Bogleheads

[psteinx]

The thread on the Vanguard Charitable Endowment Program has spurred me to start this, somewhat related thread.

Viewed conventionally, this topic is perhaps off-topic for this forum, but I view charity as, in part, investment/spending on behalf of others, and that it is important to do so both efficiently and effectively, which is more or less the goal for many of us in managing our personal investments. So hopefully the moderators will let this slide

Basically, just as I want the biggest bang for the buck for my portfolio, I want the same thing for my charitable giving.

To oversimplify things a bit, I want my charitable giving to do the greatest good for the greatest number of people.

I view this as a 3 part problem:
1) Identify the most promising areas to support.
2) Identify charities operating in that area, screening out those that are particularly inefficient in their use of funds.
3) Evaluate how effective the charities are in resolving the problems they address.

Or, to translate into more concrete terms:
1) My instincts and reading, so far, cause me to think that alleviating suffering and advancing human development in the third world is probably the most promising area to give to. But even if this is taken as a given (and I'm not totally convinced), one must still choose between different areas of focus - food programs, education, health, and so on, and different approaches within each area.
2) This is the area that is most easily addressed currently, and feels rather like the problems we face in evaluating mutual funds. Sites like www.charitynavigator.com and organizations like the American Institute of Philanthropy
allow you to determine how much of a charity's funding goes to fundraising, overhead, and so on. However, one should still take a closer look at the details of the process - reporting practices aren't always uniform (though I think AIP is particularly effective at addressing this). Also, the fact that one charity spends 5% of funds on fundraising and another 10% certainly should not rule out the latter charity, if that charity addresses a more important/worthwhile/solveable problem, and or is simply more effective with the 90% of it's money that does go into the field.
3) Once we've got a problem identified, and a few candidate charities that address it, there can be substantial differences in approach and effectiveness. Charity A and charity B both wish to address health issues in sub-Saharan Africa. Charity A focuses on research (better drugs) whereas charity B focuses on in-the-field clinics. Or charity A addresses different diseases, or different specific countries. Or charity A simply has a better (or worse) field operation than charity B.

====

To summarize...

IMO, giving money to charity so as to maximize the effectiveness of the donation is difficult. Problems 1 and 3 above are challenging for a non-expert to solve optimally (or near-optimally). Existing charity evaluation websites seem primarily focused on problem 2 above, which, while important, seems to be only a small part of the overall problem.

Full disclosure: I'm giving serious consideration to investing either a small or potentially large amount of my time in the not too distant future to creating a web site or other resource to help address problems 1 and/or 3. But I keep wondering if I'm unusual in looking at things this way, and/or if there are other resources out there addressing these problems.

[Vig Oren]

Hi, I have just clicked on the link www.charitynavigator.com , and saw the following list. But checking at the Forbes website for Efficiency and Donors Dependability I see that few on the list are non- efficient , non- donors dependable, sort of "fat cats" . So why are these organizations being pushed on this list?

I for myself would not contribute money to any organization which is below 95% in the two parameters of Efficiency and Donors Dependability. Why should I?

***********************************************
10 of the Best Charities Everyone's Heard Of

These 10 charities work throughout the country and the world. They are large, complex organizations with budgets exceeding $100 million, and at least $65 million in net assets. They became household names in part because of their exceptional financial management, no easy feat considering the scope and size of their operations. Charitable givers should feel confident that these national institutions put their donations to good use.


Rank Charity Overall Score

1 The National Christian Foundation 69.46
2 CARE 68.87
3 PATH 68.74
4 Conservation International 67.85
5 City of Hope and Affiliates 65.68
6 American Red Cross 65.37
7 Mayo Clinic 65.27
8 Hadassah, The Women's Zionist Organization of America 64.27
9 Save the Children 64.04
10 International Rescue Committee 63.98
********************************************************
_________________
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
"One of the greatest piece of economic wisdom is to know what you do not know"{John Galbraith}

[Wagnerjb]

I know I am not addressing your issue directly, but there is another aspect to "efficient" donations. I once read an opinion that stated one should limit one's giving to as few charities as possible. Same dollar amount, just don't give small amounts to many charities.

The reason is that these charities will send you dozens of donation requests throughout the year. And maybe more. We contribute to WWF (my son's choice for his charitable funds) and WWF sends wrapping paper, calendars and more. We also contribute to a major cancer hospital, and the hospital sends us a newsletter periodically. If you give to the firefighters or police - even once - they will call you for years and years requesting donations.

If you contribute small amounts to dozens of charities, there is more "waste" of resources in trying to get you to contribute again.

It is hard to narrow down your choices since there are so many worthwhile charities. But we have done this over the past 5 years or so. We don't say no to the $25 walk-a-mile kind of thing, but we save our annual giving for late in the year, and use donated shares of appreciated securities (more bang for my tax buck).

Best wishes.
_________________
Andy

[dm200]

ways of doing charitable giving. A few opinions and observations:

1. I would suggest focusing on a small number of charities. You can learn about the charity you are giving to, perhaps keep off of a few mailing lists, and your money can have an affect.

2. Some people may have moral, ethical or similar reasons for avoiding certain causes. For example, some international groups actively support (and may encourage) abortion. That issue might cause some to not support that cause. On the other hand, that same issue might lead others to support that cause.

3. Some international causes provde the capability of becoming closely involved. You may be able to meet the direct providers of aid, and may be able to participate yourself. My church actively supports health and education aid to a remote community (extremely poor) in Haiti. Many church members and supporters have actually visited that Haitian community.

[peter71]

hi,

i would second your initial impulse, similar to that of gates and buffett, that intl. development charities offer the best bang for the buck. i know gates is interested in malaria in particular right now, as that's an issue that doesn't really raise a lot of macro-economic complications, but pretty much all the big ones (including CARE and Save the Children) do work involving sanitation, clean water and child health, which are pretty uncontroversial. other organizations, and some of the main ones i support, give grants to community organizations in the third world that those organizations themselves propose, but while i do personally like that aspect those organizations will be the first to admit that those initiatives do often fail.

all best,
pete

[hammerbird]

"Rank Charity Overall Score

1 The National Christian Foundation 69.46
2 CARE 68.87
3 PATH 68.74
4 Conservation International 67.85
5 City of Hope and Affiliates 65.68
6 American Red Cross 65.37
7 Mayo Clinic 65.27
8 Hadassah, The Women's Zionist Organization of America 64.27
9 Save the Children 64.04
10 International Rescue Committee 63.98 "
============
No Salvation Army on the list?
This seems rather strange to me.

[psteinx]

OK, let's look at that top 10 list from Charity Navigator.

They list a bunch of "top" charities, but no accompanying data or methodology. They're just a bunch of names. What does CN see about them that makes them the 10 best?

Click on the #1 charity (The National Christian Foundation).

You get a bunch of numbers and charts. Hmm, they're growing, and they spend most of their money on programs rather than admin and fundraising. That's nice.

What do they do?

The top line says "Embrace the ideal of smart Christian giving"

That doesn't tell me much.

At the bottom of the page is the charity's "mission", presumably provided by the charity itself, rather than any kind of subjective evaluation of what the charity does.

So we know the charity spends about 95 cents of each dollar on programs (or at least, they report they do - again, charity reporting isn't always consistent). So we know where 5 cents of the money goes (fundraising and admin), but I think it's far more important to know where the other 95 cents goes, and how effectively it's used.

[stratton]

I don't know about other states, but Washington has a charities search web site they maintain of the most efficient charities.

Paul

[psteinx]

Just to be very clear:

Efficient is NOT the same as effective.

I don't mean to endorse inefficiency in charities. Rather, I mean that it's fairly easy to screen out inefficient charities, but that still leaves an enormous selection of efficient charities, many of which may not be very effective (at least, to my judgement).

[Vig Oren]

psteinx, you wrote:

Quote:

Once we've got a problem identified, and a few candidate charities that address it, there can be substantial differences in approach and effectiveness.

But I doubt it that most of the time you'll be able to find the truth. Take a look at the Darfur situation . This sad dilemma has been around for several years. Do you comprehend what's going on there? I don't. IMO, in many cases you'll not be able to identify the source of the problem. So how could you direct your money to a charity that "addresses IT"?

[astroturf]

[Warner]

Forbes had this article a few years ago that makes the case for looking at effectiveness and not necessarily overhead: http://www.forbes.com/free_for....2/036.html

Steve Landsburg (in Slate) makes the case for minimizing the # of charities (one being optimal): http://www.slate.com/id/2034/

[psteinx]

Vig - I agree - it's very difficult for most of us to determine whether a charity that purports to address the Darfur crisis is and/or will be effective.

That's my point. We can find numerical data, but that's of only limited utility. I'd love a site that goes beyond the numbers and provides insight and subjective opinions for charities. I agree that doing the analysis would be difficult - perhaps there are some websites already out there that do this, but I'm not aware of any that are quite what I have in mind.

Most of the time, when we spend large sums of personal money, we are either in a position to directly evaluate what we are buying, or to at least read good reviews of the product in question. I assume that for most of us, the car-buying process involves test drives of competing models, and probably some reading of reviews and track records from consumer magazines or websites.

Many of us will give amounts to charity, either all at once or over the years, that are greater (perhaps much greater) than the amount we'll typically spend on a car. But unfortunately, the giving is often poorly researched, and thus charity dollars may go to charities that are relatively inefficient, ineffective, or both.

Of course, the alternative is to shrug our shoulders and give up. Since some charity is ineffective, why bother? But I think this is a rather cold response.

I *WANT* to give generously to effective charities, but I find it difficult to rate effectiveness...

[psteinx]

Astroturf - I wasn't really trying to focus on The National Christian Foundation - I just chose that because it was on top of the CN list. One faces similar problems with just about any charity. Data about a specific charity is often provided by the charity itself, and it's hard for the donor to get to the meat of the problem - is charity A really doing more in the field than charity B? (Alternatively, is charity A's approach of, say, research, more effective than charity B's approach of field work?)

Just to repeat.

I'd like a site that:

1) Collects and synthesizes opinions about which of the world's (and the nation's) problems are most dire, but also most addressable by charities (some problems may be political or otherwise beyond the reach of conventional charities). Basically, this is the type of thinking done by Lomborg, Gore, Sachs, and others. Note that these individuals often have opposing opinions on the relative importance of tackling different issues. That's fine, and anyways, my own personal values will factor into the equation. But I'd love to see a sort of clearing hub for lots of ideas, information, and even disputes about these meta-issues.

2) For each of the ~10-30 major policy areas that one might reasonably deem to be most pressing, I'd like to see a short analysis of what the problem is, why it's important, why it hasn't been solved already, and what solutions are on the table or being put into practice.

3) Then I'd like to see a list of which charities are working in the field, with some financial summary data along the lines of what Charity Navigator has (or perhaps, a link to CN or a similar site).

4) Ideally, I'd like to see 1-3 policy/implementation experts in the field write short 'reviews' of the major charities in their field. "Charity A is trying to tackle disease X by shipping drugs in, but the drugs they use aren't effective, or the infrastructure isn't in place to effectively distribute these drugs, or local education programs would be much more effective in combating the disease, etc..."

[satori]

I’m not a scientist, but I’ve participated in doing grant writing in the sciences. When a scientist or a group of scientists at a university wants to obtain funding to train future scientists they have to write a training grant proposal to a funding agency explaining the importance of research conducted in the unit, and the quality of the coursework, the lab training, and the research facilities. Pains are taken to explain things like lab rotations, seminars, coursework, teaching, preliminary exams, research, dissertation, ethics workshops, etc. and how it all comes together (vision and operations). The unit may also point out areas of difficulty which could be remedied by ... more money. The granting agency may ask for any data it wants, for e.g. a listing of entering students or all students and their grades and GRE scores and undergrad institutions as a measure of the quality of the students being trained The agency may require the unit to provide data on how many students made or missed certain milestones, for e.g. how many passed the prelims. A measure of the success of the program might be how many graduated and how many got jobs in academia or industry, and a measure of student satisfaction may be assessed by questionnaires that the prospective grantee is required to circulate. The curriculum vita of the faculty involved in the training accompany the proposal and on it the grantors can see their list of publications. These proposals are rigorously reviewed by a panel of scientists that judges the worth of the proposal on the reputation and productivity of the faculty, the quality of the research being conducted and the soundness of the training activities and pedagogy.

My feeling is that a charity should operate like the above-mentioned scientists going for an NIH grant. It should willingly bend over backward to explain (to the donating public) not only its righteous mission, but to demonstrate how it operates and achieves its milestones (or not) , measures progress, and handles challenges and roadblocks. I think the OP's proposed charity website could prove really interesting and helpful if it can tackle the thorny issues of how to measure the relative worth of a charitable mission and how to quantify a charity's progress toward its goals. This will not be easy.

[Bud]

Well, as a guy who helped start a non-profit 12 years ago and has helped direct it since then, I will give my 2 cents...

Our non-profit is relatively small, around $600,000 in receipts last year(with only 3% of donations designated for overhead) , so take this with a grain of salt (those organizations on the above list are in the hundreds of millions).

NPs can make the numbers say what they want to just like and other corporation. The primary difference is that NPs generally have a higher level of integrity and they are not profit driven, so they tend to be more straight forward in their reporting. But, once again, making anyone's top 10 list is a big motivation for tweaking the numbers.

I would suggest that since the driving force in charities is giving & receiving, some of the "normal" standards do not apply. A donor's best way to protect his/her interests is through relationship. In a personal relationship with someone in the organization, especially someone who has been in the charity for an extended period of time (5+ years), you will see the integrity of the person as well as their character, values, principles, and practices and that will reflect in the charity in which they serve.

Why? Because most (not all) people who work in a charity receive much less income then they would in the private sector. Last year I made less than $40k, but I have no doubt that I could be making six figures if I had continued in the private sector instead of dedicating more than a decade of my life to a non-profit.

So, if the person is frugal, giving, honest, transparent, etc, those will also be qualities that are true of their organization. But, if you see big spending, corner cutting, small minded thinking, that also will be reflective of their organization.

I have rubbed shoulders with people from all sizes of non-profits working in all kinds of areas. There are some great people and good causes that I would NEVER support, simply because of these factors.

Your best bet may be to invest in a local charity (who feeds the homeless in your town? Helps single mothers? Provides free health clinics?) or in something a relative or a friend is involved in and has seen success in their mission.

For investing in organizations that do work in third world countries, it may not be practical to travel there. But, if you are thinking of giving in the $10,000's, take the time to make a trip and spend two weeks seeing what you are investing in first hand. Even if your giving is as low as $2000 annually, take your first year's donation and spend it on checking out the organization with a personal visit. Obviously, this does not work if your organization does relief in a war zone (Iraq, Somalia, etc), but for the vast majority, it is doable. Since our organization works overseas, I know that it is easy to represent things when the reality is different.

Sorry for my long winded post and I apologize for anything that may offend. I hope this is helpful and that it makes sense in your situation. I will confess, many times my heart is heavy because I do see so much going to organizations and causes that are amazing ineffective and inefficient at almost everything except raising funds. And donors can perpetuate the problem by not requiring accountability.

[minesweep]

[dm200]

that efficiency and effectiveness are two different things.

You could have the most efficient charity organization in the world, but if that organization does things that are not effective, you may not want to contribute. Or, an organization could be efficient AND effective, but you are not interested or motivated by what they do.

[psteinx]

Bumping an old thread here in part as a reminder to folks to think about charity in general (it's a time of year when many traditionally think about charity).

Also, in the time since I made my original post, I've been involved with a website that focuses on evaluating charities. If this is a topic of interest to you (or maybe even if it isn't ), please check out www.givewell.net. Full disclosure - I am an (unpaid) advisor/mentor to them.

Also, you may want to look at this blog posting, and the press release it links to, for more discussion on the right way to choose a charity, and for some other sites that are interested in this same topic.

[eurowizard]

I am not in a position to give out charity at this point in my life but as an atheist I would not want to give money to a Christian organization. Unfortunately many charity organizations are based on religion and I may find myself donating simply to the libertarian party or the NRA. I would prefer to help people directly, but not in the name of any god.

[dm200]