Kelli B. Grant of Smart Money has a piece today entitled "Charities: Why It's Best To Give Close to Home." I was interviewed for the article in which Grant argues persuasively that "you might get more mileage from your contribution by giving to smaller, local organizations, rather than to the big, brand-name charities."
Grant compiles some good comparisons that show how local organizations with missions similar to national nonprofits are often more efficient with their contributions.
For example, the national organization AIDS Emergency Fund receives a middling rating from Charity Navigator, a nonprofit organization that grades charities based on fundraising efficiency, spending on programs and other measures of generosity, in part because it puts 81.9% toward programs. In contrast, a top-rated local organization with a similar mission, AIDS Foundation Houston, spends 86.8% on programs – a difference which means an extra $4.90 for every $100 donated gets passed on to the organization’s clients.
Of course, there are many other reasons beyond efficiency for giving locally, especially during difficult economic times, and Grant cites several of them. For one thing, it is easier to see your charitable gift in action. You can visit the organizations that you support and even roll up your sleeves and volunteer.
Local organizations are often run by neighbors, co-workers, or family friends. Local charities also often provide basic services that may be overlooked by national organizations. They have local knowledge that brand-named organizations often lack and can direct services and relief more effectively. They often know where the greatest needs are and how best to serve them.
Check out Grant's full article here.
3 thoughts on “Giving locally”
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I agree with Brigid, focusing too narrowly on efficiency to the exclusion of other factors is a mistake. Nevertheless, efficiency is not irrelevant and should not be ignored altogether. It is one factor among many that ought to be considered when making charitable contributions. I was taken aback recently when reviewing, via Charity Navigator, the 990s of a number of national nonprofits that support veterans. More than a few spend less than 20 percent of their revenue on programs (helping veterans). For some, most of their revenue goes to DC-based direct mail vendors and CEO salaries. In some instances, family members of the direct mail vendors sit on the boards of the charities. Charity Navigator, as Brigid points out, can be “gamed” by nonprofits by allocating a portion of their direct mail expenses to programs. Nevertheless, it is difficult for those charities that spend less than 20 percent of their revenue on program to hide. Charity Navigator can actually be a very helpful tool for donors who want to avoid being bilked by charities that are little more than letterhead organizations run by direct mail vendors. Is it the final word on which charities you should support? Maybe not. But it can be a useful starting point.
Giving locally because an organization provides services nationals don’t, or because you can also volunteer, or because you are part of that community: all great ideas.
Giving locally because it’s more “effective” since less is spent on fundraising: terrible idea.
Let’s stop perpetuating the myth that nonprofit effectiveness is equivalent to who spends the least on “overhead” and fundraising. Leaving aside the fact that these numbers are easily manipulated, emphasizing reduction in fundraising will ultimately cripple a nonprofit if it can’t generate resources to run its programs effectively.
Ms Grant should know that Charity Navigator is entirely revamping the system of grading charities on fundraising costs, precisely because of the problems above.
The most effective nonprofits are those that have the most impact on their constituencies. And that’s determined through careful evaluation of programs, not a quick expense ratio.