I’ll be honest. Each tax time I’m surprised to see the number of clients who have donated nothing, or very little, to charity. Despite our regular contributions, even I tend to get to the end of the financial year disappointed that my good intentions to donate more didn’t eventuate.
Study after study delivers the same conclusions – spending our money on others makes us happier. It makes sense. We feel good when we give to others. We acknowledge and even feel the vast amount of suffering in the world and we appreciate our privilege.
So WHY don’t we give more?
In his book, “The Life You Can Save”, Peter Singer points to numerous possible reasons, including self-interest, feeling like someone else should be responsible, a sense of fairness (why should I give away my money when no one else does?), and futility – after all, some problems and suffering in the world is so great that it is hard to feel like a $500 donation will really change anything.
But is that the extent of it?
For me personally, I am overwhelmed by choice. There are over 60,000 registered charities in Australia. What is my money used for? Where should my money go to do the most good? What charities are effective? Who monitors these charities? Where do I even begin to do my research to figure all this out?!!!!
The simple answer is there is no simple answer! For many charities, it is extremely difficult to quantify their effectiveness. How do we quantify the benefit created by a charity focused on climate change, for example. And how could we ever compare that benefit to the outcomes of another charity that aims to educate girls in third world countries.
But despite these challenges, there are several resources and questions that can help you to make a credible and effective choice of charity and ultimately to make the change you want to see in the world.
Consider these:
Choosing a Cause
Most gifts to charities are emotionally based – over two thirds of donors do no research at all before choosing a cause and a charity. Try to move beyond the decision that pulls on your heartstrings and ask yourself the question ‘where can I have the biggest positive impact?’. Objectively consider the answer.
Peter Singer (in ‘The Most Good You Can Do’) gives the example of a decision between donating towards funds to build a new wing of an art gallery and donating to an organisation seeking to carry out surgery to restore vision for people in developing countries. Singer compares the number of people who will benefit from viewing the new art gallery wing to the number of people who will have their sight restored and the flow on effects of that to families and communities. Quantitative comparisons like this one can help to put in perspective the question of where you can have the greatest impact with your money.
Transparency, governance and leadership
Transparency of reporting and strong leadership will most likely mean a credible charity.
These few questions are worth considering:
What is the charities mission? The charity should clearly state their mission – preferably a measurable one!
Are they reporting the effectiveness of their programs? How do they measure this?
Does the charity make public their annual and financial reports? You can check this one for 900 odd charities in Australia via Change Path, who provides a fairy basic star rating system for transparency, financial stability and privacy of your information as a donor.
Tax Deductibility
Tax deductibility is a no brainer for me. If you can get a tax deduction for your donations, it allows you to effectively donate more. For those on the top tax bracket, we are talking a benefit of 49 cents in the dollar.
In Australia, you can check whether a charity has Deductible Gift Recipient status (meaning you can claim a tax deduction for your donation) via The Australian Business Register.
Effectiveness
Is the charity reporting the effectiveness of their programs? How do they measure this?
As I mentioned, measuring and objectively comparing the effectiveness of charities can be really difficult. But there are some well researched resources available:
GiveWell focuses on recommending effective global health and development charities. They believe the charities they recommend “offer the best bang for the buck in terms of lives saved or improved per dollar donated”.
Similarly, The Life You Can Save also focuses on charities that have been shown to be effective in improving the lives of those living in extreme poverty. They have reviewed hundreds of charities and recommend a handful where there is demonstrable evidence that the charity is doing good in a cost-effective way.
GiveWell and The Life You Can Save have limitations in that they do not include organisations that divide themselves up between many activities, as they contend that it is too difficult to evaluate them.
Effective Altruism Australia takes recommendations from GiveWell and The Life You Can Save, among other research, and allows Australians to make tax deductible donations to some of these recommended overseas charities.
For those wanting to evaluate animal welfare charities, check out Animal Charity Evaluator. They aim to find and promote those charities that are most effective in reducing suffering and improve the lives of animals on a wide scale. Recommendations are primarily US based, though there are some Australian charities listed.
Administration Costs
Administration costs are worth a mention. Administration costs are understood to be those costs that are not directly incurred by charities in delivering charitable services. The relationship between administrative costs and total costs of running the charity is often expressed as a percentage of the total costs of the charity.
People like to feel that their donation is going to those in need, and not to the administration of a charity. Donations to charities with lower administration costs are generally viewed as making a greater impact in the community. Many years ago, I myself remember reading a newspaper report comparing administration costs between charities and leaning towards those charities with lower percentages.
But relying on this figure to evaluate a charity is very much misguided.
A measure of a charity’s administrative costs gives no indication of the effectiveness of their programs. Some charities make a real difference in the community and have relatively high administration costs, and some charities may be less effective but have low administration costs. For example, a charity may have higher administration costs because they spend money on evaluating their programs, which means the charity can become more effective in the longer term.
It is also worth noting that in Australia, there are no standards or clear definitions for classifying a charity’s costs as ‘administration’ or ‘service related’. Comparing administration costs between charities is pointless and misleading, because how each charity chooses to allocate costs will be different.
So what have I personally done with this newly found knowledge? Well initially nothing, to be perfectly honest! Maybe it wasn’t the lack of knowledge that was holding me back in the first place?! But I eventually just set aside half an hour to sit down with my husband, and using Effective Altruism Australia, we chose a charity to make monthly contributions to that sat well with us and that we feel will use our donations effectively. And for now, I’ve kept our already existing monthly charitable donations going, but my next step is to review these and make sure they are a good choice.
No doubt about it, choosing a charity CAN be overwhelming. But don’t let a bit of research hold you back from contributing to positive change in the world. Join me in committing to give more and give well.
Do you have any resources to add? Has this wrap up been useful for you? Please share if it has, and let’s start a ripple of ‘effective’ giving xo
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