When Dan Palotta speaks in Fredericton next week, he will make a passionate plea for more liberal operating rules for non-profits, arguing they can do more good with greater flexibility.
Palotta is one of the keynote speakers at the Social Impact Dialogue that will take place Monday and Tuesday to kick off the East Coast Startup Week – the winter entrepreneurship festival in the New Brunswick capital.
The influence of the Pond-Deshpande Centre – whose dual mission is for traditional and social entrepreneurship – is strong in the Startup Week, so there is a heavy emphasis on impact ventures at the week-long festival. The highlight of the week will be the Breakthru Gala on Thursday evening, and complete agenda is available here.
A native of the Boston area, Palotta is a veteran of the not-for-profit movement and invented the multi-day charitable event industry with the AIDS Rides and Breast Cancer 3-Days. According to his website, these events attracted 182,000 participants in nine years and raised a total of US$582 million.
His most recent crusade, and the subject of his talk in Fredericton, is a liberalization of the rules overseeing not-for profits.
“I’d like to see these organizations and their members running to the wild dreams that brought them into this work in the first place,” he said in a phone interview Thursday.
Palotta contends that non-profits are shackled by rules saying that “overhead”, or the administrative and marketing costs associated with the charity, can only be a certain percentage of the organization’s expenditures. He doesn’t like caps on executive pay in non-profits. He opposes rules preventing non-profits from taking risks or trying innovations.
Non-profits now operate in an “oppressive” web of restrictive regulations, he said. And they need to be freed to pursue new projects that would bring benefits to society and the planet.
Would more liberal regulations lead to a misuse of funds? No, said Palotta. The misuse of funds and fraud are criminal problems, and anyone abusing money given to charity could still face criminal prosecution.
What he wants to see is people and institutions giving money to charities based on their performance, not on their administration costs.
He wants to see innovation in this space. Some could lead to profitable ventures, he said, such as the Cystic Fibrosis Foundation monetizing patents it holds on drugs. But there is also a need for innovation in practices and technology that can benefit society without generating a profit.
The good news is that there is progress in the discussion on non-profit oversight. Palotta noted that both Charity Navigator and the Better Business Bureau in the U.S. have said overhead is a poor measure of a non-profit’s value and performance is what matters.
“The conversation is in its early stages,” he said. “It was like gay marriage about 30 years ago – no one was talking about it but the good news is the conversation has started.”
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