In our view

What can we learn from philanthropic mistakes? - 09 April 2015 - Daily Maverick

By Shelagh Gastrow

dm 09 04 2015Philanthropists are human beings and they make mistakes. Generally they don’t like to admit their mistakes and, even worse, they do not want their mistakes making headlines. Taking into account that philanthropic money is private, whether it is an individual’s own personal resources or funds from a private foundation, responsibility for mistakes is usually only recognised in-house. So what can we learn when mistakes loom large?

Philanthropic funding requires significant levels of trust – essentially, a person or a foundation hands over money to another entity to deliver certain outcomes. Good donor practice usually requires that donors know where their role ends and where the recipient’s starts. They generally don’t get involved in grantee operations, but rely on trust and confidence in the recipient’s ability to deliver what they have promised. However, despite undertaking due diligence checks, things do go wrong and usually people are too embarrassed to admit these failures.

So what kind of things can go wrong? The most glaring is when money disappears or is used by a recipient for their own benefit. On occasions, the donor might lay a charge of fraud, but generally the complaint is left with the organisation’s board and the organisation is “blacklisted”, never to receive funds again. Thecause celebre of this kind of failure in South Africa was exemplified when Alan Boesak was accused of misappropriating R250,000 received from the Danish NGO, Danchurch Aid, the Coca Cola Foundation and the singer Paul Simon. The funds were to be used by his organisation, Foundation for Peace and Justice, but according to the subsequent court case, the money was placed in a private trust fund. In 1999 Boesak was found guilty of fraud and imprisoned for about a year.

More difficult to recognise as failure, is the recipient’s inability to account for money. This sometimes happens with organisations that don’t have the proper governance and financial procedures, don’t have paper trails or controls on spending. This does not necessarily mean that money has been misappropriated, but rather that no thought has been given to accountability. Sometimes donors can assist by bringing in some technical assistance, while others will ask an auditor to check the books. Depending on the strength of the relationship or the commitment to the cause, donors will either see this as a learning opportunity for an organisation and themselves, or they will withdraw permanently.

Failure, however, can also happen when the organisation does not undertake the agreed project or work. This is where donors are correct in asking for account in relation to reporting. They will want to know what the outputs were and the outcomes over time. Did the funding make an impact on certain individuals, groups or communities? Did it make an impact on policy? How did that impact take place? Was it measurable or merely anecdotal? Arising from the outcomes, can any decision be made about a way forward? Fund recipients who cannot answer donor questions put the donor in a very difficult situation.

Failure can also mean that a donor has invested in a particular project, but that it didn’t work out as expected. Sometimes there are unforeseen negative results, sometimes the theory of change has not worked, sometimes the design of the programme is flawed, perhaps implementation was incorrect, sometimes there is simply no impact. However, if the results are well documented, learning can take place and that itself has value. The case of Anglo American Platinum’s R100-million investment in an education programme in Limpopo and North West Province which aimed at increasing school pass rates, particularly in maths and science, in the areas near its mines, was an example of inadequate design and process. A research project to evaluate the programme indicated that the results did not reveal “a statistically significant effect”. However, the research was able to pinpoint many of the conceptual problems around the programme and this was a significant learning opportunity, albeit a very expensive one! The issue of trying to do too many projects in “small doses” meant that they could not impact on long term systemic change. The researchers recommended improved co-ordination between the company, government and local stakeholders. Philanthropy often entails risk and money is invested in projects that are innovative, but not necessarily tried and tested. The benefits of funding these innovations are that we can learn from the mistakes made and the reasons for failure can be researched.

Failure can also be related to impact versus the total rands expended. Whilst some projects may have significant impact, sometimes the cost of the programme is too high. I recently met someone who was involved in developing a bridging programme to strengthen student capacities to enter university. When they finally counted the outcomes, she told me that for the money spent, they could have sent all the students to Harvard! So whilst the project was successful, there was debate about efficiency and if the funds could have been used in more productive ways.

Another cause of failure is when an organisation accepts a donation, but cannot maintain its commitments to that donation. Well known in South Africa is the case of the Natale Labia Museum in Muizenberg which was donated to the Department of Public Works and Iziko Museums in 1985. It was closed in 2005. On inspection it was revealed that the building had been allowed to significantly deteriorate, that government had sold the donated adjoining property for a mere R50,000 (and it was subsequently resold for R900,000) and a valuable painting had also been disposed of. Count Labia took Iziko Museums to court to return the property and for compensation for the sale of the property and the painting. Iziko accepted responsibility and a settlement was negotiated. Thankfully, today, the Museum has been restored as a cultural centre and art gallery.

Politically driven agendas also sometimes lead to failure. On occasions donors are beguiled by a request from a political leader to put their money into a project, often infrastructural projects. Visiting those projects some years later will reveal the success or failure of their investment. If the project has stood alone without community support, without the associated infrastructure such as electricity or roads, without a commitment from the appropriate government department to staff and maintain the facilities, these kinds of donor investments will fail. It is important for the donor to obtain clear contracted commitment that the investment will stand the test of time.

Occasionally the unexpected happens despite the donor’s good intentions. Oprah Winfrey invested $40 million into a Leadership Academy for Girls in Johannesburg. Winfrey was a champion against sexual abuse because of her own experience as a child, but the school was rocked by a scandal in 2007 when a matron was charged with 13 counts of abuse. Give Winfrey her due, she took responsibility as the donor and founder and, learning from the experience, continued her mission to provide an outstanding education for young women in South Africa in a safe and nurturing environment.

Some of the worst mistakes are made when donors believe they have the solution to an intractable problem and insist on imposing their view on the delivery agents. We are not dealing with a set of dominos where one move affects the others in a relatively predictable way. We are dealing with complex social systems and often the most successful projects are those defined and led by the communities themselves. People parachuting in from other contexts often blindly ignore the protocols, the negotiations, the need for buy-in and local wisdom. As well intentioned as they might be, there can be a sense of arrogance when imposing a solution on a community in which they have no roots.

So yes, philanthropy does fail and it can do more damage in communities if it isn’t well crafted. However, this has to be weighed against the option of doing nothing. As Theodore Roosevelt, US President from 1901-1909, said: “Far better it is to dare mighty things, to win glorious triumphs even though checkered by failure, than to rank with those poor spirits who neither enjoy nor suffer much because they live in the gray twilight that knows neither victory nor defeat.”