Rotary Foundation Basics, Part 3: What’s Great, What Could Be Improved?

by Quentin Wodon

This last post in a series of three on The Rotary Foundation (TRF) looks at what is great about the foundation, and what could probably be improved. TRF support for Rotary projects is first discussed, based on my own perceptions and those of a few fellow Rotarians to whom I talked before writing this post. Ratings received by the foundation as a charity are then briefly reviewed.

TRF Support for Rotary Projects

On the plus side, TRF support for polio has been instrumental in the near eradication of the disease, as mentioned in the previous post in this series. The focus on polio has also helped Rotary in getting a seat at the table with major partners such as the World Health Organization and the Bill and Melinda Gates Foundation. Even more importantly for Rotarians involved in service projects, the matching system whereby TRF co-funds grants is well appreciated. Both district and global grants benefit from TRF support, but I will focus in this post on global grants.

TRF provides up to $200,000 in matching funds for global grants, with the minimum match being $15,000. This is for projects that reach a minimum size of $30,000 in overall cost/funding. The system for global grants has been fundamentally revised in recent years in order to have fewer but larger grants, which should help in ensuring that projects have a bigger impact on the ground and are well managed. Six areas of focus have been selected for the grants, which is also positive to narrow down a bit the scope of what is funded (even if this scope remains fairly broad). The rules of the game for putting together global grants are clear, which also helps.

In terms of potential areas for improvement, the Grants Online System may not be as friendly as it could be, given today’s technology. Several Rotarians mentioned to me that there may also be at times issues with the grant review process. Hopefully reviewers are as objective and qualified as they should be, but this is something that could be assessed. In addition, despite efforts to help Rotarians put together great global grants, more could be done in terms of e-learning resources and other tools to help the membership develop impactful projects beyond the management and processing aspects of grants.

Many global grants are complex and require substantial expertise. It is not always clear that project teams have enough expertise. The system relies largely on volunteer hours to prepare and implement grants. This helps not only for cost savings but also for getting Rotarians’ hands dirty. Personal experiences gained through hands-on work are invaluable, especially when working directly with project beneficiaries. But it may be useful in some cases to rely more on external paid expertise, especially for large grants. In principle Rotarians can get help from Rotarian Action Groups (RAGs) for the design and implementation of projects. These are great resources, but it is not fully clear how active and effective some of the RAGs are.

One area of concern is the ability of TRF to respond to crises, with the most recent case being Ebola in West Africa. There are two issues here. One issue is fundraising. TRF does not seem to have a good system to provide incentives (read matching funds) for individual Rotarians to donate in times of crisis. Many Rotarians donate when a major crisis hits, but they often do so through other organizations because TRF does not have a good system to attract these donations. If TRF could set aside funds to match individual donations by Rotarians for major crises, this could help the foundation raise more funds. It would also help TRF gain in visibility as a humanitarian organization. The other issue is about the allocation of the funds that could be raised. Part of the funds could be allocated to Rotary clubs in affected countries for their projects to respond to crises with some type of fast track approval. Part of the funds could also be transferred to well established national and international NGOs active on the ground in responding to crises. Overall, setting up a stronger crisis response mechanism within TRF could strengthen the Rotary brand while providing much needed rapid support to vulnerable groups in countries affected by major crises.

Finally, more expertise and commitment from TRF is needed for proper monitoring and evaluation of global grants, and for disseminating the results of such evaluations. My perception is that few projects are evaluated in-depth with baseline and endline data collection to assess impact. Impact evaluation can be expensive, so not all projects should be evaluated in that way. But more should be done in this area, including in partnership with some of the NGOs implementing TRF projects. If TRF could fund more innovative projects that would be evaluated seriously, it could have a larger impact because other organizations with more resources could then bring successful TRF pilots to scale.

Ratings for TRF as a Charity

The comments above point to some great features of TRF, but also some potential areas for improvement. One should not forget however that overall TRF is very well rated as a charity. Given that many of the followers of this blog are new, let me repeat here what I mentioned on TRF ratings a few months ago on this blog as well as in another post for Rotary Voices.

In the US, Charity Navigator provides ratings for charities. Three ratings are available for financial performance, accountability and transparency, and a combination of both. Charities can get one to four stars overall. TRF has the highest possible rating (four stars). The yellow dot in the Figure below shows exactly how the foundation is rated – it has a rating of 89.8 out of a maximum of 100 for financial performance, and 97.0 on accountability and transparency, which yields a four stars rating overall.

RI Foundation Graph

For financial performance, Charity Navigator considers seven main indicators: the share of the charity’s budget spent on programs and services, the share spent on administrative expenses, the share spent on fundraising expenses, the fundraising efficiency ratio, the primary revenue growth, the program expenses growth, and the working capital ratio. Details are available on the Charity Navigator website. For accountability and transparency, a total of 17 indicators are used. TRF could have scored even higher except for the fact that its donor privacy policy requires donors to opt out for their basic information not to be (potentially) shared with other charities.

Conclusion

Overall, TRF helps fund great projects on the ground, and it is also well rated as a charity. The reform of the global grants model of the last few years to define areas of focus and implement fewer but larger grants was smart. But as for any other organization, there are also areas where TRF could probably do better, especially in terms of the friendliness of the Grants Online System, the need to ensure that project teams have the expertise they need, the ability to respond to humanitarian crises, and the need to better evaluate the impact of projects that appear especially innovative. What do you think?

Note: This post is part of a series of three on TRF: Part 1, Part 2, Part 3.

Rotary Foundation Basics, Part 1: How Large is the Foundation?

by Quentin Wodon

The Rotary Foundation of Rotary International is a major player in the work of Rotarians worldwide. True, most activities organized by clubs and indeed most service projects are implemented independently of the Rotary Foundation, which I will refer to as “TRF” in this post. Many clubs have their own foundations and many projects do not require a foundation to be implemented. But for most investments at scale, TRF does play a key role, so Rotarians should have at least a basic knowledge of the foundation. My guess is that this is not the case today, so I thought it might be useful to run a three post series on some of the basics of the foundation. This first post discusses assets and expenses. The next will look at categories of expenses by thematic areas. The third will discuss management and suggest a few ideas to make TRF more impactful.

RTF Report

How large is TRF In Terms of Assets?

A widely used measure of the size of a foundation is its assets. According to their latest annual report (consolidated statements of activities), TRF and Rotary International had $1.2 billion in total assets as of the end the 2013-14 fiscal year, and $1.09 billion in assets net of liabilities. This represented an increase in net assets of about $130 million versus the previous year (2012-13) when net assets were at $961 million and total assets were at $1.08 billion.

One billion dollars is no small change, but some other foundations are even larger. Within the US, TRF would rank about 71st in terms of assets according to data from the Foundation Center (for some reason, TRF is not listed in the top 100 foundations put together by the Foundation Center, so the exact ranking is not available). The largest US foundation is the Bill and Melinda Gates Foundation, which had more than $40 billion in assets at the end of 2013. A dozen other US foundations have assets between $5 billion and $15 billion, and many more had assets between $1 billion and $5 billion.

In other words, in comparison to some of the largest US foundations, TRF could be considered as mid-size, even if it remains large in comparison to most foundations that tend to be much smaller. In comparison to foundations from other service club organizations, TRF is also the largest by far. Lions Clubs International now has more members than Rotary worldwide, but the Lions Clubs International Foundation had total assets in 2014 of $318 million. This is still large, but quite a bit smaller than TRF. The Kiwanis International Foundation is much smaller in terms of assets ($28 million in 2013).

How large is TRF In Terms of Grants?

Grants matter more than assets, since this is where the foundations make a difference. In 2013-14, TRF and RI had consolidated total expenses of $350 million. About two thirds of that amount ($232 million) were allocated to program expenses. The rest went to TRF development expenses ($16 million), TRF general administration ($5 million), RI operating expenses ($73 million) and RI service and other activities ($25 million).

With $232 million in program giving last year, TRF would have ranked about 25th among US foundation according to the list from the Foundation Center. This is a pretty good ranking. By comparison, the Lions Clubs International Foundation provided $44 million in grants in 2014, and the Kiwanis International Foundation made $18 million in grants in 2013. Only one US foundation – the Bill and Melinda Gates Foundations – gives more than one billion dollar in grants per year (it gives over $3 billion per year).

Why is there such a jump in terms of ranking for TRF among US foundations when considering grants or contributions instead of assets? In large part because many US foundations rely mostly or quasi exclusively on their endowments to make grants, without necessarily a lot of extra funding coming in annually (apart from returns on equity). By contrast TRF is able to rely also on donations from Rotarians, among others through its annual fund. In 2013-14, revenues from the annual fund reached $117 million. A separate endowment fund grew by $24 million. Annual giving by Rotarians, which is invested by the Foundation, is what makes it feasible for TRF to be able to make more grants in a sustainable and long-term basis.

Annual Fund

Still, we should all realize that while substantial, $232 million in grants/contributions per year remains small in comparison to some of the investments made by other players in the field of development. Official Development Assistance flows estimated by the Organization for Economic Cooperation and Development stood at $134.5 billion in 2013 (the largest recipient was Afghanistan, with more than $5 billion in aid). And some groups such as World Vision or Catholic Charities tend to have larger footprints than TRF. For example, World Vision provides funding to the tune of $2.3 billion per year for international programming as well as relief and rehabilitation, or about 10 times the level of contributions of TRF.

Who Gives the Most to TRF?

Since annual contributions are essential for the future of TRF, it is useful to look at who gives. The country that gives the most to TRF is (not surprisingly) the US. This is not surprising because the US has also the largest membership in Rotary. For the Rotary year 2013-14, TRF received $174 million from donors in the US. This includes $90 million in matches from the Bill and Melinda Gates Foundation for polio, so that individual and other forms of giving reached $84 million. Japan came in second, with $15 million in giving, followed by India with $13 million, Korea with $12 million, Taiwan with $9 million, Italy with $8 million, Canada and Germany with about $7 million each, Australia with $6 million, and Brazil with $5 million.

Giving TRF

How about giving per member? On a per Rotarian basis Taiwan comes on top with $216 in giving per Rotarian, followed by Korea ($182), Canada ($168), Japan ($134), the US ($124, not including the Gates foundation matching funds), and Australia ($123). In other countries, average giving per Rotarian to TRF is below $100 per year. Considering that membership in Rotary costs much more than that including for meals in many clubs, these levels of individual giving are frankly too low, especially in the United States where donors benefit from a tax exemption when giving since TRF is a registered 501c(3) charity. But this is another matter that will not be discussed here.

Giving per person

So that’s is for the basic financial information on the size of TRF that I wanted to summarize in this post. The conclusion is that TRF is a relatively large foundation, especially in terms of contributions/grants disbursed annually. At the same time, in comparison to overall flows for projects in developing countries, TRF is not at the same level as a number of other players, which makes the issue of strategic positioning essential for the foundation. That will be the topic of the next post in this series, by looking at the categories of expenses of TRF by thematic area.

Note: This post is part of a series of three on TRF: Part 1, Part 2, Part 3.

 

 

Rotary Membership Analysis 5: Giving and the Cost of Membership

by Quentin Wodon

Apart from volunteering their time, another way through which Rotarians contribute to service projects is by giving money. This can be done through the Rotary Foundation, as well as through club foundations or the clubs themselves. Rotarians also pay dues for their membership. In some clubs these dues may be high, especially if weekly meetings involve lunches. In other clubs the dues may be lower. By adding up what Rotarians give to Rotary and their membership dues one can get an estimate of the overall cost of membership. Calculating this cost is important. Clubs should be aware of their cost of membership and they should regularly assess whether this cost is appropriate or too high. This exercise was done in my district through the membership survey already mentioned in previous posts (as before, for details see my book on Rotary).

Cost of Membership

So, what is the cost of membership in my district? On average, according to the survey this cost came up to $2122 per year per Rotarian, of which a bit more than half was for dues and meals (most clubs meet for breakfast, lunch, or dinner, and charge for meals whether Rotarians attend the meeting or not, but there are exceptions). The rest consisted mostly of donations. Specifically, the survey suggested that about four in five Rotarians gave to their club or club foundation with an average gift of $409 per year. Three in four gave to the Rotary Foundation (of Rotary International) with an average contribution of $386 per year.

These estimates do not include other potential costs, such as the cost of participating in annual district conferences, the conference of Rotary International, and a number of other events such as Christmas dinners, installation diners at the club or district level, club fellowship events, etc. So in my district the average cost of membership is likely to be of the order of $2,500 or more, and for those who are able to give generously, it is likely to be substantially higher.

Now, my district is located in a fairly wealthy area of the United States, so it is likely that the average cost of membership will be lower on average in the United States as a whole and the same is likely to be true for other countries. Still, the cost of membership can be significant, and it is therefore a concern for many clubs, especially during hard economic times. As mentioned earlier in this series, a high cost of membership may act as a barrier for new members to join, but it may also lead some existing members to leave even if they do not say openly that this may be the reason (as Rotarians know, retention of existing member is a challenge for some clubs).

Note also that I use the term “cost” here in a generic way. If Rotarians were not members of Rotary, they would still probably give to other charitable organizations. Similarly, while Rotarians volunteer with Rotary, they also volunteer with other groups and the survey documented some of that. All this implies that while not being a member of Rotary might help to save on dues and the cost of meals, it might not generate a “cost saving” equal to the estimated overall cost of membership as calculated here, simply because donations might then be channeled through other organizations. At the same time Rotarians are likely to assess the value proposition of membership in part in function of the way they perceive the overall cost of membership to be – considering both dues and donations (even if those are voluntary). Therefore it does make sense to estimate the cost of membership in a comprehensive way.

Is the financial cost of membership too high? The membership survey asked this question. Nine in ten Rotarians in my district responded that the cost was reasonable for them, which is encouraging. But one in ten mentioned that the cost was too high. And since potential members who did not join, as well as members who may have left, were not part of the sample of the survey, it seems fair to say that for a larger share of the potential membership, cost is indeed an issue. The survey also suggested substantial variation in costs between clubs. For example, for one of the clubs that has higher dues because of the cost of weekly meals and the location of the meetings, 30 percent of the members considered that the costs were too high.

Three Additional Points

In the rest of this post, I would like to make three additional points on (1) the cost structure of clubs, (2) the cost of district events, and (3) the relationship between cost structure and giving.

First, it should be clear from the above discussion that each club should make its own assessment of its cost structure and adopt appropriate measures as needed. Different clubs have different cost structures, and this helps in targeting different types of members. In Washington DC, two new clubs were created over the last three years. These clubs serve primarily young professionals and their dues are lower than in many other clubs in part because they do not have weekly meals that must be paid in advance. For example, one of these clubs meets for cocktails. A third club meets for breakfast but it recently decided to reduce dues by letting each member pay for his/her own breakfast instead of charging all members the same fee. In my club, which has higher dues and costs for meals, a pilot rule was adopted last year to reduce the cost of membership for new members under the age of 35. These new members pay lower dues and benefit from reduced prices for meals. At the margin, because the basic operating cost of the club is covered by the existing membership, this pilot rule does not have a negative effect on the club’s bottom line and it may help recruit younger members (the rule will be evaluated to assess whether it has worked).

Second, I mentioned earlier that the average estimate of the cost of membership obtained through the membership survey did not include special events such as district conferences. When these conferences are expensive to attend, this reduces attendance, and it increases the full cost of membership for those who attend. As discussed in the 3-part series in this blog about district conferences, it is important to maintain the cost of those events affordable for more members.

Third, there is probably an inverse relationship between the cost of dues and meals, and the ability of Rotarians to support service projects through donations. We all must live within our means, and a higher cost for meals and dues may reduce the ability to give. The weekly meals and meetings with speakers are a key component of the Rotary experience in most clubs, but if the ultimate purpose of Rotary is to serve, each club must think hard about the appropriate balance between the share of the overall cost of membership that goes to dues and meals, and what is allocated to or raised for service projects. The answer to that question must be answered by each club given its own circumstances, but this is clearly an important question to think about.

In the next post in this series, I will discuss what Rotarians think is working very well in their club, and what may not be working as well.

Note: This post is part of a series of 10 on Rotary Membership Analysis. The posts with links are as follows: 1) Introduction, 2) The Challenge; 3) Why Do members Join?; 4) Volunteer Time; 5) Giving and the Cost of Membership; 6) What Works Well and What Could Be Improved; 7) Targeting Geographic Areas for Growth; 8) Initiatives to Recruit Members; 9) Fundraising Events; and 10) Telling Our Story.

 

Donating To Charities? Check Their Ratings

by Quentin Wodon

The November-December period that starts tomorrow is the most crucial time of the year for charities. This is the time for appeals to donors – before the holiday break. For Rotary, November is Foundation month because clubs appeal to their members to support The Rotary Foundation of Rotary International which helps fund international Rotary projects as well as polio eradication.

We often give to charities we know personally. And we often give on the basis of events or stories that move us (some of those stories are reported on this blog). As Mother Theresa once said, “it’s not how much we give but how much love we put into giving.” But giving with love does not imply giving blindly. Americans gave $335 billion to charity in 2013 according to Giving USA – that’s more than $1,000 per person. Whether you are a Rotarian or not, it is good practice to check the rating of the charities you are considering donating to. This is very easy to do with tools available on the web.

In the United States, a widely used rating website is Charity Navigator. This organization provides three ratings for charities – a rating for financial performance, a rating for accountability and transparency, and an overall rating that is (a non-linear) function of the first two. Charities can get one to four stars depending on their combined performance on the two ratings.

This is visualized below for the Rotary Foundation of Rotary International which is located in the upper right quadrant with four stars, the highest possible rating. The yellow dot shows exactly where the foundation is located – it is doing great, but slightly less well on financial performance (rating of 89.76 out of a maximum of 100) than on accountability and transparency (rating of 97.00).

RI Foundation Graph

For financial performance, Charity Navigator considers seven main indicators: the share of the charity’s budget spent on programs and services, the share spent on administrative expenses, the share spent on fundraising expenses, the fundraising efficiency ratio, the primary revenue growth, the program expenses growth, and the working capital ratio. Details on each are available on the Charity Navigator website. For accountability and transparency, a total of 17 indicators are used. The Rotary Foundation could have scored even higher except for the fact that its donor privacy policy requires donors to opt out for their basic information not to be (potentially) shared with other charities.

Apart from Charity Navigator, different types of information on US charities are also available on a number of other websites including CharityWatchBBB Wise Giving Alliance (BBB stands for the Better Business Bureau), GuideStar, and the Foundation Center. For those requiring more information, several of these websites provide easy access to the Form 990 that US charities have to file with the Internal Revenue Service. In other countries as well, information is often available on national websites about the charities of a particular country.

Checking the rating of charities is now easy to do, just a click away. Not all charities are rated, but many of the larger ones are. While those ratings should not be the only factor in the decision to give, they can be one of the factors. For Rotarians, the good news is that the Rotary Foundation of Rotary International not only does good work on the ground, but is also well rated.