Are Your Charitable Donations Getting to the Right People? Here's How to Be Sure.

Charitable donations are good, but when it comes to impact, not all giving is created equal.
Are Your Charitable Donations Getting to the Right People? Here's How to Be Sure.
Image credit: CatLane | Getty Images

Grow Your Business, Not Your Inbox

Stay informed and join our daily newsletter now!
Entrepreneur Leadership Network Contributor
Co-founder of SchoolSafe
6 min read
Opinions expressed by Entrepreneur contributors are their own.

Whatever their other shortcomings, Americans are generous people. For the first time last year, U.S. individuals and organizations gave more than $400 billion to nonprofits and philanthropic foundations.

Unfortunately, no matter how much Americans raise this year, the fact is that not every dollar donated will help those in need. Of the 11,000 charities reviewed by the Better Business Bureau, only about 40 percent of them meet all 20 standards for charity accountability.

How can philanthropists ensure their money does the most good? For those looking for a hard-and-fast answer, the best metric is probably the BBB’s eighth standard: that charities should spend at least 65 percent of their total expenses on program activities. In other words, any charity with BBB accreditation puts at least two in three donated dollars toward its mission.

Related: Charitable Giving is a Form of Investment

Dedicated donors know, however, that the percentage a charity spends on program expenses is only part of the story. The bigger -- and much more difficult to answer -- question is: How much change do contributions actually produce?  

What givers want to know.

Think of vetting charitable organizations like shopping: You don’t just look at a single metric when buying something; you research its features, ask your friends about it, and consider the company’s track record.

To choose a charity that will make the most of your donation, ask these four questions:

1. Does the charity have community partners?
Changing the world is like raising a child: It takes a village. Minds aren’t changed by money, and local organizations know who the thought leaders are in their community. Decentralized charities tend to be smart bets because their structure implies they have grassroots support in the areas they serve.

The Midland Institute’s Creating Entrepreneurial Opportunities (CEO) program, for example, uses a decentralized model to improve economic prospects for young people in rural areas. After watching schools and nonprofits struggle to fill skills gaps generated by declining career and technical education at the high-school level, Midland turned to a chapter model grounded in a commitment of $1,000 per year for three years from 35 investors. Students in the CEO program are also paired with entrepreneurial mentors, and most schools provide participants with course credit. Students receive high school credit for completing the program, and in some cases dual credits through local colleges.

The result? Midland’s post-program surveys indicate that 65 percent of alumni want to start a business afterward, and around 15 percent continue to operate their business after completing the program. Whether they go on to a career in business or not, program graduates come away with better soft skills like organization, teamwork, and public speaking. Plus, those who complete the program are around 20 percent more likely to attend college, often majoring in a business-related field.

Related: How to Start a Charitable-Giving Program at Your Company

2. How have the charity’s past projects performed?
Past performance may not guarantee future results, as investors warn their clients, but the success of prior projects does predict how future projects will fare. For this reason, the same names tend to appear atop charity lists year after year. Out of the 20 nonprofits on humanitarian philosopher Peter Singer’s list of this year’s best charities, for instance, just two are new: D-Rev and Helen Keller International’s Vitamin A Supplementation program.

Consider the Against Malaria Foundation, one of Singer’s top choices for 2018. Since its inception in 2004, AMF has raised nearly $140 million to purchase and distribute 53 million mosquito bed nets. One-hundred percent of its donations have been used to buy nets, 28 million of which have been distributed with 25 million more in the works.

How can donors know that AMF will do good work in the future? The Africa-focused charity puts an unusual focus on accountable distribution, tracking net presence, use, and condition by visiting 5 percent of recipients households. It has a lean staff, publishes all data collected, and tracks malaria rates. Together, those signs show that AMF has a long-term outlook and wants to see its work through to its conclusion.

3. Are the charity’s leader’s competent and committed?
Charity leaders are often chosen for their subject-matter expertise. But effective nonprofits know that technical skills are often best deployed in the field rather than the boardroom. Jason Cone, chief executive of the U.S. branch of Doctors Without Borders, has a background in crisis management, communications, and government, for instance. The only U.S. Doctors Without Borders executives with medical backgrounds are Northan Hurtado, deputy medical director, and Carrie Teicher, director of programs.

The best way to vet a charity’s leaders, though, is not to look at their resume. Denise Fellows, director and chief executive of consultancy and talent development at the Cass Business School Centre for Charity Effectiveness, suggested in a Guardian story that donors should observe the nonprofit’s work environment directly. Unhappy, unmotivated, or uncertain team members can indicate lackluster leadership. Nigel Kippax, head of consulting and training at the National Council for Voluntary Organizations, explained in the Guardian article that big egos are also a bad sign, as individuals with them tend to let problems turn into crises before acting.

Related: Corporate Charity Is What Inspires Greater Employee Engagement

4. What do donors and volunteers have to say?
Personal stories may not rise to the level of scientific validity, but they can hint at how a charity uses donated time and money. According to a study conducted by Cygnus Applied Research and Burk & Associates, donors look for three things: acknowledgment that their gift was received, assurance that the gift was put to work as intended, and confidence that their donation is having the desired effect. Eighty-seven percent of those surveyed said they’d give again, provided those conditions are met, compared to an overall attrition rate of 90 percent for first-time donors.

When talking to current and past donors, strive for a varied sample. What do donors from last week and last year have to say? Do volunteers feel that their time was spent wisely? Do large and small donors alike say that their gifts were used appropriately? What sort of assurance or proof did they receive? Don’t let a single bad story dissuade you from giving, but do look for trends, such as donors not receiving data on how their money was spent.  

A $1000 gift goes a lot further at certain charities than others. But it’s not just about what percentage of donations go to program expenses; it’s also about the program itself, the community’s connection to the charity, the charity’s leadership team, and the charity’s donor and volunteer relationships. So do your research and give generously: It’s the American way.

More from Entrepreneur

We created the SYOB course to help you get started on your entrepreneurial journey. You can now sign up for just $99, plus receive a 7-day free trial. Just use promo code SYOB99 to claim your offer.
Jumpstart Your Business. Entrepreneur Insider is your all-access pass to the skills, experts, and network you need to get your business off the ground—or take it to the next level.
Create your business plan in half the time with twice the impact using Entrepreneur's BIZ PLANNING PLUS powered by LivePlan. Try risk free for 60 days.

Latest on Entrepreneur