president of the LA NAACP, said at a news conference Monday that donations made by Sterling will be returned. He wouldn’t say how much money was involved but called it an ‘insignificant amount.’
Returning hard to come by funds is not a position any nonprofit wants to face. So, it is important for nonprofits to be proactive in knowing their wealthy individual donors; and, when faced with a conflict, decline the donation. Here are some steps to consider when declining a donation:

  • Conduct an in person meeting.
  • Say ‘thank you but we cannot accept.’
  • Give the reasons why; if it applies, be sure to explain how their business practice does not align with the mission of the organization.
  • Ask them if they would be willing to continue to support the organization by connecting with like-minded individuals that embody the mission of the organization.

Nonprofits need help from the funding community.
Nonprofits are not solely to blame for the culture of funder desperation. Private and public funders have a big role as well. Here are few ways funders can support nonprofits effectively:

  • Support impact measurement OR provide full impact measurement systems.
  • Support administrative functions of organizations, especially the development team.
  • Government should define, with the help of the nonprofit sector, an advance payment system to overcome late payments.
  • Government should increase the indirect cost rate based on feedback from the organization.

The reality of the culture of funder desperation can be summed by the words of Mario Marino, co-founder of Venture Philanthropy Partners.

As I see it, the whole system sets nonprofits up for struggle and starvation, not for solving challenges. We funders should be supporting nonprofit leaders to build strong, high-performance organizations. Instead, we cause them to think incrementally-month to month and hand to mouth.

Nonprofits cannot eradicate the culture of funder desperation without private and public funders changing the way they partner and conduct business.

Natasha A. Harrison is founder and president and CEO of CommunityBuild Ventures, LLC. CommunityBuild Ventures provides training, consultation, and coaching services that result in strategic solutions. CB Ventures equips government agencies, businesses and nonprofits to effectively produce sustainable, large-scale social change in African American communities. Follow CommunityBuild Ventures @CBVentures1.

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