Why you should care
With federal cutbacks and rising poverty, it’s especially important to give wisely
Pooja Bhatia is an OZY editor and writer. She has written for The Wall Street Journal, The New York Times and the Economist, and was once the mango-eating champion of Port-au-Prince.
In the next few weeks, millions of Americans will donate to charity — and most of our donation decisions will come from our hearts and habits, not from our heads.
Yes, we’re generous. Last year, total giving in the United States topped $316 billion, most of it from individuals, not foundations or corporations, according to Giving USA’s annual Report on Philanthropy. A recent study even claims that the U.S. is the most generous country in the world. This month, apparently, is the one that best incites generosity: Surveys of U.S. charities have found that they receive, on average, 40 percent of their donations in December.
But when it comes to figuring out — or even caring — what or whom our charity supports, we’re blithe. Big-hearted idiots. We will likely spend more hours choosing our colleague’s Secret Santa gift than a charity.
“People don’t spend a lot of time thinking about [donations] as a philanthropic investment, taking it seriously, doing the research,” says Sandra Miniutti, Vice President of Marketing and CFO for Charity Navigator, which rates non-profits. “We all have a limited amount of time. The charitable sector is a bit unknown. And most people wouldn’t go around picking up a [IRS form] 990 and reading it and understanding it.”
A 2011 analysis led by Hope Consulting, which advises nonprofits, showed that only 35 percent of people research non-profits before donating to them. Most spend less than an hour. And the proportion of people who might shift their donations to higher performing non-profits, if they had access to better information, is tiny: just five percent. We don’t care much where the money goes once it leaves our bank accounts.
“Overall, the majority of giving is emotional, irrational, and personal… and is not driven by ‘how much good [nonprofits] could actually do,’” the consultancy says.
To be sure, many donations go to organizations people already feel familiar with. More than 30 percent go to religious organizations, and 13 percent to education — often to givers’ alma maters. And a good proportion of giving ultimately benefits Americans’ bottom lines, through charitable deductions.
People don’t love admitting the self-serving aspects of altruism. Only 13 percent of donors ranked tax benefits as a “very motivating” factor behind December giving, a result that the surveying organization called “somewhat suspect.” “What else could be responsible for Network for Good processing 10 percent of annual donations in the last two days of the year,” it asked rhetorically, “with a significant spike between noon and 7pm on December 31?”
Still, there are givers who care about where their donations go and what they do, and they face a huge gap in information on non-profit performance, results and efficacy.
To that end, Charity Navigator is now in the process of rating results — “the holy grail” of charity reporting, says Miniutti. The company currently only rates financials and transparency/accountability, and its foray into results assessment will be slow. Very few charities even monitor, measure and publicly report their results in the first place — and few have the resources to do so. So in the initial going, Charity Navigator is merely assessing whether charities try to measure their performance.
Will they measure performance well? Will anyone even care? It’s not clear, but in the meantime, a few hints for would-be enlightened donors:
Avoid telephone solicitations.
Some charities hire commercial solicitors that take a big chunk from every dollar they raise. Moreover, phone solicitors can give you a hard, emotional sell. Don’t feel guilty for not falling for it. If the charity appeals to you, research the organization and donate directly, eliminating the middleman.
Avoid snap decisions and be wary of emotional appeals.
Social media has made it much easier to respond to heartstrings appeals, especially after natural disasters. After the Haiti earthquake, for instance, musician Wyclef Jean’s Yele raked in millions from well-meaning donors, much of it by text message. But where did the money go? “[M]illions in donations for earthquake victims went to its own offices, salaries, consultants’ fees and travel, to Mr. Jean’s brother-in-law for projects never realized, to materials for temporary houses never built and to accountants dealing with its legal troubles,” the New York Times reported. The organization effectively shut down last year.
Consider food banks, homeless shelters and other lower-profile non-profits.
Much of the post-recession rebound in charitable donations has come from the wealthy, and their multimillion gifts often favor hospitals, colleges and museums, according to WBUR’s recent interview with Stacy Palmer, editor of the Chronicle of Philanthropy. But thanks to the sequester and increased demand, charities aimed at direct service to the poor, such as food banks and homeless shelters, are in especial need this year.