Five years ago, a viral challenge swept the United States: Record a video of yourself getting a bucket of ice dumped on your head, and/or donate money to fight amyotrophic lateral sclerosis (ALS), a rare neurodegenerative disease. Among the millions who participated included Justin Bieber, LeBron James, Jeff Bezos, Oprah, Bill Gates, and George Bush; Barack Obama dodged the ice bucket but donated.

More than 2.4 million videos were tagged on Facebook as part of the challenge, and $115 million made its way to the ALS Association — twice as much as the charity raises in a typical year.

In a piece in the Chronicle of Philanthropy, Emily Haynes took a look at how they spent it. The result is a great case study of what happens when charities get lots of money — more than they may know what to do with.

Related Ezra Klein explains the ice bucket challenge

To be clear, the ALS Association did a pretty good job at putting the money to use. Local chapters, she writes, were able to purchase equipment for ALS patients, like “power wheelchairs, walkers, and shower benches. ... The waitlist that had existed throughout the loan program’s 20-year history has evaporated since the Ice Bucket Challenge.”

While local chapters got a significant share of the money, and spent it largely on support for the patients they serve, most of the money — $80 million — went to research. (It should be noted that in drug development, even $80 million is a drop in the bucket — taking a drug from the idea stage to approval in FDA clinical trials can easily cost $2 billion).

“All the money was spent on program priorities, and we know where it all went” may seem like a low bar. But when charities see a sudden windfall, they often fail to achieve even that modest standard.

The Red Cross raised $500 million for Haiti in 2010 and accomplished very little, and it remains nearly impossible to tell where the money went or what happened. In 2012, the group Invisible Children made an incredibly successful viral video about central African warlord Joseph Kony, raised more than $30 million, and immediately ran into a host of problems: Ugandans protested the video, critics called it racist and imperialist, the producer had a breakdown, the charity nearly went bankrupt, and Kony was never found.

Other charities just sit on the money indefinitely — better than squandering it, but still not that great.

In other words, the ALS Association faced one of the most unexpectedly difficult challenges for a charity: a sudden influx of way more resources than they knew what to do with, from one-time donors who’d almost all never give again. They did pretty well with the situation, but the challenges ahead of them, including a big budget deficit, go to show that a huge one-time funding boost isn’t always a blessing.

Why is it hard to do more good with more money?

What I want to highlight is not the windfall but how the ALS Association responded to it. Virality in the nonprofit world can be a double-edged sword.

If a charity has a small budget and not enough resources, more donations are a good thing, right?

The answer is generally yes — if the charity gets a small bump in funds. The situation is more complicated if they get an enormous bump in funds — say, double their whole annual budget, which is what happened to the ALS Association.

Most existing programs can’t absorb that much money, so there’s pressure to launch new programs. But trying to launch new programs just because you can afford them isn’t necessarily the best reason for starting them. Even if a charity’s existing work is highly effective, if new donations will be shuffled off to new, less promising projects, then the effect of the additional donations is likely to be small.

Expanding operations also often involves increasing a charity’s administrative capacity. Adding specialists can free up everyone else to spend more of their time on business priorities — making the charity more efficient and better at its job — but it tends to increase a charity’s “overhead,” which can ding it in charitable-effectiveness rankings and anger donors.

And you don’t want to expand too much. The ALS Association reports that they’re running a significant deficit right now, as they spend down the burst of money from the Ice Bucket Challenge. That can be a good thing — the alternative to running a deficit is stockpiling money you could be using to do good — but it means at some point they’ll need to slash programs or grow their base of permanent supporters.

“We are running a deficit of several million each year, even as we have taken on multi-year commitments to clinics and research studies. We need cash reserves to ensure we can meet our commitments to the ALS community,” the ALS Association said in a summary of how they’ve spent the Ice Bucket windfall.

There’s a takeaway for donors, too. While it’s fun to donate as part of a big viral event like the Ice Bucket Challenge, you can often do a lot more for a charity if you donate regularly, and if you double-check to see if the core programs you want to fund have room for more funding — that is, additional money will be spent on those programs if it’s received. No matter how important a charity’s work is, that’s only one part of the equation for effectiveness; there’s also the question of how (and whether) additional money will enable them to do more important work down the line.

But none of that means donations can’t be worthwhile, or make a significant difference. Drugs and therapies that the ALS Association funded are headed through the research pipeline. From 2014 to 2018, the NIH has provided more than $208 million in funds to researchers that the ALS Association had previously funded. The association has increased the number of patients served by 28 percent, to more than 20,000. And in many local chapters, people diagnosed with ALS — who typically have fewer than five years left to live — will no longer spend that time on a long waitlist for a powered wheelchair.

Money matters. You just have to spend it right.

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