Over the past decade, we have seen an increase in donors who seek more information on the finances of charities, so they can make better informed decisions on contributions. The National Volunteer and Philanthropy Centre's (NVPC) Individual Giving Survey 2012 revealed that people who agreed that "non profits use donated funds properly" gave, on average, a whopping 58 per cent more than those who disagreed.
The Government has been helping charities improve their transparency and governance through training courses and board assessment and providing services to match potential board members to charities. These are further signs of a giving public wanting to be better informed, which is an important foundation in ensuring philanthropic resources are used in a transparent manner, and are well engaged and well utilised.
If donors are making decisions to give primarily based on how much a charity allocates to its beneficiaries, what will be the effect on other needs critical to a charity's operations? Logic tells us it is impossible for a charity to allocate all its funds to direct beneficiary expenses and ignore the realities of operating overheads, salaries, training and development, as well as governance costs.
There has been recent media attention on a more utilitarian view of philanthropy, which focuses on the "bang for the buck". This has inspired some donors to look for the greatest benefit that can be created from the amount they give. Charities with funding needs that are harder to translate into direct benefit may appear less attractive to these donors.
It may also mean donors making giving decisions relatively, based on their understanding of expected benefits. For example, if donors expect less social benefit from funding staff training, compared with the expected benefit of providing food packs to the hungry, they will donate less to the staff training programme and more to the food pack programme.
There can possibly be a different outcome if there is a shift in perspective among donors. For instance, instead of how much of what they give goes to the beneficiaries, donors can ask how their donations can help a charity and the beneficiaries it serves.
The latter question looks not literally at how the money is spent, but how the spending has improved the charity's ability to make a difference to the people it serves. For example, it may have helped pay for another social worker to increase outreach to underserved areas. Or, perhaps, it will improve facilities, so beneficiaries have a better quality of service or fund research and innovation for new solutions to entrenched problems.
Donors who see the bigger picture of helping selected charities are not any less informed about how these organisations operate and whether intended results have been achieved. Besides a charity's annual reports, governance filings and print and social media, there are many resources to help an informed donor. Additionally, volunteering is a very effective way to better understand the impact of the charity's work on the ground.
Every donor wants his donation to count, so transparency, active communication and sensible financial planning on the part of a charity is crucial. Yet, informed givers should go beyond a narrow focus on accountability to look at how their donations can bring greater social benefit. Imagine how much more effective and powerful the non-profit sector can be in addressing social issues if it has the support of an informed giving community.
Thoughts:
- I admit being one of those that looks at how the money that I have donated will better help the beneficiary. Another side of the coin to support my argument - If the charity does not have funds to employ people, maintain venues to provide service, how sure are we that the money we donated (to help the beneficiary) will be put into good use? Thus, transparency is very important, and explanation of how the donated fund will be used would put a donor's mind at ease.
Thoughts anyone?
Yours,
Something Small Thinking Big
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