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:
- What are the funds used for?
- 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:
- 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.”
- 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.