Note: This Blog post was written with information from a New York Times Article by Deborah Jacobs on Nov 10th 2008.
If you are concerned about how the deepening financial crisis might affect your 2009 year check out the example of the Helen Hayes Awards, a nonprofit organization that supports Washington Theater. They sent a letter the week before their October event to supporters who had not yet responded to the invitation. It urged recipients to engage in “wholesale therapy” at the auction by bidding on exotic vacations and experiences that would build lifelong memories for their children.
A Russian Dream package that included two business-class tickets to Moscow, an eight-day luxury cruise on the Volga River and three nights at a five-star hotel in St. Petersburg, valued at $20,568, went for $10,000 at the live auction.
Or take the example of The Muscular Dystrophy Association. They took a similar approach, relying on what has been called transaction-based philanthropy to raise money. An online auction offered for the first time in conjunction with the M.D.A.’s Labor Day telethon raised $600,000, with a Fender guitar signed by the country-and-western singer Tim McGraw fetching $35,000.
These efforts may offend the “Old Guard” who believe non-profit fundraising should be driven purely by good will. Realists and those actually responsible for the bottom line and mission delivery on the other hand, have embraced this type of fund-raising, which comes under the broad heading of special events, as an extra source of revenue.
Food and Friends, a Washington-based group that delivers meals to local residents who are seriously ill, has 20 years’ experience with special-event fund-raising and last year used it to raise $1.6 million.
Its events ranged from Chef’s Best — an auction and tasting menu featuring prominent regional chefs that took in $650,000 — to an exclusive evening of shopping at Crate and Barrel, which donated 10 percent of the proceeds.
Neil Griffin, who owns a Washington-based marketing firm acquired through Food and Friends two Coton de Tuléar puppies for his mother. He won the first at the organization’s 2006 auction; the second dog he bought this year directly from the breeder, who gave the proceeds to Food and Friends.
Mr. Griffin said he paid $4,000 for each dog, which he said would normally sell for less than half that amount, but he added that “it was money very well spent.”
Advocates of special-events fund-raising like Mike Hanley, a 20 year non-profit professional and seasoned Auctioneer who has conducted about 100 charity auctions, say that even in a down economy people may continue to open their wallets for an “Ego Item” which can be defined as a unique item, a memorable experience or a rare chance to brush shoulders with a celebrity.
In such cases, the charitable income-tax deduction is limited to the difference between what the buyer pays and what the item is worth, said Laura Peebles, a director in the national office at Deloitte Tax in Washington. “Most auction buyers aren’t entitled to a tax deduction because they’re getting a good deal,” she said.
One of the highlights of Mr. Hanley’s sideline career was a recent “Paddles Up” effort at the Lifeworks Oscar night Gala netting $122,000 in about 10 minutes to support teenage homeless programs in Austin Texas.
Another example is Pam Zaragoza, a real estate agent in Burlingame, Calif., who recently bid $20,000 at a local school district auction for a luxury bathroom renovation, figures she bought goods and services worth double that amount. The package included an architect and contractor, a custom-made vanity and a stone slab to top it, most of the tile and a $1,500 store credit on a shower door.
Ms. Zaragoza, who is paying extra for the fixtures and medicine cabinets, said she was “not in a financial position” to make a $20,000 donation to the school district without getting anything in return.
To make sure she was the successful bidder, Ms. Zaragoza paid the “get it now price” at the school’s online auction. It was hosted by Bidding for Good, part of cMarket, a five-year-old company in Cambridge, Mass., that supplies charities with the technology to run auctions and other online sales, in exchange for 3 to 9 percent of the proceeds.
Charities can choose to limit access to their own supporters or, as most do, open the auction to other bidders, who can shop by charity or by product category at biddingforgood.com.
“The beauty of an auction is that it draws money out of the consumer-spending wallet,” which is larger than the pool of money families and individuals earmark for charity, said Jon Carson, chief executive of cMarket.
This holiday season, Jolyne Caruso, a financial adviser who helped organize Barnard’s gala and auction last spring, plans to shop though Charity Folks, another online auctioneer, which specializes in goods and services donated by celebrities. For example, instead of buying theater tickets for her parents at the box office, Ms. Caruso plans to bid for them at an auction on Charityfolks.com. Charity Folks charges nonprofits a 20 percent commission on all sales.
Not everyone is enthusiastic about transaction-based giving, however. Generally speaking, the costs associated with publicizing and administering special events make them less cost effective for charities than “virtually any other fund-raising tactic,” said Patrick M. Rooney, director of research at the Center on Philanthropy at Indiana University.
A recent survey by the center found that fund-raisers thought the effectiveness of special events declined “precipitously” with the softening economy, to 59.4 percent holding that view last summer, from 71.1 percent in December of last year, he said.
And in contrast with in-person events that provide an opportunity to educate participants about a charity’s mission, strictly transactional fund-raising is “probably not a good way of cultivating donors” even if it raises money in the short run, Mr. Rooney said. “What’s the difference between this and Wal-Mart at that point?”
Sherri Ramstedt, owner of SR Custom Events & Auctions a company that provides the Auctioneer and Auction Teams as well as consulting for Non-Profits in Central Texas disagrees. “ Some people fail to appreciate the fact that 800-1000 people assembled at an event are primed to hear your organizations story and buy in to your mission. With some efficient record keeping and follow up you can turn these attendees into long-term donors.”
