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Charity galas are high profile, not high profit

Tampa General Hospital's Night at the Circus in 2006 was reportedly a phenomenal success, bringing together philanthropists and pachyderms to raise $180,000 for renovation of the hospital's pediatric intensive care unit.

But the hospital foundation's accounting of the event for the Internal Revenue Service told a different story. In its filing as a tax-exempt organization, the nonprofit said it lost about $2,000 on circus night, with expenses outpacing revenue.

In the world of charitable special events, where balance sheets go through more contortions than circus acrobats, both accountings of TGH's fundraiser were correct.

Even though the event's ticket price, or gross revenues, didn't cover expenses, the affair generated more than $200,000 in additional cash and in-kind contributions that are itemized separately by the IRS. And those donations, which might come in the form of free hot dogs and cotton candy one day, sometimes pay off big in the long run. Consider Don Wallace, owner of Lazy Days RV in Seffner, who got involved with TGH through his sponsorship of circus night. Next thing you know, he and his wife, Erika, were donating $2-million to the hospital's trauma center.

As executive director of TGH's foundation, Robin DeLaVergne throws three big events annually: circus night, a golf tournament and the "Moments in Time" gala, which netted less than 10 cents on the dollar in 2006, according to the IRS filing.

"I'd rather people just gave and we'd never have to have a gala,'' said DeLaVergne, whose foundation raised about $3.6-million in 2006, most from direct contributions. "But there are some people who just like a party."

As the economy slows and corporations and individuals take a second look at their charitable donations, more and more people are asking: Are fundraisers really effective?

Mark Shamley of Orlando is president and CEO of the Association of Corporate Contribution Professionals, a trade group of more than 150 executives who field charitable requests for major corporations. He recently hosted a panel discussion on the cost-effectiveness of charities' special events.

"I don't think people will get out of the gala business anytime soon, but the economy is going to force not-for-profits to make modifications to their fundraising efforts," he said, adding that he has sponsored and attended plenty of events on the "chicken dinner" circuit. "There are companies that have made the decision not to support or send people to these events anymore."

Those decisions are being shaped in part by reports like the one from Charity Navigator of Mahwah, N. J., which last year analyzed the finances of special events as reported on IRS filings for more than 5,000 charities.

"Most special events lose money,'' said Sandra Miniutti, vice president of marketing for the charity watchdog group. "It's a pretty well-known fact among those that work in the sector. Special events can be very taxing on an organization's time and it can be quite expensive to meet the level of expectations of high-end donors."

According to Charity Navigator's analysis of the IRS data, charities spent $1.33 to raise $1 in special events contributions. That compares to an overall fundraising rate of 13 cents to raise $1 in direct contributions. Ignoring expenses, contributions to special events generated 15 percent of contributions to U.S. charities. According to Giving USA 2007, compiled by the Center on Philanthropy at Indiana University, Americans contributed $295-billion to 1.4-million charities in 2006.

"The take-away for the typical donor is that while special events may be fun, they may not do a whole lot for the charity's bottom line," Miniutti said. "If you're passionate about supporting the cause, you're better off writing them a check."

Joel Momberg is head of All Children's Hospital Foundation, which just held its annual Telethon weekend, a trifecta of events including a live 22-hour broadcast, the Taste of Pinellas and a VIP auction. Estate and trust gifts accounted for nearly half of the foundation's $19-6-million in revenues in 2006, with special events contributing "just a couple million dollars," Momberg said. All Children's annual gala, sponsored by the hospital's volunteer guild, netted $400,000 in 2006. Its Baseball for Kids, however, brought in less than 25 cents on a dollar revenue, according to the IRS filing. Momberg said the baseball event is unusual because net proceeds are shared with two other nonprofits.

"Events don't raise a ton of money, but we call them both fundraisers and friend-raisers,'' said Momberg, who is one of the highest-paid foundation executives in the area with compensation of more than $450,000 in 2006. "The primary motive is to raise money, but the secondary is to introduce more people to All Children's who may be able to support us in the future."

Terry Smither, executive director of the foundation associated with Helen Ellis Hospital in Tarpon Springs, also relies on special events to raise friends. That's good because in 2006, both of the foundation's events, its annual gala and a dinner for outgoing U.S. Rep. Michael Bilirakis, lost money by IRS accounting measures. Smither said the events actually netted about $80,000, less than 10 percent of the foundation's contributions for the year.

"I'm sure if we dedicated our time to other aspects of fundraising, it would be possible to make that up,'' she said. "But I still feel strongly about the need for a community event that connects people to the hospital."

Meals on Wheels of Tampa is one nonprofit that has revamped its approach, working with a Seattle consultant who trains clients to get off the fundraising treadmill. The local nonprofit, which delivers 300,000 meals a year on a budget of about $1.25-million, holds just one "ask" event a year, an hourlong breakfast that brought in $340,000 in pledges in March.

"There had been a pent-up demand from our donors for an event like this,'' said Cindy Vann, head of the agency's board. "It wasn't about a fashion show, an auction, a dinner or a performance. We help them understand who we serve, why we serve and the difference we make in their lives."

Terry Axelrod, whose company, Benevon, has been working with Meals on Wheels of Tampa for about four years, said the idea is to generate sustainable funding by connecting with individuals and corporations that support the agency's work.

"I tell them to get rid of special events and quit trying to strong-arm and manipulate people," she said. "If they like to party, fine. Get the costs underwritten, use it as recognition of people who give bigger gifts and make sure the mission is inserted. My criteria is this: When people walk away from this party, will they remember the name of the organization and what we do there?"

Kris Hundley can be reached at hundley@sptimes.com or (727) 892-2996.

HOW THEY DID
The profitability of a sampling of 2006 bay area charity events.

Biggest haul (highest net income):
  • All Children's Gala Ball: $414,652

  • Highest percentage net return:
  • Moffitt's Fashion Targets Breast Cancer: 89 cents on each dollar of revenue

  • Biggest haul from a charity golf outing:
  • Tampa General Hospital: $82,537 (80 cents on the dollar)

  • Poorest return on the dollar:
  • Moffitt's Evening with Sam Donaldson: 19 cents on the dollar
  • All Childrens Baseball for Kids: 24 cents on the dollar

  • Poorest performing charity gala:
  • Tampa General Hospital: $10,036 (less than 10 cents on the dollar)

  • Money losers:
  • Tampa General Hospital Night at the Circus: Lost about $2,000
  • Helen Ellis Hospital's Health Benefit: Lost nearly $26,000
  • Helen Ellis Hospital's Dinner with Michael Bilirakis: Lost $3,300
  • Salvador Dali Museum Dinner: Lost $7,600

  • Source: Nonprofits' IRS Form 990 filings for 2006

    Charity galas are high profile, not high profit 05/30/08 [Last modified: Thursday, June 5, 2008 10:52am]

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