Evidence-Based Giving: 5 Tips to Measure the Impact of Your Charitable Donations
February 20, 2015 | Your Finances
When it comes to giving, the most effective approach is one that aligns your values with your charitable goals. But how do you know which causes merit your attention and your dollars?
As Andrew Carnegie, one of the great philanthropists of the 20th century, once said, “It is more difficult to give money away intelligently than to earn it in the first place.”
Total charitable giving by American individuals, foundations, estates and corporations totaled $335.2 billion in 2013, according to Giving USA 2014. Of that amount, $241.32 represents individual charitable donations, up 4.2 percent from the year before. The three largest recipients of donor dollars in 2013 were religious (31 percent), educational (16 percent) and human services (12 percent) organizations.
With more than 1.5 million nonprofits in the U.S. alone1, finding and measuring a charity’s impact can be challenging. Not all charities are the same and it is not always easy to measure whether an organization is truly fulfilling its mission.
So how can you channel your money where it’s most needed, and in ways that will be most effective? Before you write a check or swipe your credit card, consider the following five tips to ensure your charitable giving is based on solid evidence.
1. Clarify your values. Before you give a single dollar or volunteer a moment of your time, make sure the charities you support reflect your beliefs and preferences. Maybe it’s world hunger, the environment, curing childhood cancer, or giving women better economic opportunity: think about what matters most to you and use those interests and passions to focus your time and charitable resources.
2. Start in your own “backyard.” Deciding which charities to benefit can seem overwhelming. When in doubt, think locally. Getting involved in your own area keeps money in your neighborhood, connects you with others in your community, and allows you to personally monitor and evaluate the success of the program. It’s a lot easier to stop by your local food bank to see how things are going than to hop on a flight to a distant country.
3. Look beyond the glossy pamphlets. While heart-tugging photos can be helpful in telling the story behind a charity, it’s never wise to rely on them alone when making a decision about charitable giving. Use the brochure to get an overview of an organization’s vision and mission, but dig deeper to understand exactly how it goes about achieving its goals. Fortunately, there are a growing number of online resources to help. Nonprofit organization GiveWell rigorously analyzes charitable organizations with an eye toward identifying those that are making the biggest difference in the world in terms of lives saved, lives improved, etc. per dollar spent. Intelligent Philanthropy is another online resource, with a free and subscription service, that helps donors find high-performing, high-impact charitable organizations based on leadership, finances, strategy and impact criteria.
4. Don’t get too hung up on the numbers. Fiscal responsibility is a necessity for any charitable organization; you want to know that the people handling your donations are doing a good job of managing their organization’s finances. However, metrics such as the percentage of your charitable dollars that goes toward programming often don’t tell the whole story. Look to make sure your charity has specific and measurable organizational goals and a documented process for tracking the impact of its programming. The best information will come from independent third-party evaluations, especially peer-reviewed studies that measure program outcomes against relevant benchmarks, averages or control groups.
5. Stay in touch. Once you’ve made your philanthropic commitment, you’ll want to check in periodically with your charity to make certain your goals and theirs continue to be aligned. Needs and goals can change; staying in touch can help ensure that your philanthropic goals are being met and that the metrics you use to measure success are the right ones.
Whether your goal is to fund a large donation or to provide a modest gift, and whether you’re planning for the end of the year or looking to create an enduring legacy, you have many options for making sure your dollars count. And while some of your choices, like outright giving, are straightforward, others are more sophisticated and will require discussion with your tax accountant and financial professional. One relatively easy option is using permanent life insurance by either naming a charity as beneficiary or giving the policy to a charity.
A gift of life insurance may provide a cost-effective way to fund your charitable goals and may provide income and estate tax benefits. To learn about this and other charitable giving strategies, contact your financial professional. He or she can help you create a plan that will enable you to maximize your charitable impact while meeting your other financial security goals.