The number one reason why most people give to a charitable organization?
It's not because they know the first thing about the charity. It's not because they know their donation will actually be used to bankroll medical research, or feed starving children, or lend disaster support. It's not even because they want the tax deduction.
The number one reason: because they are asked.
Which suggests the Catch-22 of charitable donations: "That means the most active fundraisers are getting the most money," says Daniel Borochoff, "not necessarily the organizations doing the best work."
The president of American Institute of Philanthropy (AIP), a Bethesda-based charity watchdog organization, Borochoff knows which charities do the best work with the money they raise -- and which ones don't. In 1992, he founded AIP to track the effectiveness of nonprofits and help the public make informed choices in supporting the best charities. Since then, the institute has rated hundreds of groups on specific "performance measurements" it digs from their financial disclosures.
"If you are giving the dollars, we encourage you to follow the dollars," says Borochoff, who mentions a survey earlier this year that found 67 percent of charitable donors never ask how their donations would be spent.
And that's the bottom line for Borochoff when grading nonprofit groups in AIP's quarterly "Charity Rating Guide and Watchdog Report." Spending at least 60 percent of total expenses on the charitable program (as opposed to fund raising and administrative costs) is considered "reasonable" in the AIP-rating system; so is spending $35 or less to raise $100 in donations.
Groups that meet those benchmarks score better than those that don't. In a recent AIP rating guide, for example, the District-based Animal Welfare Institute earned an "A" by dedicating 84 percent of its expenses to its mission while spending only $2 to raise $100. Other organizations earned "F" grades for directing single-digit percents to their purpose and spending $80 or more to make $100.
But other factors can give a charity a low grade, says Borochoff, who generally doesn't like out-of-the-blue telemarketer charity calls or groups that mail stamps, address labels or greeting cards as solicitations. And, he adds, "Most people who give money think in terms of the charity using it in the next two years, so if a group holds the money for three or more years, that can be reason to give it an F rating."
While consumers might find this kind of scrutiny helpful, some nonprofits don't open their books to AIP's investigators. "If a group doesn't want to be accountable to us, we will go to public sources and print our findings anyway," says Borochoff.
"And the numbers we find may be very different than what the charities themselves report . . . because there are all kinds of tricks and manipulations that go on" when nonprofits report their financial data.
Not that consumers can't try to decode it themselves: A new law took effect in June allowing anyone to see a nonprofit's annual reports by requesting it in writing. But the reports aren't likely to be mistaken for beach reading material, say Borochoff, who directs hands-on philanthropists to AIP's Web site -- www.charitywatch.org -- which provides listings of the top-rated nonprofits and information on how to give most effectively. "People don't necessarily have the patience for it, so we do it for them."
For a sample of AIP's Charity Rating Guide and Watchdog Report, send $3 to American Institute of Philanthropy, 4905 Del Ray Ave., Bethesda, 20814.
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