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More Charity, Less Overhead

September 02, 2002

Somewhere along the road, the fund-raising run for charity veered off course.

The races started as a fun way for people to do good. Runners paid an entry fee that went to the charity and got a free T-shirt. Nonprofits quickly realized they could make more money if the runners signed up relatives, friends and co-workers to "sponsor" them in the race.

Then along came Dan Pallotta, the promoter who created the fund-raiser extravaganza concept in 1993. His multiple-day walks for charity and camping trip/bike rides came with traveling tent cities, good meals and hot showers, some in such exotic locations as Alaska and Africa.

Pallotta TeamWorks events swept the United States, bringing in hundreds of millions of dollars until Pallotta last month abruptly closed the doors to his Los Angeles-based company amid complaints from nonprofits that the organizer--a private for-profit company--was getting too much of the money.

Some of these charitable groups sound a bit disingenuous, especially after they happily took money from Pallotta events during years of questions about how much of donors' money was swallowed up by event expenses. Pallotta's answer: You can't look at what percent goes to charity; you have to look at how much total goes to charity.

Most nonprofits found the situation perfectly acceptable until they saw their own bottom lines suffering--such as when the 1997 Florida AIDS ride not only showed a miserable 12% going to charity but raised a disappointing $134,000.

Nor is it correct to solely blame Pallotta's company. Participants' eyebrows should have gone up at the descriptions of his events. "Three dinners, four lunches, four breakfasts, mobile hot showers on tractor trailers ..." and far more, boasts his Web site, www.pallotta teamworks.com.

Take a look at the finances for the 2001 AIDS rides. Of the $18.8 million that donors gave, only $4 million eventually went to charity, whereas $6.6 million went to "participant support"--more than a third. Other outlays include marketing and administration.

Should Pallotta TeamWorks go away permanently, it would leave behind a legacy of costly, misleading fund-raisers.

Even the venerable Arthritis Foundation has held "Joints in Motion" runs and walks in such locales as London and Paris. The foundation says it has no documents breaking down the expenses but that these three-to-five-day jaunts take up about a quarter of the money raised. Such events blur the line between charity and donor-subsidized mini-vacations.

Fund-raisers, even for-profit fund-raisers, should hold to the basic outlines for charities set out by the Better Business Bureau that call for 65% of the money to go toward charitable activities. Charities and event participants alike should be able and willing to tell donors upfront how much of the money will go to good works.

If fund-raising doesn't get back on track, nonprofits will have to shoulder some blame for public apathy to their appeals.

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