Points of Light eStore Fiasco

I wrote this a couple days ago, but held off posting it. After reading this, most of the nasty stuff I was only guessing at seems to be confirmed.

Points of Light Foundation has a nightmare on its hands. Since 2003, the charity has operated an eStore on eBay in order to supplement its fundraising efforts. The most popular items offered were flight certificates on American Airlines. Flight certificates are usually a great deal, because companies negotiate low rates with AA, and in exchange AA is guaranteed butts in seats (travel is subject to blackout dates).

Last summer, we purchased certificates to fly to Hawaii to join family members for a special vacation and celebration. Our trip is next month.

Well, we received an email over the weekend informing us that POL had closed its eStore, and travel dates after July 15 would be canceled. We also learned the eStore was operated by a third party vendor, not POL directly.

From their release:

In recent days, the management of Points of Light Institute learned of significant financial and operational irregularities in connection with the eStore. The eStore was operated by an independent contractor who had responsibility for booking and fulfillment of travel packages.

As of tonight, POL is guaranteeing refunds to all paying customers.

Now, if we want to accompany the rest of the family on our trip, we'll have to pay more than twice the price. Ours is one of the tamer stories. Based on discussion boards on eBay, hundreds of weddings, honeymoons and family vacations are ruined, or at best, severely inconvenienced or made suddenly more costly.

Because of the eStore's mismanagement, even travelers scheduled to leave before July 15 may be in trouble. The customer service rep at POL told me Monday night that she had customers scheduled to fly Tuesday with no sign of their certificates. And travelers who purchased air through POL, but booked nonrefundable hotels or other legs separately are really up a creek.

A few observations. Points of Light really. Really. REALLY screwed up. POL's failure to closely monitor this independent contractor will cost them dearly. Both in refunds they're paying out and in public confidence. I wonder how big the story will get. Unfortunately, mismanagement is rarely isolated. Yes, it was an independent contractor, but POL ultimately is responsible. According to a story in the Nonprofit Times, POL's CEO said the store was grossing approximately $100,000 annually, based on what they showed on their books. But now it seems that over $1,000,000 worth of travel between July 15 and May 2009 will be refunded. Seriously? A $900,000 discrepancy?

In an email we received Monday night from POL, it seems the independent contractor was an individual, not a company.

Like other organizations, we are not immune to the injurious actions of a single individual. But it is all the more devastating when those actions affect an enterprise that is solely focused on transforming people and communities through volunteerism and civic participation.

That's actually worse, I think. POL was not tasked with monitoring an entire third party organization's dealings, but a single individual's. And they still managed to lose track of hundreds of thousands of dollars worth of business. Was POL really that hands off on this thing? Someone at POL was asleep at the switch. Now, as POL scrambles to sort out the mess, they're inconveniencing what I'm going to guess are hundreds of people (update: 1,100 transactions, many of which for multiple travelers) by canceling their travel plans.

And as an angry customer, spare me the "we're not immune" to bad apples line, which is just meant to remind us that they're a nonprofit. Yes, they are. And it is "more devastating" because as a nonprofit, POL had a responsibility to protect more than their bottom line. And they didn't. Here's POL's other mistake, and probably their biggest: They weren't prepared to cross the line from charity to merchant.

They're not dealing with scores of donors. They're dealing with paying customers who expect a good in return for their cash. And that's a whole new ballgame. If as a nonprofit you're going to explore nontraditional development avenues, you have to be aware of what you're offering. The moment the eStore opened, POL's nonprofit brand became absolutely 100% irrelevant. They were now a travel merchant. They traded in their hapless nonprofit card for more cash. So don't try to play it, POL.

I have to admit, I have some blame to share in this fiasco. I will never again pay for something and not have something of value put in my hand or shipped in a reasonable timeframe. We had flight reservations on hold with AA until the eStore was to mail us our certificates. At which time, we could contact AA and be ticketed. The eStore's policy was to physically mail certificates two weeks prior to travel. That was enough to make me nervous, but I swallowed my reservations and trusted the high customer satisfaction score on eBay. The eStore was in operation for five years, after all. Now those certificates will never come, and at best I can apply for my refund and more than double my expense to keep my trip.

Caveat emptor. Caveat donor. Caveat nonprofit.