Stop! And check the finances

Webster’s Dictionary defines philanthropy as “the practice of giving money and time to help improve the lives of others” and charity as “the act of giving money, food, or other assistance to poor, sick, and so on. ” Charity, by this definition, is more aimed at the poor, while philanthropy focuses on a broader audience and a diverse spectrum of needs.

The United States has a rich history of charitable and philanthropic endeavors. Driven by strong religious beliefs and traditions, as well as community culture and mutual assistance, the early settlers and the wave of immigrants thereafter participated in some form of charitable giving. As the United States grew its industries and wealth continued to rise, charities began to adopt management methods similar to business models. The 19th century saw the birth of foundations such as Carnegie (focused on educational leadership), Rockefeller (on social, economic, health, and environmental challenges) and Ford (poverty and injustice, human achievement, democratic values, and the promotion of international cooperation). . .

In recent years, particularly in the mid-2000s, the term “performance philanthropy” gained momentum in the world of charitable and philanthropic giving. Performance philanthropy focuses primarily on outcomes, outcomes, and pre-established quantitative and quantitative measures for change, generally, but not limited to, social change. The idea is to encourage donors (philanthropists) to contribute to results and potential impact rather than felt needs. After all, there are many failed initiatives and programs that seem to be implemented without a strategy or vision.

Now, you and I may not be in the million-dollar-a-year donor range. We could be more than $ 20 or $ 50 a month donors to our favorite causes, but there are some principles of philanthropic giving that we may well keep in mind if we really care about change.

One of the basic pieces of information that philanthropists look at is the finances of an organization. Financial information can be revealing. For example, how much of the budget does the charity spend on its programs and services? Look at your income statement and see. A good proportion is that 80% of your budget goes to programs and services? For nonprofits that use funds to create and administer programs and services for intended beneficiaries, a good question would be “do you have enough working capital for the year?” Like any business, such a nonprofit organization would need positive working capital to see that it can operate and implement the programs and services that it has committed to. For example, a non-profit organization running a one-year literacy program for underserved children would need at least one year of capital to ensure that there are sufficient funds to allow an enrolled child to complete the program.

Another helpful ratio is the contribution and grant ratio, suggested by GuideStar, a public charity that collects and shares helpful nonprofit information with a wide audience. This is defined as (Contributions + Grants) ÷ Total Income. It reveals how dependent an organization is on donor support. The higher the ratio, the more volatile the nonprofit will be in the face of sudden decline in donations from donors. How about your fundraising efficiency? Charity Navigator, a nonprofit organization dedicated to evaluating nonprofits, measures efficiency by dividing fundraising expenses by contributions. The lower the ratio, the more efficient fundraising will be. The Canadian Revenue Agency recommends a fundraising ratio of 35% as acceptable (ie, cost-to-revenue ratio). How well does the organization manage its cash flow? Cash flow is especially important for nonprofits that rely heavily on contributions. Being able to pay current liabilities and program expenses as they mature is essential to keep these programs and services running.

While we may not all be major donors, but small gift givers, knowing how our favorite charities or nonprofits handle their finances will give us the confidence to continue donating or may ask some valid questions that might give us pause. to reconsider.

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