Monday, May 21, 2012

Charity’s shelves 100 year pledge program because of cash flow problems


Metro’s largest charity says it will have to rethink its bold strategy to allow donors to make pledges of up to 100 years. The Big Honking Foundation of Metro says they are halting the program until they can figure out their cash flow problems.

The Foundation announced its new 100 year pledge program last year in response to the financial downturn in the US economy. Under the program, donors can spread their donation payments over a century and still enjoy tax savings in the same financial year they made their pledge. Wildly successful, the program boosted donations more than 10,000%. But strangely, income levels dropped. Last week, The Foundation announced that it would be suspending operations because of a financial crisis. The doors to the office were shut and staff were laid off.

“We just don’t know what happened. We were able to secure a massive amount of new donations. We literally have every person in Metro as one of our donors, and also several of their dogs and cats and future offspring. Our support has gone through the roof. We can’t explain it,” said Foundation CEO Spooley Snidely.

The mysterious financial problems arose a few months ago during a time of transition. The Foundation abandoned its annual gifts, major gifts and planned giving programs in favour of its successful pledge initiative. Shortly after the changes were made, cash flow started to dry up. While more and more 100 year pledges came in, strangely fewer dollars were being put in the bank.

At first, Snidely says, they thought it was an accounting problem. The Foundation has just installed a new fundraising database and financial computer system that required two brain scientists, three consultants and a faith healer to operate.

“We thought it was just an error because of all the problems we were having with the new database,” said Snidely. “But then we realized it was something much deeper.”

Snidely and the Foundation’s board decided to fire their director of finance when she couldn’t explain what was happening. Then they fired most of the gift processing staff, who strangely had been slacking off and not working as hard as they used to.

“Our finance leader obviously was asleep at the switch. Her department was a mess. They were just sitting around all day with nothing to do. She had to go. And then we decided that we’d replace them all,” said Snidely.

When the problem continued Snidely and her new finance director called in police, suspecting criminal mismanagement. The two week investigation by the FBI Forensic Accounting Squad found nothing wrong, except for the dry cleaning and hairdos Snidely consistently charged to the Foundation. Even after that was repaid, the problem continued.

The Foundation then brought in a charity consultant from New York City who was paid $900 an hour and had perfect hair. The consultant made a number of recommendations, including investing more resources into the successful pledge program. Again, pledges tripled, but cash flow  became worse until the Foundation was unable to pay for any of Snidely’s expensive lunches with her donor buddies. The Foundation toyed with extending pledges to the year 3000, but by that time it had run out of money.

“We finally realize what the problem, but too late. We suspect it was a perfect storm of a number of things. First, there was financial mismanagement on our part. Second, there was the downturn in the economy. And third, and perhaps most telling, we suspect a significant portion of our donors weren’t renewing their pledges,” she said.

“I feel terrible,” said Snidely. “We’ve done everything we possibly can to save this organization, but sadly, its toast. There’s nothing left to do put steal as much office supplies we can, shut the doors, run off to another job and leave the board of directors on the hook,” said Snidely, who plans to use the same innovative technique in her next job.