As a charitable donor, how do you know the impact of your charitable giving?

As donors, we receive solicitations daily to give to this charity or that cause. Many times such solicitations, while worthy, are of no interest. But what about those that are emotionally appealing to us - that connect to something that is really important to us? How do we know our financial generosity is really making an impact?

In this blog, we will look at three questions that every donor should ask their charity. These three questions will provide three major benefits. First, the donor becomes much more aware of how effective the charity is and how serious they are taking their mission. Second, it puts the charity on notice that you, as a donor, are informed and knowledgeable. Lastly, it is great stewardship, smart financial giving and encourages sound charitable, financial and mission efficiency. After all, if the charity is going to receive donations from generous donors, and they are in competition for donations (which they are), they must become more competitive. Here are the three questions:

Question #1: What is your Social Return on Investment (“SROI”)?

For real, tangible goods we can easily see or experience the “return” we get for the purchase or investment. For a financial investment, we think of the term “return on investment” or ROI. For charitable donations, the donor’s personal return is personal, since it is typically emotional satisfaction or a feeling. And this is okay, as long as they realize and understand it. While typically not verbalized, it is the expectation of the donor that the money the charity receives is having a social impact— it is doing good in some way, even if the impact is hard to measure. The results of carrying out the nonprofit’s mission, its social impact, is its “social return on investment” (SROI).

As an example, a nonprofit that provides after-school tutoring for disadvantaged children should be able to quantify the results of their service: i.e. to identify metrics of results of the mission. It may be number of children tutored per week, number of hours tutoring or some other metric that should be available upon donor request. Failure to have any metrics of their SROI (or not knowing what their SROI is) also tells you, the donor, that stronger internal accountability is needed.

Question #2: What is your Financial Program Percentage?

A nonprofit’s Financial Program Percentage is defined as the percentage of total funding that is going directly to the programs of the nonprofit as defined in the mission statement. The percentage that is NOT going to programs is overhead expense such as keeping the lights on, salaries, administrative and fundraising costs. Each nonprofit, as a steward and trustee of the funds entrusted to them, should include this metric in consideration of their mission impact. Most nonprofit aggregators of information on nonprofits (such as Guidestar.org) provide program percentage metrics to help asses the nonprofit’s performance. Please note that this metric should be used in conjunction with other assessment tools such as Charity Navigator’s Financial Efficiency Performance Metrics.

Question #3: How do you assure your nonprofit’s financial efficiency?

By addressing the first two questions on social return on investment and program expenses, you have notified the nonprofit that you, as a financial donor, are serious and knowledgeable about making a social impact. Continuous improvement to the process of ensuring sound stewardship should be a priority for every nonprofit. An effective monitoring process assures that the nonprofit’s focus remains on meeting its mission. Relevant questions to ask are: How often do you review your SROI and Financial Efficiency metrics? Can you provide some feedback on how you implemented your process for calculating SROI? How long has it been part of your metrics?

As a final thought, our gifts of financial generosity to charity are typically given from our heart. With that said, it is important that we are giving wisely, as good stewards of our own financial resources. As generous donors, we owe it to ourselves, the nonprofit, and most important, the nonprofit’s recipient beneficiaries to ensure we are making the most of our generosity.

 

©2018 Aspire to Give®. All Rights Reserved. Greg Doepke is a Chartered Advisor in Philanthropy® and a Certified Financial Planner®. Greg serves on the Board of Directors for the International Association for Advisors in Philanthropy and as the Philanthropist in Residence at Auburn University’s Cary Center for the Advancement of Philanthropy and Nonprofit Studies. As the founder of Aspire to Give® Greg educates and equips individuals, families, business owners, and foundations with both traditional and leading-edge philanthropic tools and techniques for smart, meaningful, and impactful giving. You can contact Greg at This email address is being protected from spambots. You need JavaScript enabled to view it.

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If you are interested in learning more about Aspire to Give®'s pursuit to advance philanthropy through donor-focused education, social innovation, collaboration, and advocacy, please reach out to Greg Doepke: Greg@AspiretoGive.com

Disclosure: Greg Doepke is the founder and principal of Aspire to Give®, a social enterprise that donates 100% of all profits to charity and is dedicated to unleashing the human spirit to advance philanthropy through donor education, social innovation, collaboration, and advocacy.
The thoughts and opinions expressed in this blog are not representative of the views of ACG Advisory Services, Inc. or the Actuarial Consulting Group, Inc. of Midlothian, Virginia. Each client and prospective client agrees, as a condition of precedent to his/her/its access to Aspire to Give®’s website to release and hold harmless ACG Advisory Services, Inc. and Actuarial Consulting Group, Inc., their officers, directors, owners, employees, and agents from any and all adverse consequences resulting from any of his/her/its actions and/or omissions which are independent of his/her/its receipt of personalized advice from Aspire to Give® or Gregory W. Doepke.