Budget Deficits, Justifying Granite Countertops, and Our Impact

Bill’s post last week started some good discussion about our Catholic Charities visit. In the comments, a number of people expressed initial concern/questioning over how nice the facilities were and if the money that bought the flatscreen TV, large conference room, and upscale décor could have been used more wisely. Also, people have been pleasantly surprised as to how much our grant would make a difference to a small program, although the organization is massive. This made me think about our earlier discussions about Dan Pallotta’s defense of overhead spending as well as Peter Singer’s utilitarian inclinations and inspired me to do some research on Catholic Charities.

The Catholic Charities of Broome County is a part of the Catholic Charities Diocese of Syracuse, a larger organization that serves other counties. According to their 990 form, the total revenue in 2014 of this larger organization was $53,079,066 and their expenses were $52,397,158. The budget of Catholic Charities of Broome County, where we would be donating, looks like this:

That’s over $20 million flowing through the Broome county chapter.  This isn’t surprising when you consider the multitude of services they perform, or the fact that they serve 60,000 people in the county. From the graphic, we can see that a far majority of their funding is from government/taxpayer sources, including Medicaid (I wonder what “Other” source of revenue provides over $800,000). Contributions and Fundraising- that’s us- only accounts for 2% of their revenue, or about $407,000. Now, the question we must ask is: in the torrent of funds that goes towards Catholic Charities’ many expenses, how does our $7,500 grant fit into the bigger picture?

As Vanessa explained, contributions like ours generally go towards closing the gap between what the government gives and what the program aspires to do. The budget with which we were presented made it clear that our money would go mostly towards paying the salaries of licensed social workers who work directly with kids. The deficit in the budget as presented helps us measure our impact. We know that our grant will not be buying granite countertops for their reception desk or huge flatscreen TVs for their conference rooms. Good, we can wipe our hands and sleep easy knowing that we made a sizable impact on a program that directly provides services to youth. Right?

But wait. What about the countertops? That flatscreen TV surely cost more than $7500. Why can’t their $20 million budget find the room to fully support a program with 80 kids on the waiting list, but our $7500 grant can save the day? As donors, we must be skeptical about these questions, but also consider the full network of systems at play.

Pessimistically, we might see this large non-profit model as ineffective or not genuine. In the shadow of a $20 million operating budget, we might look at the CCC’s deficit as insignificant or even slightly fabricated. The program was designed to extend past its allocated funds. Maybe this was done so it could appear to be in-need and pull in donors. After all, Catholic Charities’ revenues are 2% from contributions and fundraising, while they are hoping to fund 12% of the CCC with contributions/fundraising. A cynic might say that we are not really paying directly for social workers. Instead, the larger organization chose to divert its other already-supplied funds towards less pretty things (occupancy, supplies and décor), knowing that individual donors would pay for the more attractive items. If donors weren’t at all in the picture, the organization might move more of its funding to the LCSWs and hold back on the HQ renovations.

Optimistically, we can view the model as an intelligent strategy. Yes, the CCC exists as part of a massive organization. But, it was designed to operate almost as a smaller charity. It was given life through limited resources and told to find ways to fund its deficit. In a way, this is an extremely efficient use of resources. If the Catholic Charities fully funded all its programs with government grants or program funds, it would provide donors little incentive to give. By leaving a deficit, Catholic Charities leaves its programs to find their own nourishment and grow organically, through the hard work of people like Vanessa. This allows the full organization to run more programs on a smaller given budget.

Pragmatically, I tend to agree with aspects of both the pessimistic and optimistic sides, leaning more towards the latter. It seems to me that the organization knows how to stretch its funds to do maximum good. One of the strategies it uses is budgeting deficits into certain programs so they can strive to find other sources of funding. Personally, I think the upscale facilities provide useful value to the organization and all its programs. After all, it is a $20 million branch doing important and impactful work, the facilities should reflect its image to its staff, potential donors, and board members. This is important for morale and branding. Overall, I think that we have the potential to make a large impact on a small program, but we should consider that program in the context of a larger scene. Bridging an $8,600 deficit for a program in a larger organization might be a lot different than bridging an equal deficit in a smaller one.

In considering the CCC for our program grant, I’m curious to hear your thoughts on the following questions:

Do you think our contribution will make a difference? Is their program deficit genuine or do you think they could find the money elsewhere? Most importantly, to what extend should the CCC program be looked at as a smaller entity instead of part of a $20 million organization?