Are Your Gifts Really Giving Back?

Your heart’s in the right place—make sure your money is, too.

February 2016

In 2014, according to Giving USA, a public service initiative of The Giving Institute, Americans donated an estimated $358 billion to charities, the highest amount in the report’s 60-year history. Americans have grown more charitable in their buying habits, too. According to the 2013 Cone Study on cause-related marketing, 89 percent of consumers would be likely to switch brands (all other things being equal) for a brand affiliated with a charity, up from 80 percent in 2010 and 66 percent in 1993. It is clear that many Americans are philanthropy-minded; unfortunately, organizations that have learned to exploit that generosity are also on the rise.

Watchdog organizations such as Charity Navigator, CharityWatch and GuideStar can help guide consumers as they evaluate whether their cause-related purchases or charitable donations are actually being used as they were intended. The organizations all recommend doing some due diligence on the charities you are interested in. First, make sure the charity’s mission is actually aligned with its stated mission. Charities report their largest programs, and the funding allocated to them. Look to determine if the funds they report seem in line with what the charity says it does.

Charity Navigator also recommends looking for the answers to four simple questions about how charities intend to address the problem they’ve identified: Does the charity’s statement of how their work leads to results seem plausible? Do they talk about how much of their service is required in order to produce the results? Do they show evidence that their approach is effective? Do they tell you what data will indicate that their program is working, and have a plan for collecting that data?

When you're evaluating a charity that gives money straight to its beneficiaries, look at the feedback it publishes from primary beneficiaries and clients. Transparency is key: the charity's operations should be independently evaluated by a third party at least once every five years, and the charity should make that evaluation public for those who donate to the cause.

Determining whether to purchase a product that is aligned with a cause requires similar questioning, such as: Is the relationship between the product and the charity authentic? Is the packaging easy to understand (for instance, does it clearly spell out the charity involved in the partnership and whether there is a cap on the firm’s contribution)? And is the charity affiliated with the product one that matches your philanthropic goals? Information on charities’ financial health, accountability and transparency and results reporting can be found on Charity Navigator’s website.

In entertaining a charity’s solicitations, you might also look for those organizations that notoriously deceive givers about where their money goes, or pay themselves multiple salaries and consulting fees. In recent years, the Tampa Bay Times teamed with the Center for Investigative Reporting to identify some of these “charities.” Their calculations put an organization in Florida, Kids Wish Network, in the No. 1 spot as “America’s Worst Charity.” According to the Times, “Every year, Kids Wish Network raises millions of dollars in donations in the name of dying children and their families. Every year, it spends less than 3 cents on the dollar helping kids. Most of the rest gets diverted to enrich the charity’s operators and the for-profit companies Kids Wish hires to drum up donations.” America’s Worst Charities was updated in December 2014; ranked first by how much each charity took from donors and paid solicitors, and then how much of the total donations raised was paid to their cause.

With the billions of dollars Americans are willing to give, making sure money goes to the right place is crucial.