How to Evaluate a Fundraising Project

Virgin Money Giving's office
Image by HowardLake via Flickr

Charitable fundraising is a simple concept: collect cash for a specific cause or organization. The money is then used to pay for something that is severely needed, such as medical aid and scholarships for underprivileged students, or to simply keep an organization operational.

There are two basic questions to ask when evaluating a fundraising endeavor:

  1. What are the funds used for?
  2. How is the money raised?

For the first question, we encounter a number of dilemmas. There are a wide range of opinions around what causes are most important, what the world’s pressing needs are, and why you should care about everything from overfishing in Japan to the lack of educational resources for teachers in your local schools.

Forget what others are rallying you to care about. When deciding if funds are going to the right place, it really depends on what you are passionate about.

Once you have focused on a specific cause, the evaluation can begin. There are a whole host of Non-Governmental Organizations (NGOs), government programs, and other large fundraising efforts that have been raising and spending enormous amounts of money for the past few decades.

Bill Easterly, in his incredible book, The White Man’s Burden, provides chapters of analysis of the World Bank, the International Monetary Fund, and other large global efforts to combat global poverty. One thing that he constantly stresses is the lack of practical results from such large efforts. One case he cites as an example are malaria nets. Intended to protect children while they sleep, many nets are currently being used for fishing because the distribution is improperly managed.

What does this mean for you? Its important to note that even very large organizations do not always do things well. Executives working in New York don’t know how to meet the needs of a rural farmer in Ghana. Check that the organization you work with can prove that their efforts are making an impact. If they can’t show you what the funds are accomplishing, then why donate to them in the first place?

Unfortunately, most organizations are not able to show how their funds will directly serve their stated cause. One major exception to this rule is Charity Water. They are committed to transparency,  provide data on all projects, utilize Google Maps to show where there projects are happening, and even put their financial reports on their website for anyone to look over! There are many organizations that can learn a lot from Charity Water.

For evaluating the methods of raising money, there are a number of great online resources that evaluate large organizations. Charity Navigator is the leader in the field.

To answer our second question, we start to get a bit more technical. There are tons of metrics that are used in the business world that can be applied here, so let’s go over two basics:

  1. Expenses vs. Income: In the business world, this is what is called profit. If you spend more than you make, you aren’t doing a very good job. Especially for charitable causes, where a large percentage of your income comes in through donations (which are 100% pure profit), it shouldn’t be too difficult to be “profitable.”
  2. Fundraising Costs as % of Total Expenses: If you are evaluating an organization that fundraisers and provides direct aid, this is an invaluable metric. A good range can vary widely depending on the type of cause, fundraising models, and size of the charity. However, when fundraising costs seem to be a large chunk, such as with these non-profits on charity Navigator’s Top Ten Inefficient Fundraisers, something is seriously wrong.

Remember, there are tons of ways to go about this. These are just a few things you can quickly do to make sure that your efforts are having maximum effect. Also, if you cannot find an organization for your cause that meets the criteria mentioned above, then maybe you should think about starting your own. Just a thought.

Reblog this post [with Zemanta]


Filed under Guidance & How To

4 responses to “How to Evaluate a Fundraising Project

  1. Doni Bloomfield

    I would just say that as a matter of principle it’s almost always better not to start a new organization. Still, if you are convinced that starting a new organization is a good idea, look over these 6 points:

  2. While I certainly agree that your giving should follow your passions, I respectfully dissent from what seem to me to be all too simplistic ideas about evaluation.

    New charities have start-up costs that older ones have already absorbed, yet the new ones may be addressing significant issues. They also lack giving constituencies, i.e. those who learn about them, become committed and repeat and increase their gifts at very low cost as time goes by.

    A charity with low fundraising costs may in fact be failing to invest in building a future stream of support. The numbers look great now but they may indicate a weak future or even closing.

    Even established charities can have great variations in cost/dollar raised. A good university or medical center may undertake a major campaign for needed improvements. In the early campaign years costs may seem high as the costs of setting up the campaign and 3-5 year pledges of gifts are secured. In the latter campaign years, when those pledges are being paid off and the campaign apparatus is disassembled, costs may drop to improbable lows.

    If Charity Navigator and other resources on charities are the starting point for your exploration of a charity before supporting it, they are serving well. If their “snapshot” view of a charity becomes the end of your exploration, they will have served you and the nonprofit world poorly.

    Big organizations are sometimes the only ones able to address some problems and they do make mistakes (as do small ones). Yet setting up an electrical grid for a Third World country for example requires large amounts. There is no guarantee that the grantor or the recipient will spend the money wisely.

    By the way, if you decide to start your own charity, watch out. Gifts are not 100% profit and learning that can be soul-searing. Be careful that it not destroy your passion and commitment to your cause for that would be the greatest loss.

    • Doni Bloomfield

      I’d agree overall. Charity Navigator is best as a starting place – providing some simple numbers and a rather uncertain quality rating. Places like Give Well are more substantial, as they’ve tried to investigate the charities thoroughly and follow up with hard data on how they’re improving people’s lives.
      (GiveWell has a nice column on how to look into charities they haven’t evaluated: )
      Overall, as we’ve discussed before on this blog evaluations of charities are difficult for precisely the reasons that Charity Navigator is just a start: the numbers on the books, even ones like overhead and ratio of fundraising that seem like they would point out problems, simply cannot give you the final word on a charity’s quality. Overhead is often extremely important; sometimes greater resources need to be poured into fundraising. Ultimately what needs to be judged are not the inputs but the outputs – and those are not measured in nonprofit spending but in the improvement in the quality of life of recipients.

    • Raeli Savitt

      While I do see why you would consider my ideas simplistic, perhaps the intentions of my posting were a bit unclear.

      It was meant as an introductory overview for a young, idealistic, person who is looking to make a real change. If you look at our main website, you will find that that is who we are striving to help at Teens For The World.

      I appreciate you input as I do acknowledge that this post is not a comprehensive explanation of the intricacies of the practices of large non-profits, but rather meant as a cautionary post to encourage people to think before they act.

      I do agree that fundraising metrics vary widely depending on the type of organization (as mentioned in the post), and that we cannot judge based on numbers alone.

      I do not believe that starting up an organization should be taken lightly, or that it is a simple endeavor. Perhaps I was a bit irreverent towards the thousands of people who have been involved in fundraising for years, and I am happy to learn from your experience in the field.

      However, when one is choosing what organization to support, it is their right to expect that their funds will be put to good use. It is far too often that I see organizations soliciting funds while asking donors to simply trust that the money is being spent wisely.

      It is my opinion that wherever I decide to invest my earnings, whether it be in a publicly traded company on NASDAQ, a local homeless shelter, or a large NGO, that I shall expect the most benefit per dollar used. Granted, this sentiment may need to be restricted to comparable organizations in the same field, as measuring impact is not a simple equation.

      In summary, however, I would rather see funds have a real impact. To donate and try to take solace in the fact that I kept a well-meaning organization operational is simply not enough.

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )


Connecting to %s