Charity Ratings and Realities

A new thread we are planning to comment on relates to charities, philanthropies and to how good works are best accomplished. This time of year this topic is on everyone’s minds and it is surprisingly different than many may realize. Like any business charities suffer their ups and downs and have good ones and bad ones with the bulk generally doing an okay job. The difference about charities is that they are able to cover up their activities because many folks prefer to maintain a good feeling rather than examine too closely the reality of the matter. This of course makes charitable activity a fertile ground for cons and fraudulent activity cloaking such improper and usually illegal actions in what we ahve called the “halo effect.” So rule one is not to be fooled by the subject matter of an organization, if you are thinking of donating please perform your due diligence as you would with any other business investment.

Two sites may be of particular help. www.charityezone.com is a portal that connects you to many other sites offering information on charitities including the philanthropic arm of the Better Business Bureau. www.guidestar.org contains the federal tax returns of many charities which although they can be misleading are better than nothing.

Most ratings services focus on large charities so your neighborhood shelter or animal  assistance program is probably not rated. But smaller charities are easier to scrutinize because they require less analysis and time, just talk to the clients, the staff, the volunteers and the board members to get a sense of how your money will be used.

It is not that easy to quote percentages of overhead because like any business new charities have higher overheads than old ones but generally speaking overhead should not exceed 20% without a good reason. And bear in mind that a charity must make its books available on request to anyone who asks, refusal to do this indicates a problem.

The new direction of doing good is to combine beneficial activity with business so that the two are in many cases now becoming indistinguishable.  This makes due diligence a little more difficult but the effort to understand what “social entrepreneurism” is all about will make it even more worthwhile. The advantage of a charity figuring out how to support itself as a business or how to accomplish its mission as a business is that the chances that the pain and problems they are tackling stand a much better chance of being ameliorated than if they wait on contributions or contracts.

There is no excuse for charities’ boards or staffs committing errors or crimes in their work these days as so much business assistance and guidance is available from many institutions and individuals.  Do not accept the excuse that criminal activity was committed in the name of “doing good” anymore than you accept that the killing of innocents is justified by terrorist beliefs, there is no difference except in hopefully degree of damage.

~ by franklicense on December 5, 2007.