Making a financial donation to a cause you care about is incredibly admirable — no matter the organization or the size of your donation. However, it’s important to understand that making a donation isn’t always as straightforward as it seems.
In order to best understand how your donation will be put to work, it’s important to do some preliminary research ahead of making a contribution. In this article, we’ll dive into the four key areas you should explore, along with what to look for when doing your research.
What is Effective Altruism?
Effective altruism asks, How can we do the most good we can, with the resources we have? Ezra Klein recently explored this concept with Holden Karnofsky in his podcast for The New York Times.
They discussed the challenges in achieving true effective altruism, along with the difficulty in calculating impact. Notably, they explored how giving the same amount to different organizations can have vastly different impacts. While one organization may be able to define their impact by human lives saved, others may define it by chickens kept out of factory farming.
One of the most valuable takeaways from their conversation was the concept of Worldview Diversification. That is the concept of diversifying the organizations and causes you give to support. Instead of pouring all of your resources into only supporting human rights or animal rights causes, you may consider dividing your resources to support a variety of initiatives, including human rights, animal rights, climate change, and more.
We recommend checking out their conversation on How to Do the Most Good (it’s a bit long, but well worth your time!), for more context on these concepts.
There are a lot of expenses that go into running a non-profit organization. Not all of a non-profit’s funding goes directly toward supporting their mission. From admin costs to employee salaries, office space to marketing expenses, this is to be expected. Like any business, it’s normal to have reasonable costs.
Before choosing to donate, look your organization of choice up on a website like Charity Navigator to dig into their financial cost ratios, such as how much they spend on salaries, admin expenses, and all other costs. Charity Navigator breaks down the percentage each organization spends on different categories and provides a score out of 100 so you can easily interpret how financially healthy an organization is.
By carefully selecting how you donate, you may have a greater impact with organizations that optimize their expenses. An organization should spend the largest percentage on their program expenses, with other categories falling way behind. The Better Business Bureau’s standards recommend that at least 65% of the nonprofit’s total expenses should be for program expenses, including salaries.
What impact has your organization of choice had in recent years? Where are they expecting to have the most impact in upcoming years? You can use Charity Navigator again, or a tool like Guidestar to explore the nonprofit’s recent impacts. Additionally, some nonprofits work with Impact Atlas to measure their impact and demonstrate their performance.
Social media, websites, interviews, and recent press releases are great resources to understand current programs, news, and operations and give you an idea if the organization is actively moving forward toward their goal. You can also look for the impact report on the nonprofit’s website along with their latest quarterly reports. If you’d like to go even deeper, you can look at the IRS directory. Just search for your nonprofit here, then look at their financial statements.
You should look to see if the organization is actually making the impact you’d anticipated and if it’s as substantial as you thought it would be. You may find that an organization isn’t having as strong of an impact in one area as anticipated — or, they may have a more significant impact than you’d expected.
Outside of an organization’s target goals, how else are they making an impact in key areas? Consider also the nonprofit’s efforts in relation to sustainability, diversity, and inclusion. In addition to making an impact toward their mission, do they also strive to be environmentally and socially responsible?
Browse the Board of Directors
Guidestar will also show you the nonprofit’s board of directors and highest-paid employees. It’s a good idea to do some research on the individuals steering the organization. Do they share the same values as the nonprofit? Are they actively engaged in volunteer work that supports their mission? How else have they contributed to the cause?
Exploring the board of directors may also give you insight into other similar organizations that might also be worthy of supporting!
While this may not be a determining factor in your donation if you’re on the fence after digging into the organization’s cost structure and impact, exploring the leadership team can help you decide if donating is a good idea.
Take a Look at Testimonials
It’s worth taking a look at the types of programs the organization offers and how they run. If possible, try and see if they have a testimonial section that highlights individuals who’ve participated or been impacted by the program itself. While not all nonprofits have this type of information readily available, it is surely something to keep an eye out for.
Determine Donation Fees
Did you know that most donation platforms take anywhere from 3-11% of your donation? This means that for every dollar you donate to an organization, they typically only receive about 95¢. For larger donations on platforms that take large cuts, you may end up contributing a lot of money to the donation platform without realizing it isn’t all going to the nonprofit.
Before donating via a donation platform, do your research to find out how much they charge. If the nonprofit you’re donating to uses a few different platforms, donate through the one with the lowest costs. If they only use one platform, consider donating extra since you know it won’t all go to the organization.
Give With bunny.money
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