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Consider nonprofit’s impact when donating

Many people remember the popular Scared Straight program, which was conceived in the 1970s to combat juvenile delinquency. The idea was that at-risk children would be taken to a prison and be exposed to the life of an inmate. The goal was to use that experience to convince children that they needed to improve bad behavior.

What most people don’t know is that the program, which relied on charitable donations and government funding, was not effective. “The program had brand awareness and brought in a lot of money, but we have known for years that it doesn’t work,” said Kat Rosqueta, founding executive director of the University of Pennsylvania’s Center for High Impact Philanthropy in Philadelphia. “In randomized, controlled studies, it was even shown that kids who took part were more likely to wind up in jail.”

There is often some degree of risk involved with donating to charity, but it doesn’t have to be. That’s one reason the Center for High Impact Philanthropy publishes an annual High Impact Guide to highlight nonprofits that return the best bang for the charitable buck. The idea is to help donors’ dollars do more.

The free guide doesn’t concern itself with what nonprofit is raising the most money or has the lowest overhead. Rather, it focuses on organizations that are making a meaningful difference.

Locally, a different kind of resource is available to potential donors. To help citizens better understand how charities handle donations, the New York State Attorney General’s Office issues its annual Pennies for Charity report. The report gives New Yorkers an idea of how much money is raised for charity and outlines what percentage of funds are used to meet a charity’s stated purpose. The 148-page report has been published for two decades.

During 2013, the most recent year for which data are available, for-profit telemarketers registered with New York reported raising more than $302 million for charity. Of those funds, $146.5 million—or 48.4 percent of the total—went toward meeting the stated mission of charities. The remaining $156.1 million, or 51.6 percent, paid for the mechanism used to raise the money.

That year’s effort marked the highest percentage of funds raised by telemarketers for charity in more than a decade. And it was a significant increase from the prior year, when 37 percent of funds raised by telemarketers went toward helping charities meet their stated missions. “Nevertheless,” the report warns, “donors should know that less than half of the money they contribute through telemarketers is going to the charitable causes they seek to support.”

While the Pennies for Charity report is useful, experts caution it is difficult to assess the impact that a charity is having based solely on these numbers. “It’s common for people to choose a nonprofit by who has the lowest overhead ratios or who gives the most money to their programs,” Rosqueta said. “You shouldn’t be trying to minimize administrative costs. You should be looking at maximizing impact. You want to compare cost to impact. If they have low overhead, but they aren’t making an impact in the world, who cares?”

Michael Cooney, a partner at the law firm Nixon Peabody LLP in Rochester, agrees there are better ways to make personal giving decisions than simply by examining overhead. “The basis upon which I make a gift isn’t because someone has lower overhead,” said Cooney, who helped close $300 million in charitable gifts throughout the nation in December. “I don’t care if Mother Teresa had lower overhead. I give because it’s a cause I can support.”

To understand the impact a charity makes in its community or on behalf of its cause, Cooney urges potential donors to volunteer. The experience provides an up-close look at how efficient and effective an organization is in meeting its mission. “The bottom line is there is no substitute for a personal connection,” he said, noting that only a small percentage of charities actually hire professional telemarketers and fundraisers.

The Center for High Impact Philanthropy recommends several websites that help prospective donors determine how organizations will handle their contribution: Charity Navigator (www.charitynavigator.org), GuideStar (www.guidestar.org) and GiveWell (www.givewell.org.)

“Fifteen years ago, donors could pose the question asking about actual results, but it would be hard for them to get answers,” Rosqueta said. “Now, there are some great resources for people to assess effectiveness.

“Keep in mind, it’s not what a charity spends; it is what a charity achieves. Good intentions and a lot of money don’t always equal impact.”

Travis Anderson is a Rochester-area freelance writer.

1/20/2017 (c) 2017 Rochester Business Journal. To obtain permission to reprint this article, call 585-546-8303 or email rbj@rbj.net.


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