The Most Valuable Commodity is Information (Gordon Gecko, “Wall Street”)

In today’s world, the need for charity presents itself in various ways throughout daily life. The decision of whether or not to give should not be a difficult one and, thankfully, most Americans agree with me. According to a Wall Street Journal/Harris Interactive Survey, in 2006, nearly 83% of American adults contributed to a charity.

The harder decision is where to give. Many people spend more far more time evaluating the effectiveness of their new insulated lunch box than their philanthropic dollars. The lunch box will last only the school year, but the charity donation has the potential to change the world.

Do you really know the organizations to which you give? Do you know how much they spend on programs and services versus overhead and fundraising? (it should be 75 - 80% on programming for most organizations) How accountable are they for their activities? How do they report success and failure? What are the challenges they are facing and how will they meet them? The answers to all these questions should be communicated in an organization’s annual report or Web site. Knowing them will help you make sure you are getting the most impact for your dollars.

If you are a professional on the receiving end of these donations, you have the obligation to encourage this learning. Look around your organization. How is it spending the money donated by its supporters? Is information readily available to donors or are you and other managers afraid of donor scrutiny? Transparency is an operating imperative for today’s not-for-profit organizations. Your donors demand it from their financial investments; you should readily provide it for their philanthropic ones. Raising the standards for reporting and operating will help those organizations that are performing well continue to soar and encourage others to make the improvements needed have real impact.

It's About Sense, Not Cents

“No Strings Attached,” an article in the September 20, 2007 Chronicle of Philanthropy discusses the emerging trend of large, unrestricted donations and the positive impact these donations have on organizations.

The article emphasizes importance of unrestricted gifts and their advantages over restricted gifts. I agree that unrestricted gifts do provide many benefits to an organization—they offer flexibility as priorities can shift and needs change over time. Additionally, an unrestricted gift enables the management of the organization, those most knowledgeable of the needs and programs, to drive the funding decisions, not the donor.

However, this article overlooks the upside that can come with a restricted donation. A restricted gift may allow an organization to start a new program without allocating funds away from existing successful ones. Restricted gifts can involve donors who are attracted to the overall mission and capability of the organization, but want to support only a specific program.

Organizations who feel constrained by a restricted donation may not have thought through the implications of accepting such a gift. Organizations should have a 3-5 year operating plan identifying areas that will need funding—whether it is a specific project or general operations. This plan should be shared with donors so that all parties can work in partnership to achieve the same goals. As the conversation between the donor and the organization unfolds, the donor should be educated as to the impact his or her leadership gift can have on the future success and sustainability of a program—and the entire organization. Such a process will ensure that there are no “surprises” and that both the philanthropist and the organization can maximize the benefits of the donation.