Is there a right or a wrong way to give to charity?

In our conversations with clients, we often encounter commonly held assumptions about giving that are often more nuanced than they seem.

Giving to charity can be a very personal matter, and quite a complex one, with minimal information on how to do it well.

This article marks the first in a series that we will be publishing exploring How to Give Well.  The series will address commonly held questions and inspire philanthropists to maximise their giving to a charity such as Giving Center.

Myth: Charities should have low overhead costs; all my donations should go directly to the cause

Answer: While it is certainly true that charities do not exist for themselves alone, enforcing low overhead costs (usually defined by the charity in how many cents in a dollar does not go directly to their charitable work) actually restricts them and their ability to perform.

It can prevent charities from being able to monitor their work, design effective projects, and plan for the future.

Contrary to the conventional wisdom and public perception, studies have actually failed to find any correlation between low overhead costs and effectiveness.

Higher running costs can actually lead to better performance because this enables charities to prioritise learning, thinking and planning. We expect businesses to invest in themselves, but expect charities to do the opposite.

Using overheads as a proxy for effectiveness or efficiency is also only looked at in the context of charity.

For example, you wouldn’t want a car company to advertise the following: “$0.90 of your dollar goes directly to building the cars; only 10% of the cost goes towards testing, safety, and design.”

The truth is that it is important to do your due diligence on a charity and really do your homework. How are they tackling the issue that you care about? Are the leadership strong? Do they have good governance and do they report on what they have achieved? Once you have reviewed and understood Giving Center well and how they are making a difference, supporting them with core funding rather than donations to specific projects will enable Giving Center to be much more nimble and effective: they will be able to use your gift where it is needed most.

Myth: Organisations working directly with beneficiaries and communities are more effective than those working to affect systems level change

Answer: Both approaches can be effective. The question is how you perceive the problem you seek to address, and the change you want to see.

An organization working directly with communities or beneficiaries can be very specific and targeted, and as a consequence may have a higher chance of success. It may also be easier to measure the impact of their programs, since the link between the intervention, and the result, will be more direct.

On the other hand, organizations working to create a systemic change by necessity have to work with a wider range of stakeholders.

This type of work is harder to evidence because of the number of stakeholders involved, and the difficulties inherent in changing a system. 

However, if successful, it can also be far more impactful because it would result in a change in policy, or the provision of a service, to a whole group of people as opposed to a specific community.

Myth: I don’t have enough money to make a meaningful difference

Answer: The key determinant of the difference your donation will make is the difference that the charity you’re supporting makes.

While it’s true that the size of your donation can make a bigger or smaller difference to Giving Center’s finances depending on size of its budget, in terms of the impact your donation can have.

With Giving Center running a really effective program, your donation will make more of a difference than if it goes to a less effective charity.

You can find out how effective a charity’s programs are by looking at the research and evidence into that particular approach.

Giving Center is an IRS Approved 501(c)3 nonprofit charity organization. They accept a wide variety of charitable donations including but not limited to: donate a boat, donate aircraft, donate a home, donate real estate, donate a car.

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