What’s Your Charity-Giving IQ?

In the weeks after the 9.0 earthquake hit northern Japan, people around the world opened their checkbooks in an effort to help. In one weekend, the American Red Cross, alone, raised 34 million in aid for the Japanese tsunami effort, even before Japan asked for any outside assistance! But where does all the money go, and how helpful is it to the victims of the disasters?

Sometimes a charitable donation is the best thing we can do from where we are, but if we don’t make smart funding decisions, it might actually hinder recovery efforts. If too much money is earmarked for one specific cause, for instance, poorly conceived projects can get funded and money is wasted. A recent article from the New York Times “A Charitable Rush, With Little Direction” discussed some of the issues with charities and how to improve the bang of your donated buck.

Good Intentions, one of the websites mentioned in the article, has set up a site to “provide readers with the knowledge, tools, and resources they need to ensure their donations match their good intentions.” After perusing their site and learning quite a bit, I asked if I could share some of the content with viewers on Care2. Take their “True or False” quiz over the next couple pages to determine your charity-giving IQ.

T or F?: The best aid organizations have low administration costs.

False – Low administration costs is not an indicator of the quality of the charity of the quality of the aid it provides. Rating organizations based on administration costs can cause them to implement projects that have inherently low administration costs regardless of whether or not those projects are what’s most needed. It might also cause them to understaff and underresource their projects hurting their changes of success.

T or F?: It’s a good idea to earmark or restrict your funds so your donation is well spent.

Answer: Next pageFalse – Earmarking funds often leads to wasted aid. Earmarking requires an organization to spend money even if the funds are far in excess of what is actually needed. Examples of this are mini-mansions and empty orphanages built after the tsunami. Earmarking also means that “sexy” projects such as sending in volunteer teams of doctors are far easier to fund than “nonsexy” projects such as helping people with the documentation needed to access government health care programs.

T or F?: Donating used clothing or medicine after a disaster is a great way to help while also recycling items that you no longer need.

Answer: Next pageFalse – Most goods are available locally even after a disaster. Donated goods are far more expensive to ship than to buy locally and can clog ports preventing other relief items from clearing customs. Donated goods often go unused because they are inappropriate to the local climate, culture, or religion.

T or F?: Orphanages are always a good thing to support.

Answer: Next pageFalse - Orphanages are one of the most expensive way to care for children and according to the UN should be the last resort rather than the obvious solution. In addition, many children in orphanages are not actually orphans but have living parents or relatives. It would be cheaper and better for the child and the family if they received support to help them care for their own children rather giving them up to orphanages.

T or F?: The United Nations oversees and monitors international aid and development projects.

Answer: Next pageFalse - There is generally no real oversight or regulation of aid work. Two attempts to create a regulatory body under the League of Nations and the United Nations (U.N.) have failed. It is up to the beleaguered government receiving aid to track, coordinate, evaluate, and regulate the hundreds of charities pouring into their country. Most countries receiving aid do not have the manpower, resources, or regulations in place to do this.

T or F?: Nonprofits are not allowed to make any profit from their work.

Answer: Next pageFalse – Nonprofits are allowed to make a profit from their work. The profit just has to be reinvested in their work and not paid out as dividends to shareholders or board members. Nonprofits can pay staff competitive wages and bonuses, make investments, purchase real estate, and pay for other expenses crucial for a professional and sustainable organization.

T or F? A new nonprofit organization is registered every 15 minutes in the US.

Answer: Next page

True – On average a new nonprofit is registered every 10 – 15 minutes in the United States. Currently there are over 1.2 million registered nonprofits. Registering a nonprofit is a relatively simple process. Once registered there is very little governmental oversight, therefore the funding decisions that donors make do matter. Before donating make sure the organization is following professional practices and leading quality programs.

T or F?: Large, well-known organizations are a better bet to fund than smaller, less well-known organizations.

Answer: Next pageFalse – Whether an organization is competent and well run is not related to its size. Donors can never assume that large, household name organizations are following best practices or that small organizations are not professional.

This information is not intended to overwhelm, confuse or deter people from helping. Instead, it is to empower people to make their aid the most effective. Guidestar offers some tips when giving to disaster relief and recovery: Determine what kind of programs deserve your support. Do a little research, and ask questions. Does the organization have the same values and priorities as you? Does the organization measure its accomplishments and offer that information? There are many great nonprofits out there. Research and see which feel like a good fit for you.

Guidestar also suggests waiting a few weeks or months, or giving an unrestricted (unearmarked) gift to an organization with disaster-relief experience.

Thanks Good Intentions for the helpful quiz!

Related Links:
Helping Pets in Japan
10 Ways to Help Japan
Make Paper Cranes for Japan

40 comments

jenny H.
jenny H.3 years ago

Very interesting article, thank you.

Lynda Paradis
Lynda Paradis5 years ago

Thank you . I have just found out that I am incredibly ignorant when it comes to charities. I usually support local charities,with a long proven track record. I .of course want most of my donation going to direct aid rather than administrative costs.

Loo Samantha
Loo sam5 years ago

thanks for sharing

Kirsten B.
Past Member 5 years ago

OK, was about 60 % savvy - have learned a few more things for next time around. Thank you for sharing this Megan.

Lindsey Williams
Lindsey Williams5 years ago

thank you!

Mike and Janis B.
Janis B.5 years ago

We're lucky these days being able to research charities easily by googling the name. There is no need to go into any donation with your eyes shut. We always split the money approximately 75% to 25% unless the place in question is very poor in which case it is 85% to 15%.

Samantha Hodder
Sam Hodder5 years ago

thanks

Lynn C.
Lynn C.5 years ago

Thank you so much for this. You've answered some questions I've had when giving my pittance. And thanks for the Guidestar link. I'll do a lot more research now and ask those questions you suggest.

Eva E.
Past Member 5 years ago

Thanks, this was an interesting article.

I've been wary of large non-profits ever since the Haiti disaster. The Red Cross collected a lot of money, thanks to all the star-studded fundraising efforts, but look where it got the people of Haiti. That tells me that something is very wrong with the system. Where did all the money go? I saw a news report on ABC World News that the majority of the funds collected in the name of the Haiti disaster actually were put aside in some sort of a reserve fund for other impending disasters. That's not right. If you're fundraising "specifically" for a particular cause, all the monies collected should go directly to that cause.

William Ford
William Ford5 years ago

thanks