The charity industry’s ‘hidden side’

A photo composite showing the cover of a book written by Valentina Furlanetto as well as an African boy. Photo of the latter by: Steve Evans / CC BY

It’s often considered bad taste to speak ill about those who do good. But for Valentina Furlanetto, it’s crucial to reforming a malfunctioning system of charities that risks wasting funds in the name of helping the world’s poor.

Furlanetto can expect a fair share of criticism in the coming days about her book, “L’industria della carità” (“The charity industry”), released last week by Chiarelettere, a reputable publisher.

The book sets out to shed light on the “hidden side” of charity and tells a story of inefficiencies, delays and the misuse of funds, of reckless marketing and the exploitation of labor.

Setting the scene is an investigation by the Italian court of auditors into 84 projects implemented by Italian NGOs in 23 countries, which last year found a staggering number of irregularities.

Furlanetto calls on nonprofits to rethink the way they operate in developing countries but also in Italy, citing the aftermath of the devastating 2009 earthquake in L’Aquila as an example.

“In Italy, we need more professionalism, more transparency, more efficiency,” the Radio24 reporter told Devex this week. “But at the end, those are the same problems that affect the rest of the country. There is no difference between profit and nonprofit: There is a lot of job insecurity, a bit a corruption, not much transparency.”

Here are excerpts from our conversation:

What struck you the most when you were researching for this book? What was the most surprising?

The first issue was “transparency.” In my guilelessness, before beginning this work, I believed that it was compulsory [for the NGOs] to make the budgets public, to be accountable for what they do, in a transparent way. But in Italy, nonprofit organisations and NGOs do not have any duty to show their budgets, to make them public, to publish them online or in any other way. That’s indeed curious.

There isn’t any authority or institution that monitors [them], having some actual parameters to evaluate if an organisation is virtuous or not. In the United States, that is not the case. There are both institutions and online tools so that whoever wants to donate to an organisation knows the salaries of who heads it, the share of the budget that goes to marketing, advertising, operating costs, projects.

There should be an independent authority … In Italy, there is the Instituto Italiano della Donazione but it is funded by the organisations themselves. There is a large conflict of interest … In United States, there is the Charity Navigator. Maybe there is a stronger, more engrained philanthropic tradition … Kostas Mosco-Coritis, director general of Médecines-Sans-Frontières Italy, told me that Italian journalists never question him about what MSF does … to see if a project had success, if it improved the situation of the region where they worked. Nobody asks him about that. That is strange, it’s a question of the public opinion’s maturity - journalists, press included … I hope this book will open a debate on that.

You report several cases of inefficiency, bad management – some serious diversions of funds, too. Is there a common thread here?

It is not possible to make generalizations …. There are some organisations that are inefficient because they don’t operate in good faith, and others that … invest more in advertising and marketing. It depends on the situation. I do not want to make generalisations, in fact I went through the budgets organization by organisation.

So is the system broken?

Many organisations fight to stay alive, to stay in the game. Paradoxically, they continue shouting, “emergency, emergency,” when - I won’t say there isn’t an emergency, but they use the resources to keep the organization going, to pay salaries, to be visible. So it is not anymore: Where do I have to go to help as many persons I can? Instead, it’s, “Where do I have go to be more visible, to attract media attention?” That is a distortion, maybe also due to the mass media themselves. We are accomplices, too; we, the journalists, because we follow that trend, we spotlight the organization that exposes itself more, that is more able to promote its projects.

In Italy, another distortion has been caused, unfortunately, by the government’s “5 percent” policy. It should have been a system to channel the 5 percent of your [personal income tax] into the budget of an organization [of your choice] to help it support itself . But then, the run for the 5 percent has become an unbridled competition [among organizations]. During the weeks before the due date for the submission of the tax return, the richest organizations start campaigning to get the 5 percent … So, that’s a run to become more famous.

How should this be fixed?

I would suggest the establishment of an authority to oversee how much an organization spends, for example, on marketing … It can’t exceed a certain limit [and] at the international level, those percentages should be known; more than 20 percent is too much.

Those sound a bit like private sector standards.

Yes. If you want to be efficient, you can take what is good in the private sector and keep what is good in the nonprofit sector. But as it stands, it has kept what is good about nonprofits and taken all the bad habits of the private sector.

Many curious things have been taken from companies’ habits. In Italy, the charismatic leader of an NGO would hand over power to his son, which is a typical distortion of Italian family-run business. Why did Umberto Veronesi pass the foundation to his son? Why did Gino Strada do the same to his daughter? What competence do they have to do it? Sometimes they have it, sometimes not. But that is typical of the Italian private sector: Caltagirone [the construction company] hands over to Caltagirone, De Benedetti [a publisher] to De Benedetti.

Then, there is the proximity with the political arena, which in some cases has led to investigations of corruption.

Another thing nonprofits have taken from the private sector and which puzzles me is that some organizations invest part of their donations in government securities, bonds and so forth … In Haiti, for example, it was revealed that the consortium Agire and VIS were [investing in fake bonds]. They were victims, too, of course, but the benefactors discovered that their money had been invested in bonds only when the [story] came out. But even if the bonds would have been authentic, why invest in the first place? They set aside money, but they continued asking for donations.

The negative effect that can come from this is that if some organizations display those behaviors, people lose trust in NGOs overall. That’s a damage, a really serious damage. … The damage is that people become accustomed to someone shouting, “emergency, emergency,” and then they don’t believe it anymore when there is an emergency.

One of the differences between Italy and other countries seems to be semantic. There is quite a taboo in using the word “business” for nonprofits and in seeing it as a professional activity.

Yes. There is a great difference between the United States and other countries as well as Italy, for example, in terms of salaries. In the U.S., those who work for a nonprofit may get salaries quite close to the ones of the private sector. Not in Italy. Here, payouts of 500.000 pounds such as the one Irene Kahn got when she left Amnesty International do not exist. From that point of view, we didn’t mirror [the private sector]. But from the private sector, we got the job insecurity. The same job insecurity that exists in the corporate world exists also for nonprofits. There is a lot of volunteering, a lot of job insecurity, a lot of labor exploitation.

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About the author

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    Elena L. Pasquini

    Elena Pasquini covers the development work of the European Union as well as various U.N. food and agricultural agencies for Devex News. Based in Rome, she also reports on Italy's aid reforms and attends the European Development Days and other events across Europe. She has interviewed top international development officials, including European Commissioner for Development Andris Piebalgs. Elena has contributed to Italian and international magazines, newspapers and news portals since 1995.