Charitable fundraising events are risky. In times of economic uncertainty, fixed costs don’t change, whether attendance is 2,000 or two. And according to the National Center for Charitable Statistics, the average net for public charities on fundraising events is under 40 cents per dollar spent.

Beyond the uncertainty of the pay-off, planning events can be costly, especially when it comes to extravagant galas that require an army of reliable volunteers and even more planning time.

With all of the uncertainty, costs, and energy they require, why do charities still use events as a fundraising method?

The answer: the social aspect.

People are inherently social. There are few more rewarding experiences in the world of fundraising than working tirelessly with other volunteers and, at the end of the day, seeing your efforts culminate in a successful charity event.

However, because of the downsides associated with fundraising events – especially in uncertain times, there is a trend toward alternative, more risk-averse fundraising methods. One of the most compelling is the concept of a giving circle.

Definition: A giving circle is a not-for-profit organization that is comprised of individuals who make an annual contribution and join in the decision-making process of the fund’s distribution. There is generally no incremental fundraising outside the annual membership contribution.

Dozens of giving circles have formed across the U.S. and abroad based on a successful model created by Jacqueline Caster, founder and executive director of the Everychild Foundation based in Los Angeles. With 220 members contributing $5,000 annually, the foundation makes an annual gift of one million dollars to a recipient of their choice. Throughout the process, members take on important roles on committees to ensure their own donations are being used efficiently.

Caster told Vivanista, “We’ve created a model of philanthropy that can be replicated at any price point, for any cause and with any demographic as its members – a group of Boy Scouts each donating for a toy chest for a children’s hospital, college students funding a beach cleanup, or even retired seniors sponsoring programs [for] a medical research project.”

At Everychild, the application process takes almost a full year, which guarantees all potential recipients have been properly vetted.  The journey culminates at a grant hearing in the Fall where the two finalists make presentations to state their cause’s case one last time.

“Not only do our members look forward to hearing from the finalists, but many external foundations attend. Often the runner-up, having gained skills through the vetting and preparation phase, goes on to be funded by one of those foundations,” said Caster. However, since their luncheon event occurs only once a year, some would complain that the giving circle model loses the desirable social aspect of planning charitable events.

Not true, purports Caster. Having served on multiple charitable event committees before starting Everychild, she understood that socializing is often a highlight of the fundraising experience. “We keep our members informed and offer smaller events called salons at which a speaker addresses relevant topics, such as grant-making or advocacy. We also have family days where we all volunteer time some Saturday at a food bank. That social element is very prevalent, just not as a committee planning a specific fundraiser”.

Once the awardee is selected, however, their relationship with Everychild does not end. To ensure that recipients follow through on their original grant proposals, the Foundation has a Grant Monitoring Committee. This group checks in with the winner at least twice a year to measure benchmarked goals and assess the organization’s progress since receiving Everychild’s gift.

Because of the passion for the organizations they fund, the Everychild Foundation has moved beyond the role of being solely a grant-maker. They have become advocates for many worthwhile causes on local, state, and federal levels.

In the end, the value of giving circles is proven by Everychild’s success despite the economic downturn. While she has heard of many charities whose donations have decreased by as much as 40% over the past year, Caster’s Foundation remained at a mere 5% attrition rate.

“People are still willing to give in tough economic times; but they want to make sure that the dollars are really having an impact. The accountability aspect of giving circles [that] makes grant monitoring a priority gives donors great assurance that their donations are not made in vain,” concluded Caster.

5 Easy Steps to starting your own Giving Circle:

1. Select A Cause. In the case of the Everychild Foundation, their mission is “to ease suffering of children in the Greater Los Angeles area whether due to disease, disability, abuse, neglect, or poverty.”

2. Determine the Structure. What will the annual donation be per member? Jacqueline Caster said that she chose $5,000 for Everychild because with 220 members, it would yield a $1 million grant as well as a $100,000 operating budget. Keep in mind the levels your targeted Giving Circles members will be comfortable donating and adjust your dues accordingly.

3. Develop a process for decision-making. The Everychild Foundation allows members to democratically participate on committees throughout the year.

Furthermore, this Foundation’s method of voting on a winner is original: to ensure that members have ample time to mull over their decision, they are sent ballots in the mail after the event.

4. Set up a 501©(3). This is a formal process that requires thoughtful decisions including designating a board, establishing by-laws, and filing articles of incorporation, among other steps.

5. Develop a budget. Everychild has no paid staff except the professional grantmaking consultant who works with the Grant Screening Committee to vet applying organizations. Even Jacqueline herself, as founder and president, receives no compensation from Everychild.

What do you think?

Would you consider exploring the possibility of a giving circle or do you prefer the charitable event model?

What are the pros and cons of each?