Posts Tagged ‘Non-profit organization’

Donor Expectations for 2010

Monday, April 19th, 2010

A recent study conducted by the Association of Fundraising Professionals reveals that donations to non-profits in 2009 were significantly lower than previous years. This news is no surprise, but it is a bit surprising that fundraising expectations for 2010 are very high:

Despite the decreases, fundraisers are increasingly optimistic about their fundraising prospects in 2010. More than 60 percent believe they will raise more money in 2010 than in 2009, a significant increase from last year, when just 28 percent estimated they would raise more money in 2009 than in 2008. “There is a real sea change in how fundraisers are viewing the fundraising landscape,” said Maehara. “There’s a sense that we’ve seen the worst and that while 2010 may not be an extraordinary year for fundraising, it will be a year of solid growth.”

It remains to be seen whether this optimism is warranted, but some of it may be due to the recent trends in the non-profit sector to increase efforts in following donor-intention and program transparency. According to Kim McGuire in Philanthropy Journal:

“There’s a new understanding of the importance of boards taking ownership of the changes that need to happen and the difficult decisions that need to be made,” she says.

“It’s no longer rubber-stamp mode,” she says. “Nonprofits want boards to understand the financial picture, and all board members want to understand it because they’re seeing what can happen if they don’t.”

It seems paradoxical, but the financial crisis of 2009 and the increased necessity for non-profits to effectively execute their missions may ultimately benefit donors in the long run. If non-profits are to be successful in the coming years, they must now demonstrate their commitment to donor intentions and effective program execution.

Jack Miller Center

Tags: Board of directors, civic education, Fundraising, Non-profit organization, Nonprofit Resources
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Non-Profit Effectiveness

Thursday, February 11th, 2010

GuideStar, a leading online database of non-profits, is now advising donors to consider “mission effectiveness” when choosing the best charity. Financial data is very important, but different missions and other factors should be considered in the all important decision to help non-profits achieve their goals.

At the Jack Miller Center, we take donor intent very seriously, and our commitment is demonstrated by an effort to be extremely transparent with fund allocation and program implementation.

Story from GuideStar:

About Ratios in General

We’ve all heard stories about financial abuses at specific charities—concern about nonprofit wrongdoing has even drawn Congressional attention. Some donors and charity watchdogs advocate using financial ratios to evaluate charities and ferret out the ones that are using their funds inappropriately. These groups and individuals argue that any organization whose ratios fall below certain levels should be regarded with suspicion.

There’s no question that nonprofit organizations have an obligation to manage their finances responsibly. There’s also no question that ratios can be valuable tools for evaluating charitable groups. By themselves, however, these figures can be more misleading than helpful.

Take program ratio—the percentage of an organization’s total expenditures that is devoted to programs and services—as an example. A number of things, such as size, age, and location, affect a nonprofit’s expenses. (For example, a nonprofit in an area with a high cost of living will need to pay more for office space, supplies, and salaries than a comparable organization in a less costly area. For a discussion about nonprofit size and age, see How to Calculate Ratios, below, and Renata J. Rafferty, “Risk and Return: Defining Your ‘Comfort Zone’.”)

An organization’s mission is even more important in determining its costs. Say you are thinking of contributing $100 to either a local art museum or a neighborhood food bank. From the organizations’ financial pages on GuideStar, you calculate that the art museum spends 72 cents of every dollar on programs, whereas the food bank spends 95 cents of every dollar on programs. Obviously, the food bank is the more efficient organization and will put your donation to better use. Right?

Not necessarily. The median program ratio for art museums is 71 percent, and the median program ratio for food banks is 94 percent. Thus, both the art museum and local food bank are slightly above the middle of their respective peer groups.

Why is there such a difference between the two medians? Typically, art museums have higher overhead costs (such as insurance, building maintenance, security) and fundraising expenses than food banks.

At GuideStar, we believe that the ultimate test of an organization’s efficiency is how well it performs its mission. Unfortunately, this criterion is not always reflected in ratios of any kind. Look, for example, at the following two hypothetical organizations that provide job training to people about to go off welfare.

Tags: Charitable organization, civic education, GuideStar, Jack Miller Center, Non-profit organization, Philanthropy
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The Worst (and Best) Way to Pick A Charity This Year

Monday, February 8th, 2010

A joint press release by GuideStar, Charity Navigator, GreatNonprofits, and others advocated judging charities by performance and impact rather than raw financial data:

December 1, 2009–This giving season needs are greater and donations are falling—it’s more important than ever for donors and charities alike to make sure that every dollar goes farther. For years, people have turned to the overhead ratio—a measure of how much of each donation is spent on “programs” versus administrative and fundraising costs—to guide their choice of charity. But overhead ratios and executive salaries are useless for evaluating a nonprofit’s impact.

Now there is an alternative. In the last few years several organizations have emerged to provide donors useful—and free—information to help them choose charities that are actually good at what they do.

While the idea of sending money “straight to the beneficiaries” is tempting, nonprofit experts agree that judging charities by how much of their money goes to “programs” is

counterproductive. “Achieving a low overhead ratio drives many charities to behaviors that make them less effective and means more, not less, wasted dollars,” says Paul Brest, President of the Hewlett Foundation, and co-author of Money Well Spent.

Experts cite many reasons that focusing on an overhead ratio is the worst way to choose a charity:

· It tells you nothing about the impact the charity has on people it’s trying to help

· It discourages charities from investing in tools and expertise that would make them more effective

· The rules for determining overhead costs are vague and every charity interprets them

differently

· Accounting experts estimate that 75% of charities calculate their overhead ratio incorrectly

Bob Ottenhoff, president and CEO of Guidestar (www.guidestar.org), notes, “Ratios can be extremely misleading. GuideStar has spent more than a decade educating the public about the dangers of judging an organization solely on its financial balance sheet. Our focus has always been on helping donors get a complete picture of a charity.” GuideStar was founded in 1994 and was the first web site to make financial and programmatic data on nonprofits easily available to the public.

Ken Berger, President and CEO of Charity Navigator (www.CharityNavigator.org), a resource that more than 3 million users turn to each year to learn about charities, agrees that donors need to consider more than just financial ratios when choosing charities. “There is a place for financial measures, but donors need a complete picture of a charity to make a smart choice. We believe that too many donors are paying too much attention to measures like overhead.”

So what’s the alternative? Evaluate charities based on their effectiveness. Berger notes that Charity Navigator will be launching new rankings in the next year: “Charity Navigator is revamping our ratings to increase the emphasis on effectiveness and transparency to help donors make better decisions.” That’s the same goal as Great Nonprofits, Philanthropedia, and GiveWell—organizations that were founded in the last 3 years to help individual donors find the best charities. Each provides information that hasn’t been available to donors until now: Great Nonprofits provides “user reviews” similar to those on shopping sites, Philanthropedia shares hundreds of expert perspectives on charities, and GiveWell conducts in-depth analysis to identify

charities with direct evidence of impact.

“So many donors and volunteers want to know if their giving is going to make a difference. Now there are new tools for them to see which nonprofits are most deserving of their support,” says Great Nonprofits founder Perla Ni. GreatNonprofits (www.GreatNonprofits.org) features more than 17,000 reviews of nonprofits of all sizes, ranging from small grassroots nonprofits to large national organizations. The reviews and ratings are posted by people who have had a direct experience with a nonprofit – a client who has received services, a volunteer, a donor, or board member.

GreatNonprofits reviews also appear on Guidestar along with information charities

provide about their mission and social impact. Users can choose a charity based on these reviews just like they use reviews of popular products on sites like Amazon and Yelp. Philanthropedia (www.MyPhilanthropedia.org) provides everyone access to privileged, expert information from hundreds of nonprofit professionals. When these experts agree that a nonprofit is a top performer, there’s good reason to support them. “When you think about making your donations, use your heart to pick the causes you care about and your mind to pick the charities you support,” advises Philanthropedia co-founder Howard Bornstein. Philanthropedia also makes giving to top performing nonprofits easier through its online giving portal. Users can donate through Giving Mutual Funds to support entire social causes based on expert allocations or chose

to support individual top performing charities.

GiveWell (www.GiveWell.net) examines hundreds of charities to identify the ones that can provide powerful, direct evidence that they’re changing lives. GiveWell co-founder Holden Karnofsy notes, “In charity, as in anything else, good intentions are not enough. Many programs just don’t work—even when charities carry them out exactly as they’re supposed to. Donors need to ask more than how charities are spending their money – they need to ask whether they’re improving the lives of the people they serve.” GiveWell publishes in-depth reports on top charities, as well as overviews of the issues that charities address (such as global health, microfinance, clean water, and education) and reviews of academic research on the best approaches to those issues.

Ken Berger notes,“We’re tremendously excited about the role that Charity Navigator, GiveWell, Great Nonprofits, Guidestar and Philanthropedia can play in helping more dollars move to the charities that use it best.”

Summarizes Ottenhoff, “It’s understandable why people have looked at overhead ratios and executive salaries—they want to make sure their donation does the most good. The best way to do that isn’t a financial ratio, it’s information on how effective charities are.”

Now that information is increasingly available.

FOR IMMEDIATE RELEASE CONTACT: Tim Ogden 484 324 4272

Additional Contacts:

Perla Ni, Great Nonprofits, 415-902-2659, perlani@greatnonprofits.org

Holden Karnofsky, GiveWell, 646-217-4256, holden@givewell.net

Howard Bornstein, Philanthropedia, 206-601-9374, Bornstein_Howard@gsb.stanford.edu

Ken Berger, Charity Navigator, 201-818-1288, kberger@charitynavigator.org

Bob Ottenhoff, Guidestar, 757-941-1427, bottenhoff@guidestar.org

Eric Brown, Hewlett Foundation, 650-234-4500 x5744, ebrown@hewlett.org

Tim Ogden, Philanthropy Action, 484-324-4272, timothy.ogden@philanthropyaction.com

Tags: Charity Navigator, Donor Intent, GuideStar, high impact charity, Jack Miller Center, Non-profit organization
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Hint of optimism for giving sector

Tuesday, December 29th, 2009

By Todd Cohen

Inside Philanthropy: Hint of optimism for giving sector

The recession has been tough on the giving sector but a glimmer of optimism is peeking through the gloom.

First, the bad news: Eighty percent of over 100 nonprofit leaders surveyed by Bridgespan said their funding had been cut, compared to 52 percent a year ago, while the percentage of nonprofits that had laid off staff grew to 43 percent from 28 percent, and the percentage of nonprofits dipping into reserves grew to 48 percent from 19 percent.

The good news from the study is that 42 percent said funders were stepping up support, up from 11 percent a year ago, while 69 percent said redesigning programs to achieve outcomes in a less costly manner was part of their plan, up 10 percentage points from a year ago.

Also reporting greater optimism among fundraisers is a new giving survey by the Association of Fundraising Professionals.

Based on 291 responses to an online survey conducted Dec. 7-11, 34 percent of charities were raising more money this holiday season than the same period last year, when only 23 percent were raising more than the same period a year earlier.

And while fundraisers are split on whether they will raise more in all of 2009 than they did in all of 2008, 59 percent expect their organizations will raise more funds in 2010 than they did in 2009.

A third study, by the Association for Healthcare Philanthropy, says businesses and individuals hit hardest by the recession have shifted their giving to long-term pledges and gift commitments rather than not giving.

The most effective fundraisers, the study says, use a mix of “well-rounded programs and activities” to raise money, “shattering the myth that big-ticket galas, golf tourneys and telethons are the only way to attract donors.”

The most successful fundraising programs have a “sustained emphasis on building relationships and cultivating major gift donors,” the study says.

While it has led to greater demand for nonprofit services, higher nonprofit operating costs and greater stress on givers, the recession also should be prompting nonprofits to rethink the way they raise money and stick to the basics.

What works best is to invest the time and effort to better understand, cultivate and engage givers so they will understand the needs of charities and want to be part of the ongoing effort to better serve their clients.

Tags: Charitable organization, Jack Miller Center, Non-profit organization, Philanthropy
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