The end of a calendar year is a time of increased focus on charitable giving as well as planning for the upcoming fiscal year. When a donor’s primary objective is leveraging donations for the greatest benefit, rather than simply a tax deduction, research is in order. Ironically, tax considerations may change considerably if current legislative language is not altered. The standard charitable deduction could almost double, potentially reducing the number of filers who choose to itemize down to five percent.
Regardless of the weight given to tax deductions, donors can expend an inordinate amount of time trying to discern the effectiveness, efficiency, and integrity of multitudes of nonprofit organizations clamoring for financial assistance. There are some well-known repositories of information on nonprofits, such as Guidestar and the Wise Giving Alliance of the Better Business Bureau. In theory, the BBB has a solid rubric of criteria for judging nonprofits. However, two weaknesses of universal effectiveness measures are that they can be manipulated, and they do not consider contextual differences. Rubrics have difficulty capturing the logic model of how the mission is accomplished or the degree of authentic success.
Certainly, glaring data points (e.g., percentage of budget spent on fund raising) should be red flags but otherwise “normal” statistics do not convey important meaning. Organizations with “perfect” rubric scores can still have serious problems with accomplishing objectives most important to donors. For instance, when Hurricane Harvey hit the Texas coast, the Red Cross had difficulty meeting needs and the mayor of Houston discouraged donations to that organization. The fallout caused a regional CEO to resign, citing a conflict between serving the national organization and meeting the needs on the ground as he perceived them.
Another façade of success is simply successful fund raising, which gives the appearance of competence and effectiveness. What ensues is a vicious cycle of sorts. Donations are given due to a presumption of competence triggered by knowledge of income levels; donations continue, further giving an impression of competence.
One option for donors is to seek the advice of a nonprofit consultant who is not paid on commission. Consultants have much exposure to an array of organizations, whether they have worked with them directly or not. Often, one hour or less of a consultant’s time can channel a donation towards a donor’s philanthropic objective. Further, sometimes nonprofits need capacity building guidance, enabling donations to their mission to be leveraged exponentially. We are wise to remember words often attributed to Abraham Lincoln, “Give me six hours to chop down a tree and I will spend the first four hours sharpening the axe.”