How to evaluate a charity
Randi Weaver – Good Giving Planner
With the end of the UK tax year approaching, both established and new donors may soon be selecting a new charity beneficiary and donating, or completing an earlier pledge made, in order to maximise their tax benefit for the current tax year.
A key part of the donation process, whether working with a philanthropy planner or making one’s own decisions, is evaluation.
The next article in our series on the topic of good giving practices and processes focuses on evaluating a charity.
Evaluating a Charity
Recent charity news has centred on the thorny issue of senior executive compensation. Inside and outside the sector, everyone seems to have an opinion. Some believe that they can consider a reported level of compensation and make a judgement about a charity’s spending.
In philanthropy planning, executive compensation is but one component of the list of evaluation criteria that donors, be they individuals, families or companies, may wish to consider prior to deciding to support a charity with time, talents or a cash donation.
There is no set list of evaluation criteria; each donor creates their own, assessing a charity’s size, reach, categories of expenditure, policies and other operational factors most important to them. While one donor’s evaluation checklist may differ slightly from another’s, all are ultimately focused on revealing the financial need of a potential beneficiary or project, how efficiently a charity is organised, and their programme effectiveness to-date.
Why is Evaluation important?
We know through donor surveys that people do not always give to the most urgent needs. Most donors choose causes that mean something to them personally. With over 160,000 registered charities in the UK, once this cause area is determined, a mechanism to compare and contrast the potential beneficiaries, to select or de-select, is required.
Also, particularly in cases of large donations, it is important for a donor to mitigate both financial and reputational risk by learning about the intended recipient and their track record.
A checklist of decision-making criteria for review and assessment is a key tool for new donors and established philanthropists alike.
Where does Evaluation fit in the donation process?
Evaluation is part of Beneficiary Selection and takes places about halfway along the charitable giving timeline. Once a donor has decided to donate, the next step is to set a budget for a specific period of time. Following that, cause areas of interest are identified, as well as the preferred geographic locations of the beneficiary. The process continues with the development of a long list of possible charities and/or projects. It is at this point that Evaluation commences. Charities and their projects are first studied in isolation and later compared against one another to see which best fits with the donor’s selection criteria.
How is an Evaluation completed?
A donor or their philanthropy adviser will create a list of evaluation criteria and then set about completing it for every potential beneficiary. The length of the list is generally in direct proportion to the size of the donation; the larger the donation, the more assessment required.
The Charity Commission website (www.gov.uk/government/organisations/charity-commission) is usually the first port of call. Through the “charity register,” one can access two key areas of evaluation: a concise presentation of a charity’s objectives and their financial statements. After a review, a visit to the charity’s own website will build on the information gathered.
There is a growing number of other databases which consolidate helpful information. These include: Charity Choice (www.charitychoice.co.uk), The Big Give (www.thebiggive.org.uk) and Charity Financials (www.charityfinancials.com)
In the case of a large donations, a visit to the charity to meet with a member of the fundraising team, the chief financial officer or chief executive may also be beneficial for both the donor and the charity. Not only will a more in-depth conversation be possible, but a donor will gain insight into the organisation’s culture and values and the personalities of the leaders, factors which are not apparent in number crunching and checklists.
An Informed Donor is a Happy Donor
Knowing a beneficiary or project, through thorough evaluation, ensures that a donor is informed. The discovery process can be the foundation of a mutually satisfying and enduring relationship.
As always, if you’d like to start a conversation about your charitable and good-giving plans, please contact me at email@example.com.