Proving That Charity Works

Amid growing concern that donors have no way to know whether their giving makes a difference, efforts to improve how individuals pick and choose charities are gaining steam.

That could be good news for giving: A majority of wealthy people polled by Bank of America and the Center on Philanthropy at Indiana University say they would give more if they knew their dollars were having an impact.

But if the evaluations aren’t done well, they could complicate life for charities, few of which are eager to jump through additional hoops.

BEHIND THE TREND:

Fresh approaches to evaluation. Charity Navigator, the nonprofit watchdog, is changing the way it rates organizations and next year will revamp how it evaluates charity finances so that low administrative costs aren’t the primary consideration.

It will also start giving high marks to charities that are open about their programs and finances and plans to spend 2010 devising a new way to measure the results of charity programs.

Charity Navigator joins GiveWell, GreatNonprofits, and Philanthropedia, three groups that have recently developed new ways to give donors more information on nonprofit performance.

Explaining overhead costs. This month those four organizations and GuideStar, another group that provides information on charities, mounted an effort to tell Americans to stop seeking out groups to support based solely on how little they spend on overhead and to look instead at an organization’s results.

Proliferation of financial advisers. Arabella Philanthropic Investment Advisors, the Philanthropic Initiative, and Rockefeller Philanthropy Advisors each have recently hired more employees or plan to do so in the coming year as more and more donors seek advice on how to steer their money to the best charities.

Nonprofit groups like Root Cause and New Philanthropy Capital are stepping up the services they offer to financial advisers whose clients want to know how to direct their charitable gifts.