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Caroline Fiennes

Caroline Fiennes offers tips for charitable giving in her new book It Ain't What Your Give, It's the Way That You Give It

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Charity donations: how to spot the most effective good causes

Caroline Fiennes

21st March, 2012

Many of us support charities which work on some of the biggest environmental issues of our time. But which are the good ones, and how can we really help? Caroline Fiennes, author of 'It ain't what you give, it's the way that you give it', finds out

In Kenya, where diarrhoea is a major killer of children, several methods have been tried to clean water supplies. Delivering chlorine for free to households is pretty sensible: $1,000 spent that way can prevent 323 incidences of diarrhoea. Great. But $1,000 spent on giving people chlorine when they collect their water from community water sources - which also seems sensible - can achieve more than twice that much, preventing 689 incidences.

So charities are not all equally good. That sounds almost heretical because we often think they're all laudible and deserving. But let's think carefully: medical care is a good thing and yet we know that some types of medical care are better than others: some help greatly, some a bit, some make no difference, and some are actively harmful. Same with teaching: great teachers engage and inspire, some teach a little, some have zero impact and some deter pupils forever. So perhaps we shouldn't be surprised that it's true for charities too.

It's also true of ways that donors give. There are ways to give £100 such that it helps a bit, ways to make it worth at least £150 or possibly £200 to the charity, ways to make it worth nothing at all, and, at worst, ways that donors can get in the way such that charities would rather not have them and their £100 at all.

There are three golden rules. (1) Find a great charity. (2) Help it. (3) Don't hinder it.

Find a great charity

You're looking for charities which don't just do some good but which are the best at their type of work. Great charities are ambitious, so a good indicator is whether it measures its effectiveness, publishes full details of its research process and talks about the results. That should all be clear from its public materials, even if it's small.

A charity's impact (its effectiveness) relies on two factors. First, it needs a good idea. In the example above, distributing chlorine at water sources is a better idea than taking it to homes.

And second, it needs to implement that idea well. That relies on the skill and training of the staff, which varies between charities just as it does between organisations in most walks of life.

For the impact to be good, both the idea and implementation must be good. To put this another way, an organisation could have a great strategy but implement it so dismally that it creates only low impact. If you're into formulae, think of it like this:

impact = idea x implementation

The quickest way for busy people to find good charities is to look at the lists of charities which have already ‘passed' scrutiny by somebody reputable with more time. Good grant-making foundations such as BBC Children in Need or Comic Relief publish their lists, as does GiveWell, an independent analyst.

Amongst people doing the analysis themselves, the most common error is to consider the amount spent on administration (that is, if you give £100, how many of those pounds get spent on the charity itself). This indicates nothing about whether a charity is any good.

Suppose that two charities distribute equally good solar panels in Southern Africa, and suppose that one costs £1 per installation whereas the other costs £10. For 1,000 installations, their equipment costs will be either £1,000 or £10,000. Both programmes will incur costs in finding and dealing with 1,000 buildings and the communities (e.g., hiring and accommodating workers and financial management). These ‘admin costs' might be £1,000. The cheap programme costs £1,000 for the kit plus £1,000 for 'admin', i.e., £2,000 all in, of which admin was 50 per cent (£1,000 ÷ £2,000). The expensive programme costs £10,000 for the kit plus £1,000 for 'admin', i.e., £11,000 all in, of which ‘admin' was just 9 per cent (=£1,000 ÷ £11,000).



Judging by the ‘admin' percentages, the cheap programme looks bad - but that's precisely because it's cost-effective! There are myriad other reasons that admin is a bad metric but this illustration cuts to the heart: it leads us to the wrong choice because it doesn't ask ‘percentage of what?'

Help it

And now, we shall rustle up money from thin air! You probably know one way of doing this, which involves getting HM Treasury to chip in. If you pay tax at 20 per cent, then Gift Aid will increase your gift by a quarter, whereas if you pay tax at 40 per cent, Gift Aid increases it by two-thirds.

A less well-known trick is to give without strings: don't stipulate that your donation can only support a day-centre in Hull, or tree-planting near Shanghai or whatever. This 'restricted' money is tough for charities to manage (at best, it's hard to keep track of umpteen pots of money, and at worst, donors all want to fund the trees in Shanghai but nobody wants to fund the equally-important ones in Shenzen). Charities say that 'unrestricted' money is half as valuable again as restricted money: putting that another way, making your £100 unrestricted is like adding an extra £50 from nowhere.

The way to create no value at all is to give to many charities. If you chop up your £50 into 50 donations of £1 each, the whole lot may get consumed in bank fees.

Don't hinder it

To be honest, if you just give money, offer other things such as your time or useful items and then leave the charity to get on with its work, you won't hinder it.

The problems tend to come from large donors which have application and report processes. A salutory concept is the 'net donation' - the amount of a donation which is left after the faffing about which donors require. ‘Net donations' are often surprisingly low. One physicist at Columbia University has calculated that some of his grants are net negative - that is, he pays to have them.

The key rule is: don't act like medieval royalty! Don't make charities waste a load of their donated resources on dealing with you.

We entrust to charities some of the most important work in our world. The impact of supporting the good ones well, rather than the poor ones badly, are vast and real differences in how - even whether - we all live.
______
Caroline Fiennes (pictured above) is the author of It Ain't What You Give, It's the Way That You Give It: Making Charitable Donations That Get Results. Ecologist readers are offered it for £12.99 rather than retail price of £16.01 by clicking here.

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