How to Donate Your Money Wisely

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Two articles published last week – one in the Global Post and one in the New York Times – presented conflicting messages on the effects of aid money in the developing world. New York Times columnist Nicholas Kristof fielded readers’ questions about charitable giving. The questions were answered by Melinda Gates and Kristof himself, two bleeding hearts for human rights and advocates of helping the less fortunate. The Global Post story, on the other hand, illustrates the inadequacies of aid organizations collecting donor money and the economic havoc created by international aid in post-earthquake Haiti.

Money is tight for most us and we certainly don’t want to fill the coffers of NGOs and non-profits who might be taking a cut to pay for cushy headquarters, Toyota Land Cruisers and fundraising bonuses. So how can we make sure our generosity benefits the right causes and the people most affected by disasters and poverty? Ben Smilowitz, director of the Disaster Accountability Project has a few tips on how to donate with more discrimination.

“Thousands of organizations are telling you that they’re the best group to give to,” said Smilowitz. “In reality, only a small percentage of those groups are actually positioned to deliver.”

He authored a report a year after the Haiti earthquake that surveys how the 196 organizations that solicited donations spent their money. There are several measurable qualities that we should look for in an organization before we write that ten dollar check for earthquake relief.

Duration in country – “How long an organization has been in a country is tied to how many relationships they’ve built and well they know their way around.”

Teach a man to fish – The Global Post article illustrates what happens when a country uses aid as a crutch. It destroys the economy and the country ends up unable to fend for itself. Look for organizations who work to empower local governments so they can take care of themselves in the long run.

Money raised vs. money spent – If an organization has money unspent after a disaster, it might have excess funds. “If they still have money in the coffers, why throw more money at them until you’ve seen results?” said Smilowitz. Also, if an organization explicitly says it has reached its fundraising goals and have used its funds effectively, there is no reason for donors to keep giving.

Conditions on the ground – If conditions are stabilizing and the organization has spent less than its collected donations, then save your money for another cause.

Services offered – “If cholera is affecting people on the ground, maybe food is not a top priority, but rather making sure clinics are staffed,” said Smilowitz. “A staffed clinic will save lives.” In other words, water sanitation, not mobile banking or food banks, is a useful service in the event of a cholera outbreak.

Generated interest money – If the interest is going to the general fund, then an organization is actually profiting by holding on to unspent donations instead of using it. The interest money should be going back to the cause for which you donated your money.

What are they doing this week? – “People should look at an organization’s website and be able to figure out what they did that week,” said Smilowitz. “We want to know where they’re operating, the scope of their operations and what they’re providing.” Information should be communicated with real numbers and data, not anecdotes. This will prevent us from falling prey to information that is no longer current. A year after the Haiti earthquake in January 2010, aid organizations were still telling anecdotes about meals they provided, yet feeding stopped in May.

Smilowitz acknowledges that it is difficult for concerned citizens to do all this research in the wake of a disaster when the knee jerk reaction is to text a donation with your mobile device to help people in desperate need of food and medicine. But he advises that donors should take a moment to think about who they’re donating to.

“Even if it’s your favorite organization, you don’t know if they’re actually on the ground,” said Smilowitz. “If you want to give to the group’s general fund, then go for it. But if you want to make sure that money gets on the ground and saves lives within the first week then you need to wait until you know what you’re doing.”

A weekly newsletter featuring the biggest ideas from the smartest people