Monday, June 15, 2009

Is Salvation a Kroc?

A cousin of mine used to say that free advice is worth what you pay for it. While not terribly original, he was also wrong. Free advice is often way too expensive. When you're getting something for free it can be tough to hold the person offering it accountable for timeliness or follow-through. This can lead to serious complications. But that's another discussion.

The issue today is that there are also generous gifts that organizations can't afford to accept. Note the article in today's Times ( about Joan Kroc's enormous bequest to the Salvation Army. The gift of $1.8 billion was restricted to building 30 new community centers. Mrs. Kroc stipulated a sum equal to construction cost be placed in an endowment for operations.

We recommend to clients that they should raise 30 to 40% more than the construction cost of a new building just for a maintenance endowment. (Since the project cost of a new building may be as much as twice the construction cost, the maintenance endowment might be more like 20% over the total funds needed to build the building. For more about these issues see Understanding Facilities: Essentials of Planning and Design, at

But that says nothing about the operating costs for the building (utilities, housekeeping), the programs or services provided in it (staff, equipment, supplies), or administrative overhead. Mrs. Kroc's endowment bequest may or may not have been sufficient to cover these ongoing costs. Apparently the Salvation Army concluded they were not.

We did some work for the Salvation Army around the time of the bequest, in 2003. They had some big concerns then about the gift: news of such a gargantuan gift could dampen the sense of urgent need on the part of other donors; at the same time, the gift was not directed precisely toward the core programs and services of the organization, and could be as much a distraction as a benefit; the lavishness of the intended facilities could be a challenge to the austere brand identity (my words) of the Salvation Army.

While other nonprofits will likely not have to deal with gifts within even several orders of magnitude of the Kroc bequest, the lessons of it are important ones. Mission, not donors, should drive the direction of an organization. And the real costs of any venture need to be considered from the start.

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