Why Charity: Water’s 100% Model is Bad for Non-Profits and Donors Alike

by Joe Garecht

Charity Water Logo

If you’re at all active on social media or in non-profit marketing, you’ve probably heard of Charity: Water.  They’re one of Silicon Valley’s favorite charities, they are exceptionally good at marketing, and by most accounts they do good work.

Charity: Water also aggressively markets what they call the “100% Model” to donors, promising that 100% of the money donated through “public donations” will go directly to programs, with a group of major donors, board members and foundations providing the money the organization needs to pay for overhead expenses.

By itself, this is nothing new.  A number of non-profits have, over the years, promised that 100% of monies donated during a particular appeal or for a particular program would go directly to mission-related work.  What is different is the fact that Charity: Water is making this pledge the norm for their donors, promising that 100% of the money you give will go to programs, 100% of the time.  Add to that the skill with which Charity: Water is marketing this “100% Model” message, and it is becomes something much more sinister.

Charity: Water’s 100% Model is bad for non-profits, donors, fundraisers and the non-profit sector in general.  And it’s time to shine a light on it.

Not Really True

The first problem, of course, is that Charity: Water’s claims that 100% of the money raised from “public donations” goes directly programs isn’t really true. (What exactly does that “public donations” phrase mean, anyway?  Are those who are funding the overhead for Charity: Water not doing so “publicly”?)

Of course, we all know that for the most part, non-profit donations are fungible.  Charity: Water may be giving 100% of most people’s (small) donations to programs, but that means that they are forced to use 100% of a few people’s (very large) donations on overhead.

To simplify things, let’s say that Charity: Water raises $1,000 from the public and $100 from the folks who fund their overhead.  They spend $100 on overhead and $1,000 on programs, and announce that they are operating under an innovative “100% Model.”

Now, let’s say that instead of segregating funds like that, they raise the same $1,100 from the public and their institutional funders combined, and spend the same $100 on overhead and $1,000 on programs.  In both instances, they have spent 10% on overhead.  What’s changed?  Nothing.  Except now they can’t claim to use a “100% Model.”  It’s smoke and mirrors.  All non-profits have overhead.  Overhead necessarily reduces the amount of money that goes towards programs.  Charity: Water is no different.

Causing Problems for Other Non-Profits and Causes

After reading the above, you may find yourself saying, “Sure, technically you are right, Charity: Water is using smoke and mirrors to make it look like they created a new innovative funding model, but what’s the harm?  Maybe some people will give who wouldn’t otherwise have given as a result of this model!”

Except there is a problem – a very real problem – that Charity: Water is creating for other non-profits and causes (and donors as well).  They are making donors believe that it is possible to fund non-profit work without funding overhead and administrative expenses.  (Not to mention teaching donors the fib that overhead expenses are necessarily bad).

And that’s a lie.  A very big lie, and one that presents a huge problem for charities worldwide.

The success of Charity: Water’s 100% Model requires that the organization aggressively market this falsehood.  If people believe that they should be looking for organizations who will promise to use 100% of their donations on programs (with nothing going towards overhead) Charity: Water wins, because it is one of the few non-profits which claims to allow donors to do just that.

That belief feeds the “overhead myth,” and it leaves other non-profits in a precarious position.  They can either launch their own “100% Model,” effectively lying to their donors by acting like these donations aren’t fungible with the “overhead” donations, or they can tell the truth, risking losing donations as a result.

Remember – this isn’t a theoretical exercise.  Every day, non-profits face questions from donors about their overhead expenses.  These donors want to know why they are spending 11% on overhead instead of 10%, or whether they spend too much on paid fundraisers.  Charity: Water’s aggressive marketing of the 100% model fuels this problem.  And as a result, homeless shelters, addiction recovery centers, schools, hospitals and other non-profits that are doing good work have trouble recruiting new and larger donors.

The 100% Model also feeds donor malaise.  Think of the donor who has bought into Charity: Water’s marketing and assumes he will be able to find other non-profits in other mission fields who will agree to spend 100% of his donations on programs.  Imagine his shock when he can’t find other organizations offering the same program.  He’ll assume that other non-profits are doing something wrong, or maybe even unethical, when in fact they are spending the same or less on overhead as Charity: Water.

A Call to Action

It’s clear that Charity: Water’s 100% Model is bad for donors, bad for non-profits, and bad for the sector as a whole.  It also borders on an outright lie.  What can you do about it?

First, reject the temptation to follow this path yourself.  Instead, be sure that your non-profit works hard to keep overhead expenses tied directly to your ability to do your work, and transparent about what it costs to run your organization.

Second, when donors ask about “overhead,” tell them the truth… that overhead (and fundraising expenses) allow you to carry out your mission, do good work, and expand your capacity.

And third, consider sending an e-mail to Charity: Water (or sending them a tweet at @CharityWater) to call on them to abandon their misguided 100% Model and by doing so to help improve transparency and trust for their donors and the entire non-profit sector.

Facebooktwittergoogle_plusredditpinterestlinkedinmailFacebooktwittergoogle_plusredditpinterestlinkedinmail

Related Articles from The Fundraising Authority:

Get Your Free Copy of How to Hold Great Fundraising Events

Sign up for The Fundraising Authority Newsletter, and getHow to Gold Great Fundraising Events your free copy of How to Hold Great Fundraising Events: A Step by Step Guide. This 10 page special report will guide you through the entire process of running a profitable fundraising event for your organization. Click here to get your free copy today!


Joel Worrall April 15, 2014 at 9:42 am

Raising the debate of whether or not the 100% model is good for charity is valid, but it’s difficult for me to take this argument seriously.

I’m not a part of CW, but my understanding is that their accounting structure does in fact explicitly designate “public” (i.e. mass marketing) vs. “private” (a structure they call “the well”) donations. Thus, referencing CW and associating the words “lie” feels slanderous and certainly seems inaccurate. My interactions with CW seem to indicate an intentionality on their part to produce honest communication.

Like I said, I’m all for having a valid discourse on whether the 100% model is good for charity, but that discussion can only be helpful in a context where the facts are accurately presented. Not that you need to take this advice, but I’d encourage you to reexamine the facts, edit, and re-publish accordingly.

Respectfully,
joel

Dana April 15, 2014 at 11:31 am

Thank you for a well-written article that clearly explains why these types of nonprofit fundraising campaigns have harmful effects on nonprofits who prefer a more transparent approach. There are a couple of international NGOs advertising similar 100% models, here in Vietnam. I’ve had several current and prospective donors say, “Why can’t your organization do that?” And I’ve had to explain the real situation to them. Frankly, some donors love it and respond to the facts with, “hey, as long as it’s not my money that they are using to cover their overhead.” These fundraising strategies do not support best practices in building effective donor-nonprofit partnerships, which are badly needed.

Joe Garecht April 15, 2014 at 4:09 pm

Joel,

Thanks for your thoughtful comment. It is much appreciated. I agree that Charity: Water has its heart in the right place, and I believe that they do segregate, as you suggest. However, I think organizations like C:W need to think through what they are doing, led by the brain as well as the heart. In this case, I think they are not only misleading donors as to the benefits of this “model,” but also hurting the sector.

Thanks again,
Joe

Joe Garecht April 15, 2014 at 4:10 pm

Dana,

Thanks for your comment – I agree… one of the most dangerous things about models like this is that they lead to an unsustainable situation for the non-profit sector as a whole.

Joe

Nicolas October 30, 2014 at 7:00 am

Hi Joe,

Even though you have a point, the topic is obviously very debatable with pro’s and cons, but it’s not right to make bold statements. Ideally, and read ideally, this model can and should work as the goal is to get donations to the place where they are needed most, and if everybody “chips in”, organizations can operate based on this foundation. If your neighbor or the government then decides to fund your operating costs, the 100% model still applies. If people would spend as much time on doing good for others as they would on arguing about things like this, the world would already be a better place.

Joe Garecht October 30, 2014 at 4:31 pm

Nicolas,

Thanks for your input. As you might imagine, I respectfully disagree, but I welcome your participation in this discussion. I think it is vitally important to talk about charity funding models during this time when so many people are hyper-focused on “overhead.” Charity: Water’s big mistake, in my opinion, is in acting like overhead doesn’t exist for them. It does – and because money is fungible, everyone, including their “public” donors, are in essence paying their fair share of overhead. There’s nothing wrong with that – overhead is GOOD if it allows a non-profit to do good work. I wish Charity: Water and other folks would stop acting like overhead is a bad or unnecessary thing.

Thanks again for your comment –

Joe

Cathy J Sharp May 25, 2015 at 6:16 pm

Joe, first, I agree 200% with you and respectfully disagree with others who suggest that if some other entity covers the cost of overhead, C:W’s 100% model is still accurate. It simply isn’t. Even as constricting as accounting regs are for non-profits (as most should be to prevent true fraud and fuzzy practices), there are still ways non-profits can present the figure in a way that justifies the 100% model, which is legitimate even if inaccurate. All that said, with total respect Joe, there always seems to be a piece missing when this comes up and by the way, thank you for raising it again and keeping it in front of people’s minds.

Often the missing piece is: ME. I’ve been a fundraiser for over 20 years and to borrow from Dan Palotta, I am overhead. My career has been dedicated to helping others through my work as a fundraiser, not as a social worker (although I might argue that I have to have pretty fierce skills similar to what social workers do when I consider all the different types of people I have to interact with!) yet what I do is officially and legally (according to the IRS) defined as separate from direct program services.

My motivation to help others is NO different than that of my colleagues who work with our clients yet I regularly hear that no one wants to pay for admin or fundraising expenses. There are many non profits who are supported entirely or largely by non-government funds so of course they are fundraising and have administrative costs that are covered by donations from somewhere so to say 100% is going to programs IS wrong and deceptive. Anyway, I digress slightly as my intention is to suggest that the core issue is how overhead is and has been defined for decades which separates admin and fundraising from the delivery of the organization’s services.

Now, is that a much bigger (and possibly unrealistic) undertaking than trying to change the perception of overhead? Probably although I believe it is part of the same issue. As I said, at least keeping this issue front and center as often as possible is part of the same fight against the 100% model.

Joe Garecht May 27, 2015 at 10:19 am

As I have said over and over again, fundraising is integral to the success of almost every non-profit on earth, which means that fundraisers are integral to the success of every non-profit. Non-profits that neglect fundraising (and fundraising staff) are neglecting their mission. And the idea that fundraising costs are wasteful overhead directly hurts the very people that non-profits are trying to serve.

Comments on this entry are closed.

Previous post:

Next post: