The recession has dampened our spending in many ways: fewer dinners out, less shoe shopping and, according to a recent study, fewer dollars spent on charitable donations. According to Boston College’s Center on Wealth and Philanthropy, individual charitable giving dipped by 4.6 percent in 2009. While that number is predicted to rise between 3 to 4.5 percent to about $225 billion this year, many are still skittish about giving at pre-recession levels. And like the evaluations we’re making with other purchases — will this car get good gas mileage, will this jacket last more than one season — many want to make sure they’re getting the most bang for their charitable buck, too. Tonic spoke with Ken Berger (pictured below left), chief executive and president of Charity Navigator, a nonprofit that evaluates charities for donors, to find out how we can make the most impact with the dollars that we do donate.
Start with your heart. Follow with your head.
The first thing you should do when they’re thinking about giving is to start with your heart. Identify the causes that mean the most to you. “After you identify the cause, the next thing is to use your head,” explains Berger. “Many people don’t go to the next step. They know of a large charity and that’s it. They’ll donate. But the next step is to do your due diligence. Even a little research makes a big difference.”
There are three main areas that Berger says you should look for when evaluating whether a charity will use your money wisely. You can also find grades for charities based on these criteria at Charity Navigator.
1) The financial strength of the organization.
You want to know that if you give money, the institution will be around tomorrow to use it. During the current financial downturn, many charities are under threat of closing. Look at the charity’s books. First, are they solvent? That is, do their assets exceed their liabilities? Second, do they have enough working capital? That is, do their bills exceed the amount of assets they have to pay them off?
The other consideration is how much money is being spent on administrative costs, or “lining pockets of leadership rather than meeting mission,” says Berger. At bare minimum, the majority of the charity’s money — at least 51 percent — should be going to programs. At Charity Navigator’s highest-rated charities, no more than 25 percent of donations go to overhead costs. A huge red flag? When you see leadership getting paid seven-figure salaries. “Don’t even go there,” Berger warns.
2) Accountability and transparency.
You should be able to find information — like the charity’s finances — easily and it should be easy to understand. Ask yourself, Is the organization open about how it operates and does it give you meaningful information about what it does? Go to the website of the charity you’re researching. You should be able to find their financial information, the names of board members, or their goals and accomplishments within a couple of clicks. You should also be able to call them up to ask any questions you have and they should be very responsive.
3) Evidence of their effectiveness and results.
A lot of charities “will tell you nice stories of helping one person,” Berger says. “Stories without data is meaningless.” Outside of charities in the business of immediate emergency relief, you should look for whether the organization is making lasting change. “The best charities are the ones that can tell you, ‘We didn’t just employ this many people, but a year from now 75 percent are still in jobs,’” he says.
Giving during a disaster
When disaster strikes, like with the Gulf Coast oil spill or Haiti’s earthquake, many want to give — and give quickly. The sense of urgency surrounding the event will tempt people to give to whichever charity gets in front of them fastest. “The due diligence can be done within an hour two at most,” Berger says. “In an emergency, it’s more critical that you do the due diligence to make sure that every dollar counts.”
What’s more, a big, well-known charity “does not in any way mean it is effective. It just means it is effective at fundraising and marketing,” Berger advises. The key is to look for charities that have a long track record in the region. For those looking to give to earthquake relief in Haiti, Charity Navigator recommends a group called Partners In Health, which has been in Haiti for decades and will continue to help in the country long after the public’s attention and dollars turn to a new crisis.
What to watch out for
Charity Navigator strongly recommends against giving money to charities that call you on the phone because often, these calls are coming from professional fundraisers who take a big cut off the top. Also, be aware of sound-a-like name charities. Go to a site like Charity Navigator that verifies that an organization is registered with the government.
Donating your time
What if you don’t have the financial means to donate? Your time may be even more valuable. Because of the recession, many charities have had to lay off staff. Meanwhile, the downturn has created a greater need for their services, Berger explains. “If people do have time available, it can be an extremely fulfilling experience to up-close-and-personally change lives and serve people,” he says. “Give as much as you can but use your head so your heart doesn’t get broken.”
Photos 1 and 4 courtesy Wikimedia Commons, photo 2 courtesy of EuroRSCG, photo 3 courtesy of Ken Berger.
