The government’s raid on giving makes no sense

Posted on April 13, 2012 by carolinefiennes

The UK government recently announced that it would cap tax relief on charitable giving. The surprise move has met a furious response, and makes no sense whichever way it’s intended. It’s a shame, because the charitable world has plenty of real battles actually worth fighting.

The detail. The government is capping the total amount of tax exemption which any individual can claim, at £50k or 25% of income whichever is the greater. Fair enough to clamp down on tax avoidance schemes, but the issue is whether charitable giving constitutes tax avoidance.

The fact is that we don’t the government’s logic – it’s not explained it clearly. Below are all the hypotheses I’ve constructed and heard – and why they’re all bonkers.

Philanthropy is a tax avoidance device. Well it’s not a very good one, since it costs the donor money. If I donate £100k, the tax payer adds £66k, but I’m still £100k worse off than I would have been otherwise. The tax system provides a discount for giving: not an incentive, as such, so it’s hard to imagine anybody who’s in command of the maths giving to a bona fide charity in order to save themselves money.

‘These austere times’. Obvious HM Exchequer is empty, but if the Chancellor’s concern is raising tax revenue, surely dropping the 50p tax rate is rather curious. Added to which is the fact that much of charities’ work saves the government money, and the donations which the cap may scare away greatly exceed the revenue which the Exchequer would save.

‘We can spend your money better than you can.’ Perhaps the government dislikes the tax-payer subsidizing individuals’ charitable giving because it thinks that government does a better job of spending money. That’s a left-wing position – which, though defensible, nobody made in the Labour years, when tax-subsidy grew – and an astonishing view for a Conservative administration.

It would be particularly bizarre for an administration whose central tenet is moving responsibilities away from the central state through localism and ‘the Big Society’.

Out of control. It is said that HMRC dislikes forsaking money to organizations which it can’t control. Again, this conflicts with decentralization: it doesn’t control local authorities, or the Greater London Assembly, and the government’s agenda will soon cede more power to cities and elected police chiefs.

There is a serious point here that donors are answerable to nobody, and yet the money they spend is partly the tax-payers. Perhaps half of the money in endowed foundations belongs to the tax-payer, whose ability to influence or object is precisely zero. This should not be acceptable: it’s like taxation without representation. Only one* of the many foundations in the land allows the public to even see its meetings (the City Bridge Trust: hardly new, it was founded in the year 1209), but even there, HM Taxpayer has no say.

If the government wanted to force more transparency and accountability in foundations, it could, but this tax vehicle will not achieve it.

Johnny Foreigner. Perhaps the government was spooked by an EU ruling that UK taxpayers can reclaim UK tax on donations to charities in other EU countries. It certainly is weird that UK taxpayers should subsidise organizations in, say, Portugal. But the government denies that this is the reason.

If that were the problems, there’s an easier solution. UK charities pay VAT – about a £1bn of which they can’t reclaim (big scandal which nobody knows about). The UK government could cancel ALL tax reliefs for donors (which are ~£1b/year), and instead spare UK charities from VAT. That would solve the foreigner problem and be roughly cost-neutral all round.

No donkeys please. ANY charity gets tax breaks. And the set of charities includes some which probably aren’t priorities for most tax-payers: donkey sanctuaries (in the UK and abroad), dogs homes, the opera, Eton…

If that is Chancellor’s objection, he should say so. And then he should fix it – by initiating a national debate about which causes should get tax relief and which shouldn’t. There’s a review of charity law underway, so he can get that to consider it. But the sledgehammer he’s chosen will miss that target.

‘Some donors are giving to charities which don’t do much charitable work’ said the Chancellor this week. Correct: some charities are rubbish, just as some doctors are rubbish, some teachers, some golfers. But that’s not a reason to punish them all in this way.

There are two reasons that charities might not be much good:

1. Fraud. Sure, some charities are fraudulent. If that’s the concern, then beef up the Charity Commission*, or fire it. Fraud in a few is not a reason to choke off revenue from the many.

2. Quality. For sure, there is a quality problem in the charity world. Health is closely analogous to charities – both industries ‘do things’ to other people, often without those people’s consent or full grasp of their situation. In the health world, there are three rather good quality assurance mechanisms. None of these is mirrored in the charity world.

First, all health treatments have to go through rigorous, public and independent scrutiny before they can be administered (i.e., the peer review system). Charities have no such thing. Most ‘impact reporting’ is by the charity itself, so it’s hardly independent, and it’s anyway voluntary and hence patchy. The international development community is rather better than the domestic charity sector – they have randomised control trials, and systematic reviews and write in peer reviewed papers – but even there it’s voluntary.

Second, public money is spent on treatments only when they’ve been approved by the National Institute of Clinical Excellence. All other public spending is subject to ‘value for money’ analyses by the National Audit Office. The charity world has no such thing. Simply registering as a charity – which only means abiding within very broad areas – is sufficient to get tax-payers’ money.

And third, health professionals are all highly trained. They also belong to professional bodies, who can strike them off. By stark contrast, any old body can set up a charity, run a foundation, even advise major donors, on the basis of zero qualifications. It’s like the wild west.

All of these quality assurance mechanisms could be introduced by the government – and should, I’d argue. None is achieved by the tax cap.

So what do we conclude? That the Chancellor is mad?

Jill Rutter at the Institute of Government, says that the charity tax raid, along with the pasty tax, granny tax, and other tax debacles, arises from a fundamental brokenness in our tax policy system: tax policy is bound to fail because, uniquely amongst policy, it’s devised by The Quad (PM, Deputy PM, Chancellor, and Chief Secretary) in isolation with no outside consultation or discussion.  Like much philanthropy, in fact.

Here’s why I don’t support the campaign to ditch this change–>

__

*to my knowledge

**There are in fact three charity regulators in the UK, contrary to popular wisdom. The Charity Commission does England & Wales; there’s also the Office of the Scottish Charity Regulator, and the the Charity Commission for Northern Ireland.

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Understanding impact. What would have happened anyway?

Posted on April 11, 2012 by carolinefiennes

Article first published by the Society of Impact Assessment Analysts

In understanding a charity’s impact, we seek to identify the difference which the charity has made in the world. That is, what has happened which would not otherwise have happened. Though this may sound obvious, impact data rarely actually show it.

For example, imagine a city with poor air quality. A charity works there, trying to persuade drivers to turn off their engines when they’re idling at traffic lights. The charity reports that at the beginning of the year, the air was clean 10% of the time, whereas by the end of the year, it was clean 20% of the time.

Great!

Actually this indicates precisely nothing about whether the charity is doing a good job. Perhaps the improvement was due to the charity; but perhaps it would have happened anyway. Maybe engine technology is improving, or drivers are trying to save fuel because petrol prices are rising. Perhaps more improvement would have happened without the charity: annoying campaigns occasionally provoke people into doing precisely what the campaign is trying to curb.

At this stage, all we have from the air quality charity is ‘before & after data’. So we have an attribution problem. We know what happened but we have no idea why, and therefore we have no clue about the charity’s impact.

To determine the charity’s impact we need to ascertain three things:

1. What happened? In the air quality case, the change from 10% to 20% was pretty clear, but often identifying everything ‘what happened’ is pretty complicated.

2. How is that different from what would have happened anyway?

Since we’re normally allocating scarce resources, analysts usually also need to know:

3. How good are those results relative to other charities’ results?

To answer the second question, we need to understand the ‘counterfactual’: what would have happened anyway. That requires having a ‘control’ – that is, a situation in which everything is the same except the charity’s work. Setting up a control is sometimes easy, often tricky and occasionally impossible. How to do it is a big topic for another day.

Notice that ‘before & after data’ get nowhere near the second question. Yet charities often present results which are in fact just ‘before & after data’. For example, we hear statements such as: ‘awareness of HIV transmission is much higher than when we started’, or ‘following our campaign, the law was changed’. This is no better than saying that ‘before our work, the average height of a child was 1.2 metres whereas afterwards it was 1.3 metres’!

We need to watch out because ‘before & after’ data can be impressively complex or detailed: ‘HIV transmission rates are now 14% in the villages in which we work, whereas they were 20% a year ago’ or even ‘every time we go into a village, the transmission rate drops, and every time we leave, it rises again’, or ‘We use the “Complicated tool” to measure a randomly-chosen sample of 10% of our patients, and we find that in 95% of cases we get a drop in xyz behaviour, with a 15% margin of error and 23% standard deviation’. But complexity and detail are no proof of rigour.

Before & after data, on their own, are not useful. Rather, we need to ensure that data about ostensible results show both what happened and how that differs from what would have happened anyway – because only then can we see whether anything is actually being achieved.

How do you find a great charity?–>

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Goldman Sachs doesn’t (appear to) understand stats. Who are the muppets now?

Posted on April 5, 2012 by carolinefiennes

This article first appeared in Third Sector magazine. 

The legendary investment bank Goldman Sachs was described by Rolling Stone magazine two years ago as being “like a great vampire squid wrapped around the face of humanity”; and a former executive who resigned very publicly last month via a New York Times article, revealed that some of it staff refer contemptuously to clients as “muppets”.

But what about its  corporate philanthropy? Well, it has run an astonishingly effective philanthropic initiative on immunisation – and made, in another project, some spectacularly spurious claims about charitable impact.

Masters of the universe

First, the immunisation. Great corporate philanthropy involves using a company’s unique resources to create benefits that only that company could have generated. Goldman Sachs provided a small group of bankers on a pro bono basis to create the innovative International Finance Facility for Immunisation.

This takes numerous governments’ financial commitments to health and, by issuing bonds secured against them, makes the money available up front. This enables better planning, which accelerates research and development, reduces vaccine prices and speeds delivery. Vaccinations enabled by the bond are expected to have immunised half a billion children, fully three million of whose lives are thought to have been saved by the IFFIm alone.

Mahna mahna

But then, by contrast, there’s the Goldman Sachs programme called 10,000 Women, which supports female entrepreneurs. It takes out full-page adverts in magazines to share some data that it presumably thinks should impress us: “70 per cent of [the programme’s] graduates surveyed have increased their revenues, and 50 per cent have added new jobs.”

In my view, this is the worst type of ‘impact reporting’, because it tells us precisely nothing.

To understand charities’ impact we need to answer two questions: first, what happened?; and second, how is that different from what would have happened anyway? The data that Goldman Sachs gives here fails to answer either question. It’s an error common to many charities’ impact reports.

What happened? The data doesn’t even show whether the performance of the women on the programme improved. Perhaps they were doing just the same beforehand – perhaps they were doing better before and the programme dulled their skills. At the very minimum, charities should report not just ‘after’ data (as Goldman Sachs is doing here) but ‘before’ and ‘after data’, so we get some sense of the change.

What would have happened otherwise? Even if those women’s performance has improved, has it improved more than it would have done otherwise? Again, we’ve no idea because there’s no control or comparator. Perhaps all businesses have grown that much – or perhaps others that didn’t do the programme have grown more. A better statement would be “70 per cent of graduates increased their revenues, whereas only 20 per cent of other businesses did in the same period”. The “other businesses” here would be acting as a control group. This is very basic statistics.

In fact, the control group in the 70 per cent/20 per cent example still wouldn’t prove much. It’s not hard to imagine that the kind of women who get themselves onto a Goldman Sachs programme are just the kind of go-getters who would do well in virtually any circumstance. This selection bias means that we don’t know whether the results are due to the programme itself or to systematically unusual characteristics in the women it selects.

The only way to control for selection bias is an experiment in which a researcher takes a large enough set of female entrepreneurs who are eligible for the programme and randomly assigns them either to do the programme or to not do it. Then it compares what happens to the two groups’ performance over time. This latter set is a control group, which will – if the experiment is done right – show what the women who did the programme would have achieved otherwise. Voila.

Selection bias is also common in charities’ impact reports. Randomised control trials of the type described are, happily, increasingly commonly used to figure out what is really working: the Education Endowment Fund is using them in UK education, and both Innovations for Poverty Action and J-PAL (the Abdul Jameel Poverty Action Lab) use them for alleviating extreme poverty.

Selection bias, controls and randomisation are standard tools in the statistician’s box. The masters of the universe should make better use of them.

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A grand unified theory of effective giving starts with beneficiaries

Posted on April 5, 2012 by carolinefiennes

This article first appeared in Alliance Magazine.

‘What do you think of our team?’ asked the chairman of a new foundation. I hesitated, fearing he would dislike my answer. The trustees were experts in only two of their three focus areas: none knew much about the third.

That this would impede the foundation’s ability to serve its intended beneficiaries seems obvious, just as the merit or error in other practices seems obvious, even if the proximate issues are quite diverse. Demanding that charities report on each of their umpteen restricted grants? Nope. A large foundation hiring a ‘learning officer’ to mine its data for insights? Yes please. Donors’ missions driving their giving but not their investment strategies? No thanks.

It is not by reference to The Great Philanthropy Book In The Sky that we distinguish good practice from bad. So, I reasoned, perhaps these situations speak to some unarticulated principles buried within us. I went in search of them.

I followed erudite footsteps. The fruitful obsession of science is unifying apparently unrelated phenomena. For example, you feel you get forced backwards as your car starts, yet thrown forwards as it brakes: physical inertia explains both. Tree-frogs have huge eyes, but worms have none: adaptation to circumstances explains both.

Unashamedly, the principles I propose flow from the question ‘what’s best for beneficiaries?’ That is, what will improve the world as much as possible? Yes, that may sound blindingly obvious, but that doesn’t matter: if that really is our overriding goal, we should invoke it constantly. And it can’t be that obvious, since much in charity and philanthropy patently doesn’t revolve around beneficiaries. In any case, many scientific findings – that objects keep doing what they’re doing unless something stops them, for example – sound obvious once stated, but weren’t always obvious at all and have surprising implications. (Just as the law of inertia doesn’t dictate where you drive, these principles won’t dictate which beneficiaries a donor should serve, but rather how they best serve them.)

Straight from that goal flow four principles. My contention is that any decision in philanthropy can be resolved by reference to these principles. To my knowledge, this is the first set of principles for charitable giving ever articulated, and I’m genuinely interested in whether you find them helpful, complete and consistent.

We’ll consider a few implications of each principle.

1.     Use everything you’ve got, and to its best advantage

‘Everything you’ve got’ may encompass talents, contacts, knowledge, cash, investments and experience. So there is the case for impact investing, since it deploys investment capital to serve beneficiaries. This principle also suggests that companies include charities in bulk purchasing arrangements; purchasing power is a useful ‘thing they’ve got’.

‘To its best advantage’ implies that investment bankers shouldn’t use their volunteering time for painting walls. Goldman Sachs’ pro bono work on the International Finance Facility for Immunisation (IFFIm) hastened the development and deployment of vaccines which have immunized half a billion children, fully 3 million of whose lives are thought to have been saved by the IFFIm alone.

Most major donors’ resources include an ability to assess charities. That benefits beneficiaries when they recommend good charities to other donors and share their logic. Hence the frustration of GiveWell (the rigorous charity analysts in the US) when the Gates Foundation wouldn’t publish logic or detail of its giving to Japan after the tsunami.

2.     Make good decisions

The obvious implication here is to find high-performing organizations – by using decent independent research and funding it if it doesn’t yet exist. Hence the wisdom of the foundation mining its own data for learning, which might improve its decisions.

Solving beneficiaries’ issues requires understanding them, which immediately implies focusing on just a few problems. The new foundation was right about that, but clearly lacked expertise to reliably make good decisions in one of its areas. Similarly, we rightly distrust celebrities endorsing charities: how does your success (normally) in a totally unrelated field imply that your decisions are good for beneficiaries?

3.     Maximize the amount available

A few large gifts create less waste in the cash transfer process than do several smaller ones. And if funders could use common application forms – as even eccentric old universities have managed – they’d spare charities the absurd costs of writing the same data in umpteen formats, leaving more ‘available’ for supporting beneficiaries. Similarly with streamlining reporting requirements.

This principle is why we applaud donors sharing infrastructure: for example, Eurostar partnering with the established Ashden Awards for its new award. And why we deplore NatWest’s CommunityForce,which ran a laborious process for finding ‘community projects’, when it could have just asked a community foundation.

4.     Help, and don’t hinder

Restricting a gift is a good way of hindering because it denies a charity’s management the flexibility to serve beneficiaries’ changing needs. As is giving things the charity doesn’t want, gloriously ‘celebrated’ by aid agencies’ annual prize for Stuff We Don’t Want.

And donors should ask whether they’re helping in a way that limits the charity’s risk in answering, as the Grantee Perception Report does.

Let’s test-drive

Should you give anonymously? These principles show the way. If association with you would hinder the charity’s ability to serve beneficiaries, then yes. If it might attract more resources for serving beneficiaries, then no, because ‘everything you’ve got’ may include an ability to inspire and motivate others.

You have £20 million to give: do you give in your lifetime or in perpetuity? The principles recommend giving relatively rapidly. To take just one argument, this makes more money available, because the money is managed over fewer years, incurring lower management fees.

None of these principles pertain to the amount which is given, but they all relate to process and deployment. Because the impact of a donation ain’t determined by what you give, but the way that you give it.

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Corporate giving: philanthropy without the money

Posted on April 5, 2012 by carolinefiennes

This article first appeared in The Guardian’s Sustainable Business section.

Companies using their assets to create change can have a far more effective impact than by simply giving cash

If you search on Google in the UK for “suicide”, you’ll see a red telephone at the top of the page alongside the words “Need help?” and the number for the Samaritans.

google image

This probably cost Google very little to arrange, yet is hugely valuable – much more so than a donation of the equivalent cash to the confidential emotional support charity.

So should companies hand out cheques or be more creative with their social engagement? Kurt Hoffman, director of the Institute of Philanthropy, offers a clue when he says “money is the least valuable social change asset”.

While the first iteration of corporate social responsibility was often built around handing out donations to local schools and community groups, most companies recognise today that they can be far more effective by using their key skills and non-financial resources to leverage change.

An illustration of that change is that corporate social responsibility indices used to include measures of the amount of money which a company had given. Mercifully these have virtually disappeared in favour of focusing on what has been achieved. Achievement is typically much greater when companies use their core commercial capabilities rather than just money.

For example, many logistics companies use their skills and capabilities to deliver much-needed aid to populations in the developing world.

TNT managed to get aid to communities affected by the south Asian tsunami within 48 hours, faster than any NGO could have. In Africa, the Coca-Cola Company has used the trucks and network which form its logistical operation to combat the spread of HIV and Aids. It distributed condoms and attractive information material to all those dusty villages in the back of beyond where, astonishingly, you can always get a Coke.

By contrast, Ikea recently gave tens of millions of pounds to a three-year programme for the UN refugee agency, UNHCR, to care for 120,000 refugees in the Horn of Africa. While that work is vital, Ikea’s support would be more effective if it concentrated on leveraging its own resources and knowledge to create change, rather than handing out money.

Achievement is greater still when companies can align doing good with their commercial goals. For example, iodine deficiency disorder is the world’s most prevalent cause of brain damage, affecting over 740 million people, 13% of the world population. Yet it is easily prevented, simply by including iodine in people’s diets. Unilever created a brand of iodine-enriched salt for sale in India and has since taken it to Ghana, where it became profitable within 18 months

Swire, a massive Asian conglomerate has a cap-and-trade system for water between its various businesses to incentivise the property development business to design low-water usage into buildings that it will rent out or sell. This insulates it somewhat against political and financial pressure on water guzzlers.

Neither of these examples fits the stereotypical view of corporate giving. But because they’re commercially attractive, they’re easier for companies to defend and sustain – so achievement increases yet further over time.

When companies are considering how to engage with social and environmental issues, the most important question is what will best help beneficiaries. Any good philanthropic strategy, like any good commercial strategy, involves finding a unique configuration of assets which allows the biggest impact for the smallest input.

Since companies have unique capabilities – distribution fleets, huge internet audiences, public trust – it’s often rather bizarre if their response to a social or environmental problem is to give cash.

Purists will moan. Charities’ revenue are declining and companies have the cash to top them up. But the objective isn’t to fund charities: it’s to get a job done, such as reducing water usage or improving brain development. Several of those examples involved charities – the Google ad for the Samaritans, Unilever working with Unicef in Ghana, for example – but the partnership is much more intelligent than just writing a cheque.

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Three golden rules of effective charitable giving

Posted on April 5, 2012 by carolinefiennes

This article first appeared in The Ecologist.

Many of us support charities which work on some of the biggest environmental issues of our time. But which are the good ones, and how can we really help? Caroline Fiennes, author of ‘It ain’t what you give, it’s the way that you give it’, finds out

In Kenya, where diarrhoea is a major killer of children, several methods have been tried to clean water supplies. Delivering chlorine for free to households is pretty sensible: $1,000 spent that way can prevent 323 incidences of diarrhoea. Great. But $1,000 spent on giving people chlorine when they collect their water from community water sources – which also seems sensible – can achieve more than twice that much, preventing 689 incidences.

So charities are not all equally good. That sounds almost heretical because we often think they’re all laudible and deserving. But let’s think carefully: medical care is a good thing and yet we know that some types of medical care are better than others: some help greatly, some a bit, some make no difference, and some are actively harmful. Same with teaching: great teachers engage and inspire, some teach a little, some have zero impact and some deter pupils forever. So perhaps we shouldn’t be surprised that it’s true for charities too.

It’s also true of ways that donors give. There are ways to give £100 such that it helps a bit, ways to make it worth at least £150 or possibly £200 to the charity, ways to make it worth nothing at all, and, at worst, ways that donors can get in the way such that charities would rather not have them and their £100 at all.

There are three golden rules. (1) Find a great charity. (2) Help it. (3) Don’t hinder it.

Find a great charity

You’re looking for charities which don’t just do some good but which are the best at their type of work. Great charities are ambitious, so a good indicator is whether it measures its effectiveness, publishes full details of its research process and talks about the results. That should all be clear from its public materials, even if it’s small.

A charity’s impact (its effectiveness) relies on two factors. First, it needs a good idea. In the example above, distributing chlorine at water sources is a better idea than taking it to homes.

And second, it needs to implement that idea well. That relies on the skill and training of the staff, which varies between charities just as it does between organisations in most walks of life.

For the impact to be good, both the idea and implementation must be good. To put this another way, an organisation could have a great strategy but implement it so dismally that it creates only low impact. If you’re into formulae, think of it like this:

impact = idea x implementation

The quickest way for busy people to find good charities is to look at the lists of charities which have already ‘passed’ scrutiny by somebody reputable with more time. Good grant-making foundations such as BBC Children in Need or Comic Relief publish their lists, as does GiveWell, an independent analyst.

Amongst people doing the analysis themselves, the most common error is to consider the amount spent on administration (that is, if you give £100, how many of those pounds get spent on the charity itself). This indicates nothing about whether a charity is any good.

Suppose that two charities distribute equally good solar panels in Southern Africa, and suppose that one costs £1 per installation whereas the other costs £10. For 1,000 installations, their equipment costs will be either £1,000 or £10,000. Both programmes will incur costs in finding and dealing with 1,000 buildings and the communities (e.g., hiring and accommodating workers and financial management). These ‘admin costs’ might be £1,000. The cheap programme costs £1,000 for the kit plus £1,000 for ‘admin’, i.e., £2,000 all in, of which admin was 50 per cent (£1,000 ÷ £2,000). The expensive programme costs £10,000 for the kit plus £1,000 for ‘admin’, i.e., £11,000 all in, of which ‘admin’ was just 9 per cent (=£1,000 ÷ £11,000).

Judging by the ‘admin’ percentages, the cheap programme looks bad – but that’s precisely because it’s cost-effective! There are myriad other reasons that admin is a bad metric but this illustration cuts to the heart: it leads us to the wrong choice because it doesn’t ask ‘percentage of what?’

Help it

And now, we shall rustle up money from thin air! You probably know one way of doing this, which involves getting HM Treasury to chip in. If you pay tax at 20 per cent, then Gift Aid will increase your gift by a quarter, whereas if you pay tax at 40 per cent, Gift Aid increases it by two-thirds.

A less well-known trick is to give without strings: don’t stipulate that your donation can only support a day-centre in Hull, or tree-planting near Shanghai or whatever. This ‘restricted’ money is tough for charities to manage (at best, it’s hard to keep track of umpteen pots of money, and at worst, donors all want to fund the trees in Shanghai but nobody wants to fund the equally-important ones in Shenzen). Charities say that ‘unrestricted’ money is half as valuable again as restricted money: putting that another way, making your £100 unrestricted is like adding an extra £50 from nowhere.

The way to create no value at all is to give to many charities. If you chop up your £50 into 50 donations of £1 each, the whole lot may get consumed in bank fees.

Don’t hinder it

To be honest, if you just give money, offer other things such as your time or useful items and then leave the charity to get on with its work, you won’t hinder it.

The problems tend to come from large donors which have application and report processes. A salutory concept is the ‘net donation’ – the amount of a donation which is left after the faffing about which donors require. ‘Net donations’ are often surprisingly low. One physicist at Columbia University has calculated that some of his grants are net negative – that is, he pays to have them.

The key rule is: don’t act like medieval royalty! Don’t make charities waste a load of their donated resources on dealing with you.

We entrust to charities some of the most important work in our world. The impact of supporting the good ones well, rather than the poor ones badly, are vast and real differences in how – even whether – we all live.

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No money? Here’s how you can still make a difference to charity in a recession

Posted on April 5, 2012 by carolinefiennes

This article first appeared in the Daily Mail Online.

In a recession, more people turn to charities for support, precisely when donations are harder for charities to find. But there are tricks we can all use to make our donations go further, to give ‘things’ which are more useful than they seem, and to rustle up money for charities from thin air.

Don’t let the banks gobble your donations

Just like any business, charities (normally) pay bank charges for processing cheques, payments and credit card transactions. So if you divide your £50 into 50 donations of £1 each, you’ll generate 50 sets of bank charges which may consume the whole lot.

Better to give fewer but larger gifts. That is also true if you’re giving £50m in fact.

Be a flexible friend

Sometimes donors stipulate that their money must be used to hire a teacher, or in Northern Ireland, or within six months. This makes charities’ jobs extremely hard – without actually adding any benefit to anybody – because it denies them the flexibility to respond to change in need, or to take new opportunities.

Imagine a charity in Sri Lanka which has money ‘restricted’ to improving education. Then the tsunami hits, destroying homes, roads, livelihoods. Suddenly, education isn’t the hugest issue. Money ‘restricted’ to education is then pretty useless, and getting donors to ‘un-restrict’ it takes time, which in those situations means lives.

The Liberian activist Leymah Gbowee thanks ‘unrestricted’ money for her success in ending the civil war, for which she shared the Nobel Peace Prize last year. It gave her the flexibility to do whatever the rapidly-changing situation required: at one point, linking arms and blocking the doors of a hotel room in Accra in neighbouring Ghana until the Liberian politicians inside had made a deal.

Unrestricted money is so much more useful that charities say they’d rather have £100 of flexible money than £145 of restricted money. Put that another way, donors can give 50 per cent more value at no extra cost just by making money flexible.

Goat giftYou don’t have to be a big donor to do this. If you ‘buy a goat’ from Oxfam or other ‘gifts’ from charities, there’s usually a box somewhere that you tick to enable the charity to use the money in a different way if it needs to. You effectively get an extra half-a-goat for free. Bargain.

Get Her Majesty to chip in 

If you pay UK tax, the charity can add a load of extra cash to your donation: a quarter if you’re a basic-rate payer, or a whopping two-thirds if you’re a higher-rate tax payer. All you have to do is complete a little form which the charity will almost certainly have if you ask.

Charities can even get the tax back on donations of goods to charity shops. Again, just ask for the form.

Rustling up money from thin air

Sometimes its possible to divert money you would normally have to spend on other things towards charitable causes and still achieve your desired outcome.

Fred Mulder, who founded The Funding Network (a Dragons’ Den for charities), was in a dispute with his neighbours in London over access to some land that he owned. There was every chance that he and they would all hire expensive lawyers to resolve it.

Instead, Fred offered a compromise. He offered to give his neighbours perpetual access if they each (Fred included) donated £25,000 towards education in Zambia. This move generated over £100,000 for charitable work – none of which had previously been designated for charity.

And furthermore, it’s improved his relationship with the neighbours – which a legal fight would never have done – because they have a shared endeavour. Clever, isn’t it?

On a different scale, the Starfish charity helps HIV/AIDS orphans in South Africa. It is supported by a lot of young-ish South African professionals living in Britain. They raised a good deal of money by hosting dinner parties at home and asking each guest to donate the money they would have spent if the party had been in a restaurant.

It’s genius – Starfish has tapped into people’s ‘personal entertainment’ budget that they would normally not consider using for charity.

You can even generate money for charity by being online. Searches via charity search engine EveryClick make a donation for every term you search on. For online shoppers, various portals make donations for every purchase: easyfundraising.org.uk and TheGivingMachine.co.ukgenerate donations for purchases from retailers including John Lewis, Mothercare, Apple, Wallis, Fat Face, Dell and LateRooms.

Giving things

We all know about taking old clothes to charity shops, but you can donate almost anything. These are some quirky examples:

Cars – Several organisations will collect an unwanted car and turn it into money for charity through www.giveacar.co.uk.

Hotel shampoo – I know some business people who travel constantly and give the complimentary toiletries from hotels to a domestic violence refuge. For people on the run from a violent partner, it’s nice if somebody’s provided some decent shampoo.

Long hairYour hair! – If you have more than seven inches of hair cut off, take it home and donate it to make wigs for people who’ve lost hair due to medical treatments, like the Little Princess Trust.

But do check with the charity first. People donate real junk, so much so that aid agencies run an annual competition for Stuff We Don’t Want (#SWEDOW). Past winners have included second-hand knickers(!), and the 2.4million Pop-Tarts airdropped onto Afghanistan by the US government in 2002.

Far from providing amusing tales, these items create costs for charities because they need storing and sorting, and simply become a hindrance. It’s not difficult to check that a charity needs an item before sending it.

The biggest factor in what your donations achieve isn’t whether you’re rich. It ain’t even what you give: it’s the way that you give it.

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Improving your fundraising hit-rate

Posted on April 5, 2012 by carolinefiennes

This article first appeared on The Guardian’s Voluntary Sector Network. 

Do you play the National Lottery? Why ever not, given that you could win a few million pounds which I dare say you’d find pretty handy? Probably because the odds are terrible: the micro-chance of winning is too unlikely to justify the ‘cost of entry’. Most of us know that because we’ve automatically done the calculation of risk and return.

Charities do well to make that calculation when raising funds: weigh up a particular funding stream’s costs of entry, the size of the prize it offers and the odds, before committing time.

Funders who solicit applications or proposals (which include commissioners) vary hugely in the time required by their application process – the ‘cost of entry’. They also vary hugely in the odds they offer applicants – that is, the proportion of applicants they eventually support.

Most donors receive far more applications than they are able to fund.NatWest’s CommunityForce programme recently received 17 times as many applications as it was able to fund, and ended up rejecting 93% of charities. It also had a potentially high ‘cost of entry’ because winners were chosen through a public poll so charities have to persuade lots of individuals to vote. After all that, the prize was a £6,000 restricted grant, so for many fundraiser’s the cost of entry calculation wouldn’t look good to any charity that wasn’t confident of winning a public poll.

For NatWest’s CommunityForce, the odds, prize and entry cost are knowable in advance, just like they are for the National Lottery: the entry mechanism, grants offered and eventual rejection rate were virtually identical this year to last year.

Sometimes it’s not possible to estimate the probabilities in advance because the donor is new. This may have been the problem with the Social Action Fund, which is Cabinet Office money disbursed by the Social Investment Business. In its first round, it received 700 applicationsof which it supported just 16, only one in 44, giving it a scorching 98% failure rate.

There are many stories – some rather apocryphal – of donors funding none of their numerous eligible applications. The lesson here is “RTFM”, as they say in technology – ‘Read The Manual’. Charities applying when they are obviously outside the guidelines is like buying a lottery ticket but failing to choose any numbers.

These discouraging odds and high entry costs surely explain why the costs of fundraising are so high for charities: according to Matthew Bishop and Michael Green‘s book Philanthrocapitalism, raising £100 typically costs a business around £7 but can cost charities about £20-40. Those costs are what economists call a ‘negative externality’: a problem dumped onto somebody else. They don’t show up in the donor’s own accounts, but are real nonetheless.

The (obvious) tragedy is that each unsuccessful application represents time and/or money which could have been spent productively on solving social and environmental problems. It’s an opportunity cost: the charity forewent the opportunity to do something good. And who bears that opportunity cost? The poor who don’t get served, the school-children or isolated elderly who don’t get supported, and ultimately all of us because our society doesn’t get fixed.

Some donors manage this wastage well. BBC Children in Need currently rejects three charities for each one it supports (pretty mild against the numbers above). Its strategy director Sheila-Jane Malley says: “We’re painfully aware that every application which doesn’t get through was work for somebody. We’ve begun to look systematically at how we can prevent as much of that work as possible.” It’s clarifying its guidelines precisely to prevent inappropriate applicants, aiming for just one rejection per successful applicant. The Community Foundation of Tyne & Wear and Northumberland has even fewer, rejecting just 42% of applicants.

Charities can manage it too, to some extent. Where possible, look at the odds, the costs and the prize before setting out, and actively manage the risk/return in the portfolio of funding opportunities you pursue. If the odds and prize are low, then enter ‘cheaply’: limit the time commitment by recycling other material, for example. And if they’re too low to warrant the effort, don’t come out to play at all. Money is worth having, but not at any price.

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Giving Evidence: advice on giving, based on evidence

Posted on March 23, 2012 by carolinefiennes

Charities are not equally good. Neither are techniques for finding and supporting them. Giving Evidence advises donors – individuals, families, foundations, companies, governments – on the ways of giving which will achieve the best ‘returns’, by a fanatical devotion to the evidence.

________

New book about effective ways of giving: It Ain’t What You Give, It’s The Way That You Give It

‘Freakonomics of the charity sector’, Martin Houghton-Brown, CEO, Missing People

The Body Shop: ‘A very clear guide with insight for any donor’

Dragons’ Den’s James Caan: ‘great advice: inspiring and entertaining’

Available at introductory discount from here, and on Kindle.

________

Work with donors

Eurostar: ‘Caroline Fiennes is a great source of advice…  helped Eurostar become effective very quickly’

We help donors across the whole range from choosing objectives, defining a strategy, gathering relevant partners, implementation (including identifying great charities and other non-profits to support), to tracking the charities’ impact, and tracking and improving the donor’s own impact. Recent clients have included a new family foundation, professional tennis players, Guardian News Media group and global a professional service firm.

All our work is based on evidence about how to achieve the most for beneficiaries: finding great organisations, helping them in the highest-value ways, and minimizing the work-load and wastage created for them.

________

Press coverage of Giving Evidence and It Ain’t What You Give, It’s The Way That You Give It

________

Should donors support small charities?

Not universally, no. But neither should they uniformly support large one, or local ones, or old ones or young ones or popular ones or trendy ones, or – as the evidence suggests they do by fully 22% – ones whose names start with the same letter as their own. Data-free fetishes are no more welcome in charity and philanthropy than they are in medicine, policy or the military.

Just has there has emerged disciplines of evidence-based medicine and evidence-based policy, it’s time for robust evidence-based giving.

Sometimes that will favour small charities. They may be more responsive and personal, and some tasks – such as a village lunch-club – just don’t require massive resources. [Smallness in charities can be deceptive because donated goods and volunteer time aren’t evident in an organisation’s revenue or cost figures, so the operations may be substantially bigger than they appear. This is just one of the surprises of the basic maths and demography of the charity world.]

Often it won’t. Small charities – like small anything-elses – don’t get economies of scale so may be expensive. And some of the challenges they face are hard: you just can’t eradicate malaria if you’re small: and in fact, multiple small organizations, if not properly coordinated can – by dishing out different drugs and increasing drug resistancy – exacerbate the very problems they try to solve.

Understanding a charity’s impact is hard, just as isolating the impact of an interest rate is hard. But we must make ‘best estimates’ in order that our limited resources achieve as much as possible. It involves being clear about what actually happened, and how much of that would not have happened otherwise. It’s therefore fundamentally about distinguishing correlation from causation. My book rattles through how to do it – with a short-cut for people in a rush, and the full, rigorous detail for the more patient.

Since charities address problems which, as Warren Buffett said, have already ‘resisted great intellects and often great money,’ we owe it to beneficiaries to abandon childish tastes and fetishes and prejudices, and focus ruthlessly on what actually works – however surprising, small or large an organisation delivering that might be.

This article describes various ways of improving education in India, all of which sound great, but some are 25x better than others.

Here a company gives ~£2.5m in such a bad fashion that it will achieve almost nothing.

This describes a rather better process for giving, in which a company uses a foundation’s existing infrastructure to gain economies of scale.

Great charities’ overhead costs are… nice and high. Here’s why—>

[The maths of my letter to The Economist. From NCVO Almanac 2010 (Sec2,Q1), total no. voluntary orgs in Eng&Wales = 146,788, of which 387 are ‘major’ i.e., rev >£10m, that is 0.26%. For whole UK, total no. voluntary orgs=171,074, of which ‘438’ are ‘major’, also 0.26%.]

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Should You Donate to Sport Relief?

Posted on March 23, 2012 by carolinefiennes

This article first appeared in Huffington Post

This weekend, Sport Relief is running masses of activities this weekend to raise money for charity. But not all charities are the same. So is Sport Relief a good one? 

Yes. Before we get into the reasons why, let’s be clear about what Sport Relief is. It’s run by Comic Relief, and happens in the years in between Comic Relief’s biennial big TV campaigns. Comic Relief is a grant-maker: it doesn’t run programmes or activities or sports clubs or day centres itself, but rather finds other, ‘operational’ charities which do and it gives them money.

Charities vary markedly in how good they are. Some do an OK job, some an amazing job, some achieve nothing at all, and some are actually harmful. It sounds almost heretical because we tend to think that all charities are good. But we also think that teaching is a good thing, and so is providing medical care, and yet we’re familiar with the notion that some teachers are better than others and some doctors are better than others. Some charities are demonstrably 25 or even 200 times better than others. It’s worth giving through a grant-maker if, and only if, it does two things better than you could on your own.

First, find and select better charities than you could. And second, support them better than you could, that is, if they can make your £50 achieve more than you could on your own. Comic Relief does well on both these fronts. On finding better charities than you can, it’s pretty well known, so charities go to it. On selecting charities, it sensibly focuses on just a few goals. Bill Gates focuses on eradicating polio and improving US education; Warren Buffett’s son’s foundation tries to prevent prison rape; the Wellcome Trust (the UK’s largest charity, which used to own GlaxoSmithKlein) aims to enable ‘extraordinary improvements in human and animal health’.

Donors are almost universally more effective if they have goals and a focus, rather than just dishing out cash, because they get to understand problems better and can develop better solutions.  Comic Relief’s overall goal is “a just world free from poverty”, within which it focuses on mental health, climate change, street children, HIV/AIDS, older people, and sexually exploited trafficked people. Notice that those are not all the easy, fluffy causes – it’s chosen some tricky areas which really need attention. And it publishes a vision and strategy for both its UK and non-UK giving, with goals for each programme (e.g., “Ensure that people with mental health problems are at the heart of decisions that affect their lives, whilst supporting recovery and reducing stigma and discrimination”). It stays fresh by reviewing its focus areas every four years, checking that they’re still priorities, and involving experts in each area.

Identifying good charities can be hard because the differences are often subtle and buried. Comic Relief employs staff with expertise in its focus areas, and uses published assessment criteria in order to make good decisions. This is precisely the same reason that you employ professionals to find good investments for your pension rather than doing it all yourself. Not all grant-makers do this: for example, NatWest recently chose charities based not on how good they were, but simply on how popular they are, which is unlikely to mean that it found the best ones. Comic Relief supports charities which directly support individuals and also ones which change government policy, public awareness and system-wide change. An example of the latter is Comic Relief co-funding a major campaign to change attitudes to mental health, ending the discrimination which people affected can face.

OK, but what does Comic Relief actually achieve? Well, it reports about all that. That is oddly rare among grant-makers. It reports on how much it raises, and reports on what it achieves – which after all is the aim of the game.

Turning to the second point, Comic Relief does support charities and causes better than you could on your own. It uses its brand and contacts in ways which you couldn’t do on your own. It gets Sainsbury’s to stock more Fairtrade, gets Alesha Dixon and Chris Moyles to climb Mount Kilimanjaro to raise awareness of malaria, and works with the BBC to make programming highlighting abuse of older people. Plus it uses its influence with other funders.

There are other great grant-makers too which are good routes for your money, such as BBC Children in Need. These choices about which charities to back, and how, make all the difference to what your money achieves. Because in terms of impact, it ain’t what you give, it’s the way that you give it.

In general, how can you distinguish a good charity from a bad one?–>

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