Need Charity Ride Explanation

[elcolombiano]

There are all these Charity ride events, they cost like $100 bucks to ride a Century. If you want the dinner its another $20 if you want the Jersey its another $80. As each day gets closer to the event the price keeps going up to register. The event is billed as a Charity event for some type of cancer or something like that. How much of the money raised actually goes to the charity? Are these charities really big drug corporations that get Research and Development money for free from these events and then when they come out with a pill that may help someone ill charge hundreds or thousands of dollars for the medicine and it is almost all profit that winds up in the pockets of these corporate executives? Are these fund raisers really profit raisers for the organizer to make some money and he/she can get tax free status by providing some percent of the proceeds to one of these "charities". These people that participate in these events and raise thousands of dollars think they are doing a good deed, but are they really? Please tell me I am wrong. This is making me sick thinking how so many people have been misled for so long.

[DRZRM]

I did a couple of Boston to NY AIDS fund raising rides in the 90s, they were very well organized and well supported, and I remember the organizers got hammered by the press (NYT?) about the small percentage of money that went to the actual organizations (IIRC around 30%). They did raise huge sums though (they may have had a $2,300 individual minimum back then) and those multi-day events always have higher cost than single day events.

Interesting article (http://www.smartmoney.com/spend/travel/are-charity-walks-and-races-worth-the-effort-1306536923690/) on the subject.

[LJohnny]

I think the charity rides have been hammered a lot for the reasons you point out, high price etc. but the main reason IMO, is the little amount that actually makes it to base cause. 20-30%. As pointed out the classic example is the Aids ride which fell from favor after the exposé. I don't agree with the model, but at thus same time I don't discourage anyone from doing them as at a minimum they bring the topic to the forefront.

[handsomerob]

I was the coordinator for our local Bluff City Blues 100 a couple years ago and we (Memphis Hightailers) donated 100% of the ride proceeds ($5000) to charity.

[KidWok]

There are all these Charity ride events, they cost like $100 bucks to ride a Century. If you want the dinner its another $20 if you want the Jersey its another $80. As each day gets closer to the event the price keeps going up to register. The event is billed as a Charity event for some type of cancer or something like that. How much of the money raised actually goes to the charity? Are these charities really big drug corporations that get Research and Development money for free from these events and then when they come out with a pill that may help someone ill charge hundreds or thousands of dollars for the medicine and it is almost all profit that winds up in the pockets of these corporate executives? Are these fund raisers really profit raisers for the organizer to make some money and he/she can get tax free status by providing some percent of the proceeds to one of these "charities". These people that participate in these events and raise thousands of dollars think they are doing a good deed, but are they really? Please tell me I am wrong. This is making me sick thinking how so many people have been misled for so long.

Well...seeing as I direct a charity ride and work for a non-profit, I'd be happy to give you some explanations.

To begin with...you should always do the research anytime you want to support a non-profit organization. Ask questions as to what their mission is and whether that mission statement is the most efficient/effective way to improve lives. Ask how they deliver on their mission and where they spend their money. The Better Business Bureau recommends that you do not support an organization that has more than 35% (IMHO...a reasonable if not generous %) of its expenses in admin and fundraising efforts. If they spend more than that, they are feeding their own pockets above what they should be.

It seems there are two major types of fundraising events (not just rides) in general. You have events put on by the organization where proceeds directly benefit go into the organization's coffers. There are a lot of organizations out there that also rely on third-party fundraising events, which better fit your description where the charity receives a minor amount.

Third-party events are much like the items you buy on the store that say "proceeds benefit XYZ". They are effectively a brand licensing where the organization allows its name to be used in exchange for a cut of the profit. In a way, this is a bit deceptive because the bulk of that money is likely going to a production company. For the non-profit, this is a really easy way to hide the real cost of doing business. When the check comes in from the production company, it is pure revenue, often without much recorded expense. There is no tracking of what percentage of the event's gross revenue actually came to the organization. Unless you're dealing with an event production entity that is firmly attached to the mission of the organization and is full/partially donating the value of their services (ex: event producer's child has XYZ disease and he really wants to support XYZ foundation), this is usually not a good way to support an organization if you truly care about their mission.

Events directly produced by and supporting a non-profit organization are generally a better way to go. The organization has full accountability of the event's net revenue and, as mentioned above with the BBB recommendations, they are usually shooting for a similar <25-35% expense/gross ratio, which accounts for all sources of revenue such as corporate sponsorship, registration fees, merchandising, donations, etc. This is the scenario I work with and there is no room to hide in terms of budget transparency to our board members, the event's current and potential revenue potential, its impact on the organization's overall budget and mission-delivery efforts. In an ideal world, a non-profit organization would ONLY do these type of events, but you have to keep in mind that a direct fundraiser requires internal staffing. A small non-profit that cannot afford to take on year-round FTE may not be able to do these type of events unless they can get that dedicated staff member to do multiple events throughout the year and justify the salary. If your child has a rare disease which a very small organization is working hard to combat, your best option is to NOT attend their fundraising event, but just walk into the office and open your checkbook. They don't have to spend a dime (short of keeping the lights on and having someone there) for you to support them in that scenario.

Something else that I think really deserves more scrutiny in this day and age are "pass-through" non-profits, where they are really just taking the money and giving it to another non-profit. This doubles the "waste" as they are likely to take their 35% cut before giving to another organization that will lop off another 35%. Anyone can start John/Jane Doe Foundation, hire a bunch of their friends to be paid exec's and perked board members, and set the mission to be "funding XYZ disease". If there is already an XYZ disease foundation, then John/Jane Doe Foundation is really just acting as a competitor and not a supporter. So if you care about a certain mission or disease, you should do your research as to what organization best addresses your concern.

Last thing I'll mention (I could go on forever about these things since I see worst scenarios than OP has mentioned), absolutely positively DO NOT support an organization that treats marketing as mission-delivery. Increasing awareness for XYZ disease is NOT the same as funding research or producing programs to cure and control XYZ disease. Most organizations will list marketing as a cost of doing business (fundraising...part of the 35%). As a donor to other causes, I regularly review annual reports and have stopped supporting organizations when they start treating marketing as mission-delivery. I don't want to see the billboard...I want to see the result.

FWIW, my event is the direct opposite of the scenario that OP suggested. I build a budget each year (oh joy...it's that time of the year again) and then go to my sponsors (including the well-known big pharmaceutical corporation that is our title sponsor) to cover most, if not all, of my production expenses (catering, jerseys, bottles, vendors, sites, etc). I go to companies asking for donations of products we need (clothing, food, etc), which all saves me from spending money I already secured. The vast majority of what the rider/fundraiser brings is IS going to the mission. The first year of the event I direct, we just barely broke even, which is actually good as we didn't cost the organization money to invest in a new brand/revenue stream. The second year, we netted about 50% expense/gross revenue. Our goal is to reach that 25-35% by about year 4-5. In the for-profit world, you see something similar, with many businesses not clawing their way out of debt for several years.

There are some of us who really care about a mission and want to make the world a better place by working in the non-profit sector. I just spent today leading 12+ hours worth of riding/face time with my fundraisers. None of what I spent today was on the org's dime. I'm salaried and do not get paid to be away from my wife and two young boys for the day. They know that I love the org/mission, but not as much as I love them. I make sure that all of my fundraisers feel well-taken care of because I want them to direct all of their kindness towards their fundraising efforts to support the org. On top of that, I donate several grand a year of my income to the org and also ask my wife's family foundation to kick in a substantial foundation grant towards our kids camp, which means that the grant is solely used for a specific program per donor intent and cannot be used for fundraising and administration expenses. Yes...you the donor can specify HOW you want the money to be spent.

Hope that answers some of your concerns. I'm regularly answering questions from people who have every right to be cynical about what they see in the non-profit sector. You ABSOLUTELY can make sure that your support goes to a deserving and effective charity, but it will take some homework on your part.

Tai

[CNY rider]

FWIW, my event is the direct opposite of the scenario that OP suggested. I build a budget each year (oh joy...it's that time of the year again) and then go to my sponsors (including the well-known big pharmaceutical corporation that is our title sponsor) to cover most, if not all, of my production expenses (catering, jerseys, bottles, vendors, sites, etc). I go to companies asking for donations of products we need (clothing, food, etc), which all saves me from spending money I already secured. The vast majority of what the rider/fundraiser brings is IS going to the mission. The first year of the event I direct, we just barely broke even, which is actually good as we didn't cost the organization money to invest in a new brand/revenue stream. The second year, we netted about 50% expense/gross revenue. Our goal is to reach that 25-35% by about year 4-5. In the for-profit world, you see something similar, with many businesses not clawing their way out of debt for several years.



Tai

Thanks Tai for this great post.
I'm curious though, with the production expense covered by Big Pharma, and all the product donations, how do you just break even?

And I've never been a United Way donor because I've had a thought similar to this one: "else that I think really deserves more scrutiny in this day and age are "pass-through" non-profits, where they are really just taking the money and giving it to another non-profit."

Would you agree with my characterization of United Way or am I off base? I just prefer to pick specific charities and support them directly.

[oldpotatoe]

There are all these Charity ride events, they cost like $100 bucks to ride a Century. If you want the dinner its another $20 if you want the Jersey its another $80. As each day gets closer to the event the price keeps going up to register. The event is billed as a Charity event for some type of cancer or something like that. How much of the money raised actually goes to the charity? Are these charities really big drug corporations that get Research and Development money for free from these events and then when they come out with a pill that may help someone ill charge hundreds or thousands of dollars for the medicine and it is almost all profit that winds up in the pockets of these corporate executives? Are these fund raisers really profit raisers for the organizer to make some money and he/she can get tax free status by providing some percent of the proceeds to one of these "charities". These people that participate in these events and raise thousands of dollars think they are doing a good deed, but are they really? Please tell me I am wrong. This is making me sick thinking how so many people have been misled for so long.



Big sigh............................

[Ahneida Ride]

The President of the local PBS station makes 160K.

Local University President .... 7 figures !

Visit Charity Navigator before donating.

[Bruce K]

The Pan Mass Challenge raises I've 35 Million for Dana Farber Cancer Institute with 100% of rider donations going to the hospital. Billy Starr, the organizer receives a six figure salary. I don't necessarily find that out of line for what the charity does.

As others have said, research is the key.

I support The Davis Phinney Foundation with direct donations and choose which events to participate in.

BK

[charliedid]

Ugh...

I guess it depends on the ride. I was involved in RFAC (Ride For AIDS Chicago) this year and we raised over $600,000.00 and 100% of that money goes to support and treat those in need.

[KidWok]

Thanks Tai for this great post.
I'm curious though, with the production expense covered by Big Pharma, and all the product donations, how do you just break even?

And I've never been a United Way donor because I've had a thought similar to this one: "else that I think really deserves more scrutiny in this day and age are "pass-through" non-profits, where they are really just taking the money and giving it to another non-profit."

Would you agree with my characterization of United Way or am I off base? I just prefer to pick specific charities and support them directly.

CNY...great questions...again...you absolutely should ask questions about these things.

Starting a large event is much like starting a business and our goal was for the event to be nationally recognized and top-performing within a 4-5 year window. Accomplishing this required that we invest in brand/graphics/website creation, launch marketing and consulting, and a much higher than expected marketing level. Most of that is one-time investments except for the marketing budget still being relatively elevated in the first few years. Once we start getting close to our rider limit, we'll spend less on marketing. A first year event also doesn't draw sponsorship money very well because most companies aren't eager to put their name behind an unproven event. When I mentioned that our costs are mostly covered by sponsors, that is referring to current (third) year and last year to a lesser degree. In the first year, we only had a title sponsorship with no supporting sponsorship. These days, we have several sizeable non-pharma sponsorships in addition to the title provided by big pharma. Can't emphasize how much relationship cultivation effort it takes to gain, maintain and increase sponsors' support.

It should be noted that we certainly could have launched the event without all the fancy branding, website, marketing, etc. We could have chose a more "organic" path of people just finding out about the event on their own and slowly trickling in, but when dealing with events that have the potential of generating $100K's or M's of revenue per year once they get a full head of steam going, spending a bit more up front to get it moving faster begins to make sense. I look for vendors that have some connection to our mission and are willing to write off a portion of their fees as donations so that we don't have to pay full rate, but at the end of the day, the caterer, bike tour company, sites, etc all need to make a living too. A lot of people out there struggling to make a living and we can't just start every conversation with "we're non-profit so you should not charge us". Completely unrealistic and oftentimes a deal killer right from the start.

The relationship of the gift has to take care of both the donor and org's needs. Pass-through org's such as United Way may serve a very effective and legitimate purpose for managing a wealthy donor's many gifts, or vetting non-profits (asking the questions for you) to make sure donations are going to a worthy cause. I wouldn't ever say that they don't have a place in the non-profit sector so I'll re-emphasize the "more scrutiny" aspect of my original comment.

I do think that there is an increase in these types of orgs and, in my personal practices as a donor, do not support them. Since I work in the non-profit, I usually do seek out ways for my donation to directly impact a mission-delivery effort, whether that is at my organization or others. If I start to sense that the recipient organization doesn't like that I ask so many questions, it's usually a sign that they aren't mission-focused enough and I'll find something else to support. I want to hear from the folks that can't stop talking about what they could do with my money know that my donation IS going to safer streets for cyclists, resources for patients, funding for research, etc. When an org gets my donation, they usually get me as an avid volunteer as well.

Sure...you'll have more fun at the 5k run or charity ride. You'll get a shirt/jersey out of it, some great food, employees/volunteers making your experience fantastic, etc. All these things cost money and that's nothing to be ashamed about. It is the cost of doing business and normal in the non-profit industry. These types of events are oftentimes great for beginning a relationship with a donor. They may start supporting the org through such an event, but eventually become that person that just gives straight to the org.

Tai