The Science of Judging Charity

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The Los Angeles Times has launched their new "Charity Fundraising Database" in an attempt to apply a rating system to the fund-raising performance many local and national charities to which California readers may consider donating. A simple double drop-down menu allows the user to choose either a charity name, or broad genre, yielding a score as defined by the databases's "efficiency matrix." Let's take a closer look at how the LA Times has attempted to analyze fund-raising performance, and its relation to charity effectiveness.

The LA Times broke the fund-raising statistics of their selected charities down into two main categories: net return and gross revenue. Charities are judged on how high the rate of return was from their donors, as well as the amount of donations they accrued, total. This simplistic model is good in that it provides clear, unbiased statistical data (based on California's AG Office) to donors interested in seeing how effective certain fund-raising efforts are, and which charities use these tools "best." Aside from this use, however, I am wary that these statistics might be interpreted as directly relating "for-profit" fund-raising efforts to general charity "effectiveness." This correlation, on all accounts, is not true. The database disregards charities that don't participate in traditional fund-raising techniques, and scores negatively small organizations that bring in less revenue than larger organizations might. Also, this rating system may lead donors to believe the sticky trope that charity revenue is equivalent to efficacy. As (I hope) we all know, a tiny charity with good organization, outreach techniques, and tools can accomplish a great deal, while still pulling in only a small amount of revenue.

This young blogger's conclusion: beware the Times' database. Treat it as a tool to understand the revenue/return trends of larger charities, but don't let it be the sole guide to your donations. As with most things in this web-society, one must take large, generalized conclusions with a grain of salt, and research the ins and outs of what the study is actually reporting, and why. For a further discussion of this topic, check out Peter Panepento's blog on philanthropy.com.

Dana Variano

Comments

Dana,
Thanks for this service. Sean,

Thanks for pointing us to the LA Times system. Here's the comment I would have left at the Times site, if they had offered that opportunity. The points you raise in caution are all excellent. In this case, the Times' matrix, while an interesting idea, is a bad system. There is no way that it won't be misleading to users. First, by my quick count, the matrix presents data only on aproximately 354 charities. In Los Angeles County alone, there are approximately 7000 nonprofits with revenue over $25,000 (i.e., 990 filers), and over 13,000 in Southern California alone, based on a study I did in 2004. Way too small a sample size to stand in for the whole, but because of the Times' (steadily diminishing) authority, that is how readers are likely to take it.

The data is pulled apparently from filings with the California Attorney General (disclosure: I know many people in the AG's charitable section, they're excellent, but way too understaffed), and only from professional fundraisers. This data is really only useful regarding the specific engagement of a professional fundraiser. The worst performing charities indicated in the matrix may very well have excellent overall fundraising performance, if you were to add in the results of fundraising by their staffs and volunteers. And the best performing ones likely are doing far better when you take their staff and volunteer fundraising into account.

We'd all be better off if the Times instead pulled this and later tried to present something more comprehensive. (I've plenty more to say about what that would look like, but have gone on too long already.)

Posted by: Pete Manzo

You make a great point about the amount of organizations studied by the Times. The lack of information provided openly about their research and data-grabbing strategies just makes me question the Times even more. I think their findings are important, but need to be presented in a better way as part of a more complex and intricate study, like you noted.

Posted by: Dana Variano