See also our list of due diligence tools that should be used and diagnostic questions that should be asked before giving to any organization.
Investigate before Writing That Check to Charity
Hank Ezell. The Atlanta Journal-Constitution, November 16, 2003.
Controversies over spending of September 11 donations and corporate management scandals have left many people wondering whom they can trust. This article briefly discusses several steps for a rational and rewarding plan for spreading one’s donations around.
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How to Check a Charity’s Effectiveness: Several Web Sites Help Measure How Non-Profits Spend Their Money
The Holland (Mich.) Sentinel, January 4, 2004.
According to the American Associate of Fundraising Counsel, Americans donated nearly $241 billion to charity in 2003. Of that money, 76 percent came from individuals. But how do individuals know which charities to support? Good intentions aren’t enough, so are there reliable methods of evaluating a charity’s effectiveness? This article suggests starting by researching an organization’s IRS Form 990. This form, for organizations that raise more than $25,000 annually, evaluates how much is spent on administrative or operating costs and how much is spent on program-related costs. But one should not make donations based solely on such percentages; after all, certain organizations may require more administrative attention or may be aiming at different quality standards than other organizations. In the end, individual givers should consider the percentage ratings, but they ultimately should do whatever they can to determine the extent to which an organization is truly meeting its stated goal. The best organizations will be confident about advertising how they are really achieving what they set out to do.
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Questions to Ask Before You Write the Check
The Philanthropy Roundtable. Introduction by Marvin Olasky. The Effective Philanthropist series. Washington: Author, 1997.
Effective philanthropy is difficult to achieve. Accordingly, this book, published by the Philanthropy Roundtable, a national association of individual donors, corporate giving representatives, foundation staff and trustees, and trust and estate officers, attempts to help givers develop goals and strategies for discovering and evaluating nonprofit organizations. Each of the contributing authors addresses a different category of philanthropic activity: (1) David Kuo examines the social service sector. (2) Jerry Martin and Anne Neal treat factors concerning higher education. (3) Lynne Munson addresses philanthropy in the arts. (4) Edward B. Kacic examines the health care sector. Each of the sectors addressed contains unique considerations that make careful evaluation essential prior to funding. Overall, these authors give practical advice not only in clarifying personal donor priorities but also in finding nonprofit organizations that support one’s values and in holding nonprofits accountable in responsible donation management.
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Useful, but Limited: What Donors Need to Know about Rating Services
Paul D. Nelson. Philanthropy 18, no. 1 (January/February 2004).
“No evaluating group, however helpful, can take the place of a funder’s practical wisdom.” This quote from the article’s conclusion effectively summarizes the thrust of everything that precedes it. Himself an employee of an organization that rates nonprofit organizations, the Evangelical Council for Financial Accountability, the author delves deep into the evaluation process to show its benefits and shortcomings. He ultimately reaches the conclusion that “the best funders will use every tool ... to help them guide their work, including rating services. But ... they won’t put their final trust in anyone’s judgment but their own.”
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Donation-Processing Charity Lost at Least $17.7-Million in Gifts
Nicole Wallace. The Chronicle of Philanthropy, March 4, 2004.
More than $17.7-million in charitable donations never made it to the intended recipients as a result of the implosion of PipeVine, a San Francisco nonprofit group that processed on-the-job contributions for companies, according to a court-ordered report. Also, an agreement was reached with the United Way of the Bay Area, PipeVine’s founder and largest customer. The United Way agreed to provide $3.45-million to those owed money in exchange for being released from future claims in the case. During its existence, PipeVine handled donations totaling more than $100-million a year for companies that run on-the-job fund-raising drives, United Way chapters and other charities. The organization shut its doors abruptly on June 2, citing “a severe liquidity problem” and saying that it had “a negative fund balance that will result in a shortfall in amounts payable to some charitable organizations.”
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To Give, or Not to Give? Arts Organizations Are Feeling the Pinch As Private Donors Cut Back. It’s More Important Than Ever to Be Generous—but Do Some Checking First
Thane Peterson. BusinessWeek, May 28, 2003.
With the stock market, the economy and corporate earnings all lagging, charitable giving is in a slump. Total U.S. giving by individuals, companies and foundations is likely to fall in 2003 by about 22 percent, or about $47 billion, to $165 billion. Museums and other nonprofit arts organizations are being hit the hardest. When faced with having to pare their giving, most people and companies reduce arts donations before they cut back on support for organizations such as the Salvation Army that help the poor and disadvantaged.
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The Most Good for Your Charity: As with Investing, Research and Planning Are Vital If You Want to See Your Donations Put to the Best Possible Use
Robert Barker. BusinessWeek, November 16, 2001.
As with investing, research and planning are vital if you want to see your donations put to the best possible use. It turns out that investing well and giving wisely aren’t all that different. Just as it’s important to track your investment portfolio and rebalance your assets, it’s important to keep an eye on a group to which you donate money.
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Rating the Charity Raters: Measuring Charity Effectiveness Is More Than a Matter of Money
Paul Niehaus. Organization Trends [newsletter of Capital Research Center], October 2003.
In an effort to promote charitable giving, several groups, such as Charity Navigator and Ministry Watch, have developed a rating system for nonprofit groups modeled after those systems that evaluate profit-driven organizations. By having a method of evaluation and comparison, donors can make wiser choices about where to place charitable funds. However, are these rating systems truly that helpful? Fundamental differences in the way that for-profit and nonprofit organizations operate can make simple imitation of the for-profit rating system problematic. The most important difference between for-profit and nonprofit organizations is the standard of effectiveness. In the for-profit organization, the standard is simple: Whatever makes the most profits is the most effective method. For the nonprofit organization no similar criterion exists; rather, one must look at the goals of the organization and evaluate not only how effectively these goals are being met but also whether these goals are even worthy ones to support in the first place. Thus, while nonprofit rating systems may be somewhat helpful in determining where to place donations, further fine-tuning of the rating systems is necessary for truly wise giving.
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The Evaluation Wars: Giant Foundations Bog Down in Conflicting Theories as Smaller Donors Use Local Wisdom to Find Effective Grantees
William A. Schambra. Philanthropy 17, no. 3 (May/June 2003).
“Am I doing any good by giving this money away?” is a question everyone in philanthropy should ask regularly. It is hard for funders to do good; it is all too easy for them to feel good—if they don’t bother to investigate the consequences of their giving. We hear much about choosing “effective” grantees and even more about “evaluating” grants given. In fact, it often sounds as if responsible philanthropy requires legions of scientists to evaluate the results of one’s funding. Does that mean that small- and medium-sized foundations who lack the resources to undertake vast evaluative studies should just give up, perhaps passing their assets to some giant foundation with the scientific wherewithal to do the job right?
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New Service to Screen Charities for Grant Makers
Elizabeth Schwinn. The Chronicle of Philanthropy, April 3, 2003.
GuideStar, the online database of charity financial information, is collaborating with two organizations to develop a new subscription service designed to help foundations and corporate grant makers avoid supporting charities that are charged with illegal activity or linked to known terrorists or other wrongdoers. The service will check charities, their chief executives, and their board members against domestic and international government records, regulatory filings, and news from major sources.
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If It’s Too Good to Be True ... : Those Who Are Foolish in Small Things Often Get Caught Being Foolish in Big Things
Christianity Today, November 16, 1998.
It doesn’t matter if you are a retired person on a fixed income with little knowledge of the world of high finance or a college president accustomed to handling a budget of millions. You can get sucked into a scheme that will cost you dearly. It doesn’t matter if you are an Evangelical Friend in Camano, Wash.; a Nazarene in Wichita, Kans.; or a Dutch Calvinist in Grand Rapids, Mich.: You can get suckered, swindled, taken for a ride and given a bath by a charming, Christian confidence man. Jesus told us that the “children of this age are more shrewd in dealing with their own generation than are the children of light” (Luke 16:8). And our news sources bear out his judgment. This article’s advice: Wise up. Don’t get suckered.
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Wall Watchers: Raising the Standard of Giving: The Story Behind the Leading Web Site for Donors to Christian Ministries
Erica J. Parkerson. The Charlotte (N.C.) World, May 27, 2003.
Every year Christians entrust billions of dollars to ministries, but how effectively is that money spent? Over a decade ago, Rusty and Carol Leonard decided to find out. Today Christian ministries and givers alike are taking notice of their efforts. The Leonards founded the Matthews-based ministry Wall Watchers, a Christ-centered, nonprofit organization existing to educate and empower givers to Christian ministries. Through its Web site, Wall Watchers seeks to raise ministries’ accountability and increase givers’ confidence so that more resources will be made available for the Lord’s work.
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BBB Wise Giving Alliance Standards for Charitable Accountability
Better Business Bureau Wise Giving Alliance.
Ken Hunter, president of the Council of Better Business Bureaus, has said that Americans tend to be smart shoppers but are miserable at making smart charity decisions. “They ask very good questions before they make their purchases, but the same savvy shoppers consider it rude to ask discerning questions concerning charities,” said Hunter, who helped investigate hundreds of charity frauds when he served as chief U.S. Postal inspector. “We need to get over that to be successful.” These standards outlined by the Better Business Bureaus’ Wise Giving Alliance include stipulations that at least 65 percent of a charity’s expenses go to programs and no more than 35 percent to fund-raising and administration. The former standard was 60 percent for programs.
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To Give Well, Give Wisely: As More Americans Are Bearish about Giving, Charity Is Ever More Needed; Get the Biggest Bang for Your Buck
Reshma Memon Yaqub. Worth, December 2002.
Money is a crucial ingredient in helping to fight circumstances like poverty, sexual assault and disease. For this reason it is important that we give where our money will be effectively used toward mitigating such problems. In efforts to help givers discover charities, Worth magazine has attempted to identify such charities in this article. This article includes a sidebar listing, America’s Top 100.
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Good Works: Investigate before Investing Your Donations in a Charity
Dirk Smillie and William P. Barrett. Forbes, December 9, 2002.
What are charities doing with the money they receive from donors? For the nation’s 200 largest nonprofit organizations, Forbes magazine surveyed three key features: donor dependency, charitable commitment and fund-raising efficiency. Average donor dependency—the share of a nonprofit’s surplus coming from contributions as opposed to sale of goods or investment performance—rose sharply, from 75 percent to 94 percent this year. Charitable commitment details how much of the money a nonprofit spent went directly for its stated charitable purpose, as opposed to management, overhead or fund-raising. This year’s average was 84 percent. Fund-raising efficiency shows the percentage of funds raised from gifts that remains after subtracting fundraising expenses. This year’s average is 89 percent. The details of this survey may prove useful to the giver looking to do some investigation before donating to a charitable fund.
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’Tis the Season: A Guide to Charitable Giving
Robin Wallace. Fox News, December 10, 2002.
According to Charity Navigator, a watchdog group in Mahwah, N.J., charities raise more than half of their annual donations during the weeks spanning Thanksgiving and Christmas. This year, reeling from cuts in government funding and a struggling economy, groups are making an aggressive grab for your dollars. And chances are you’ll give, according to the American Association of Fundraising. But how to choose between worthy causes? Is it better to send one organization a large check or small amounts to several groups? And how do you know how the money is actually being used? The author offers a few suggestions for giving smartly.
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New Service Screens Charities for Prospective Donors, for a Fee
Ian Wilhelm. The Chronicle of Philanthropy, November 28, 2002.
Philanthropy Group is a kind of investigator-for-hire service for donors who want to know details about a particular charity not found in basic financial statements or charity watchdog reports. Initial demand for this firm’s services suggests the company may have found an untapped business opportunity within the world of philanthropy.
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Charity under Scrutiny: More and More Organizations Are Evaluating Nonprofit Groups
Ian Wilhelm. The Chronicle of Philanthropy, November 28, 2002.
In the past few years, the number of charity watchdog groups has proliferated, each with its own approach and mission, giving donors several research options as they prepare to make their year-end gifts. In addition to Charity Navigator, an Internet-based evaluation service called Ministry Watch, which rates some 500 Christian organizations, was created in 2000. Those groups join the ranks of the venerable Council of Better Business Bureaus’ Wise Giving Alliance and the outspoken and often controversial American Institute of Philanthropy as the four leading charity evaluators.
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Reinventing Philanthropy: A Second Revolution in American Philanthropy Is Under Way. But If It Is to Transform the Nonprofit Sector, Donors Will Have to Make Better-Informed Decisions
William F. Meehan III. The McKinsey Quarterly, 2001 No. 1.
Philanthropy in the United States has entered a period of unprecedented and transformational change. Like the titans of the industrial revolution a century ago, the leaders of today’s information revolution are putting their own mark on the social sector. Carnegie, Ford, and Rockefeller created the idea of the large, professional private foundation—an idea that underpins today’s philanthropic and nonprofit work. Their modern counterparts are bringing entrepreneurial acumen to philanthropy, demanding measurable results, and carefully assessing a variety of social investments.
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Rockefellers Starting Service for Would-Be Philanthropists
Stephanie Strom. The New York Times, April 27, 2002.
The Rockefeller family has started a nonprofit organization to help other wealthy individuals and families develop and manage their charitable giving. The organization, Rockefeller Philanthropy Advisers, was formerly part of Rockefeller Financial Services, a for-profit company. The move to make it independent and supported by its own fees is evidence of a trend emerging in philanthropy today, driven by the astounding amount of money expected to flow to charity over the next several decades.
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Giving Smartly: Investigate Before You Donate to a Charity. Our Performance Ratings Are a Good Place to Start
Tomas Kellner and William P. Barrett. Forbes, December 10, 2001.
Individuals and corporations, feeling a lot more charitable since Sept. 11, will give away perhaps $200 billion this year. It’s all the more reason to watch how well big charities are run. Our annual survey of 200 charities gives you the basic data on financial performance. This list of the largest charities (as measured by private support) is in two parts. The first covers revenues and expenses, the second contains our analysis based on three ratios. For each, a higher number indicates your dollar is being better used.
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Best Practices for Philanthropists
Tom Grimm. The Advisor, Winter 2002.
“Best practicies” is a term usually applied to businesses and nonprofits that implement new practicies which are ultimately experienced as superior performance, products, and services. Why not consider implementing best practices as generous, cheerful givers? Here are some guidelines for conducting best practices for philanthropists.
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