The president of the US Charity Defense Council has called out Australian donors who  categorise investments in fundraising capacity as an ‘overhead expense’.

The president of the US Charity Defense Council, Dan Pallotta, has called out Australian donors who categorise investments in fundraising capacity as an ‘overhead expense’. Andrew Sadauskas reports.

Dan Pallotta.

Leading US social entrepreneur Dan Pallotta has called on Australian philanthropists and funders to invest more in building the fundraising capacity of the organisations they support, in order to maximise the impact of their giving.

Pallotta made the comments at Atlassian’s Sydney headquarters, during a workshop event to launch the Social Impact Hub’s Funding for Impact thought leadership initiative.

Funding for Impact, which is being run in conjunction with Philanthropy Australia, aims to change the public conversation on funding charities and champion funders who help not-for-profits grow their impact and provide tools for others to follow suit.

Currently the founder and president of the Charity Defense Council, Pallotta created the Breast Cancer 3-Day walks and the multi-day AIDS Rides, which raised raised in excess of half a billion US dollars over nine years. A highly influential TED Talk he delivered in 2013 has been viewed more than 4.4 million times.

“The nonprofit sector exists to alleviate and correct for market inequities. Philanthropy is the market for love and for whom no other market is coming. But it doesn’t really seem to be working,” Pallotta said.

“A huge part of the issue is scale. Our organisations are miniature and these social problems are massive in scale. And, with the best of intentions, we have a social system that keeps our organisations miniature and the social problems are massive in their scale.

“We have a fascination with innovative programs, and an illiteracy about how to scale innovative programs, because we have a double standard [with] two rule books: one for the not-for-profit sector and one for the rest of the economic world.

During the speech, Pallotta argued that for-profit businesses are encouraged to grow by utilising financial incentives, marketing, taking risks, giving projects time to succeed and leveraging profit to attract capital, yet the same actions are demonised in the not-for-profit sector.

“That whole system gets policed by this question: ‘What percentage of my donation goes to the cause versus overhead? I want the percentage going to the cause to be really high and the percentage going to overhead being really low,’” Pallotta said.

“This idea that overhead steals from the cause creates the fundamental problem, which is that it forces nonprofit organisations to go without the overhead things they really need to grow, in the interests of meeting all this pressure from the public, government, funders and donors to keep overheads low. [That includes] overheads like fundraising.

“But investments in fundraising actually raise more funds, and we have it precisely backwards. We should be investing more in fundraising. Fundraising is the one thing that can raise vastly greater sums of money than you could ever achieve by obsessing over [overheads].

“Only fundraising has the capability to multiply the money that you put into it. It even has the capability to multiply the amounts invested in the other elements of capacity building. It’s really important that we segregate out fundraising from the other elements of capacity building – it doesn’t belong there.”

Pallotta urged Australian not-for-profit leaders to “return to the wild-eyed dreams that got you into this work in the first place”, and to scale up to address major social issues by investing in fundraising.

“Believe that you’ve got as much dreams of a better world, in their full measure, as Mark Zuckerberg, Rupert Murdoch or Elon Musk feel about theirs,” Pallotta said.

“These people believe, with zero embarrassment, about the audacity of their dreams, and that marrying those dreams with capital can fundamentally alter the world as we know it. Are we not entitled to do the same on behalf of all the children and disenfranchised people of the world?”

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