Oct 192011
 

Because, why not? If I didn’t piss you off with my tithing post, I’m bound to get your blood boiling over this one. It’s angry comment time!

Am I the only one who feels like he donates to charity because he has to? I mean, sure, nobody is holding a gun to my head and forcing me to do it, but there’s still a moral obligation to donate some excess cash to your favorite cause. Depending on what you’re passionate about, that cause could be anything from getting the kids to stop smoking to delivering meals to old people. If somebody is disadvantaged out there, you can bet there’s a charity to help them.

On the surface, charity seems like a great idea. Somebody gets the proverbial shaft, causing them some sort of hardship. When the future looks bleakest, in steps the charity to provide the victim with some sort of assistance. This assistance is as varied as the number of charities themselves. That shot in the arm should be enough to give the down and out guy enough of a boost to get him through whatever he’s going through.

Or, you have the charities that are researching for cures for certain diseases- cancer, MS, whatever. These charities are always looking for that extra dollar to fund towards research. Hey, maybe the $20 you donated last year will finally conquer the demon of diabetes. You just keep thinking that. That’s what they want you to think.

Here’s a couple things to think of before you give some of your hard earned cash to charity.

The Medical Ones Suck

Let’s, to pick on a prominent Canadian charity, look at The Canadian Diabetes Association. Just how efficient are they as a charity?

Well, according to the excellent Moneysense charity guide, we see that only 43% of revenue actually goes towards research, with the other 57% going towards canvassing for more donations and administration. That’s right kids, they spend more money on other stuff than what they do on diabetes research. That’s an organization that’s either really bad at fundraising or has a lot of staff picking their nose. When we keep digging, we find it costs them over $43 to raise $100. Those are pretty good net profits in the corporate world. They’re pretty poor results in the philanthropic world.

In the world of charity, there are some good operators and some not so good operators. How am I supposed to tell the difference? By donating to the crappy operators, people are just feeding the monster. I wouldn’t want a nickel of my money going towards an organization that wasn’t ran efficiently, and neither should you.

To further pick on the Canadian Diabetes Association, most charities aren’t big enough to matter. According to their 2010 annual report, the Association funded $6.8 million in research. On the surface, this sounds like a pretty impressive number. And it is, until you place it next to the amount spent on research and development by the 5 largest drug companies in the world.

CDA- 6.8M
Big 5 Pharma- 32.5B

The 5 largest pharmaceutical companies have a budget nearly 5000 times bigger than the Canadian Diabetes Association.

Yes, I realize I’m being unfair here. The Canadian Diabetes Association is like the David Eckstein of charities. (as in, it’s small) Bigger charities with bigger budgets do stand a better chance of making a difference. But with the best researchers ending up at the drug companies, (and the bigger paycheques of the private sector) I like Pfizer’s chances of curing diabetes a whole lot better.

Charity Is Everywhere

Hot diggity, are there always a billion and 1 charity events going on.

Just recently I’ve been approached by kids selling magazine subscriptions, girl guides selling cookies, STARS, a large local project, cancer research and the food bank. It seems like every place you go has some sort of thing going on for charity, which usually tries to get a buck or two from your pocket. No, I don’t want to write my name on some heart shaped piece of paper for a dollar. Leave me alone.

With more and more competition, charities are being forced to be more aggressive. For the old school nationwide ones, that means stepping up their direct mail campaigns, usually with lackluster results. For the local ones, that can mean anything from putting on more events to even going door to door to solicit funds. Aggression pays off in charity these days.

But at what point do people start to resist all these efforts? Maybe I hang out with meaner people than you, but I’m starting to feel a charity hangover starting to happen.

Still, You Should Donate

The point of this post isn’t to convince you to never donate to a charity ever again. Rather, I want you to pick your causes carefully. Rather than just writing a cheque, do a little research to see just how efficient the organization is and how effectively they spend their money. Look at whether people are largely abusing the charity, or whether it legitimately helps people in need. For every good charity there’s a crummy one.

And, whenever possible, consider donating your time as well. In today’s busy world, that can be a greater investment than just money.

And if you just want to avoid the whole thing until you find charities that don’t suck, at least I’ll understand.

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  14 Responses to “Why Charity Is Overrated”

  1. We are highly selective in our charitable donations.  I wrote about it late last year in our Giving to Charity article.  We select groups located in our community (Regional AIDs network, local Humane Society, local Women’s Shelter, food bank, place for kids to escape etc etc).

    I couldn’t agree with you more on this one.  Pick and choose.  And research where that money goes.  We are all about grass roots support but i’ll be damned if i’m going to participate in the annual United Way (month) campaign at work, or the United Federated Charities or the … list goes on and on.

    We’ll give to those who have very little.  Who do really good things WHERE WE LIVE.

  2. I am interested in seeing the reaction to this article, but you’re right – people should watch their money no matter where it’s headed.  If you can find a charity that sinks most of its funds into, well, charity… you’re golden.  If you’re looking for the best returns on your charity dollar you should do a little research!

    In the States we’ve got Charity Navigator, so there’s a place to look it up if you’re north or south of the longest undefended border in the world.

  3. One thing you have to watch out for is salaries and compensation. Above you assume that in the Canadian Diabetes Association example that 43% of revenue “goes towards research”. What the table actually says is that 43% goes to “programs”.

    I think “charitable programs” is often loosely defined and I believe salaried employees can be included in those programs. Somebody correct me if I’m wrong here.

    • Technically, salaries have to be reported as operating expenses or administration expenses and not in the program funding categories. If the salary is directly tied to the program (ie if you are donating to research, you are donating to fund the scientists doing the research and their materials).

       There are exceptions to this and other things to watch out for as well.  A lot of charities doing ‘awareness’ work, ie TV campaigns, public speaking etc are able to claim those expenses as program expenses because of the way they have worded their Mission Statements and charity designations.  So for instance, a Breast Cancer charity that has an aim of ‘raising awareness about Breast Cancer’ can spend all of your donation advertising about Breast Cancer and asking for more donations. Kinda shady imo.

  4. This is an awesome post.  Well, not the whole ‘don’t give anything’ point, but in general, you should take the time to learn where your money is going and what it is doing.  There are several places you can check out the charities you like: charitynavigator.org is pretty great but they don’t do Canadian only charities.  Whenever possible, donate directly to the organization – don’t donate through telemarketing drives or from those people who stand on the street.  Up to 50% of your donation gets wasted that way.

  5. To be fair to the research charities, their research dollars go a lot further than the private sector. A foundation grant to a university lab generally pays only for slave labour (err… I mean, grad students), maybe a post-doc or technician-level salary, partial salary support for the professor, and supplies. Any fancy infrastructure (lab space, MRI machines, PCR machines, fume hoods, etc) is sometimes partially paid for by paying for time on it (usually barely at cost), or available for free by virtue of being at a university that has that stuff. Even then, many suppliers offer a slight educational discount.

    A private-sector for-profit pharm lab on the other hand has to pay full-board cost for everything from chemical reagents to equipment. They have to hire workers who generally have MSc’s or PhD’s and expect to get paid private sector wages. If they need anyone to help consult, like getting an MD to refer patients, they have to pay for that too — no one’s going to volunteer their time to get their name on a paper if there are no publications coming from it.

    And finally, you can’t just compare charitable funding one one disease and compare it to a whole pharma budget — those companies are researching dozens of areas, so their diabetes funding may very well be comparable or even less than the charitable funding.

    Anyway, all that said, I’m pretty leery of charities that spend a lot of money in order to raise more money.

  6. What works for my wife and I, and I suggest this to anyone who uses
    budgets (which should be everyone), is to budget for charity.  Once you
    have a bank account gathering money for charity, you can start
    “shopping” for where to spend it.  You don’t have to worry about not
    giving to charity, it’s in the bank sitting there until you find the
    right “deal”, a charity or need that is fitting for your hard earned
    cash.

    There are a couple benefits to this, the primary one is that I no longer
    feel the need to give when people come knocking.  I give to charity
    every pay check, I don’t need purchase that popcorn or frozen pizza or
    magazine in order to “do my part”.  And then when I find a worthy cause,
    I do some research and then write a nice big check.  We have made
    donations in the thousands this way, because our account builds up until
    we spend it.  We are able to meet larger and more pressing needs than
    we ever could on the spur of the moment.  And it doesn’t hurt at all, it
    was already “not my money” when I put it in the charity account.  All I
    feel is that sweet happy feeling of supporting a good cause, my
    checkbook account doesn’t budge and I don’t see a hit on my credit card
    statement.

  7. I agree you have to be selective. I’ve donated to MSF – Doctors without borders a couple of times and now they keep sending me fricking annoying pamphlets. Wasting my donation money.

  8. [...] offer, the article I came across was no different. What I read that sparked my interest was “Why Charity is Overrated“; this article does not deter you from donating to a charity, it instead makes it clear you [...]

  9. [...] Financial Uproar discussed the importance of researching the charities that you donate to. [...]

  10. [...] the most hilarious finance blog out there, Financial Uproar, wrote about why he thinks charity is overrated. I think he just writes these kinds of posts to get people ticked off. If that’s the case, I [...]

  11. Do you believe that it’s not worth it to give to charity period? As in to ever give to others for solely charitable or feel-good reasons? Or are you saying that it’s not worth it to give to bad charities that don’t use the money well, and apparently that’s all charities.
    Those are two very different concepts, and I’m not sure which you’re standing on.

    I too believe strongly in checking out groups before donating. I won’t give any money to a group that pays fundraisers, and a large amount needs to be going to the actual cause. I am extremely picky, and do my own research, and won’t give to anyone who comes to my door or stops me on the street, though I might do further research on their group and consider it for later.

    I think a big problem is that too much charity is about making the givers feel good. So instead of just giving to an existing charity, everyone wants to start their own, until you have a billion individual groups all theoretically trying to work to a certain same end, and doing so horribly inefficiently. 
    I recently saw a report done by economists looking at AIDS research and charity money, and identifying which areas actually get the most done for the least money, and which research areas are truly the most promising (ie. likely to bring tangible results, preferably sooner). I think more of that kind of rational thinking is needed instead of heartstring-tugging.

  12. This is just common sense. I mean would you really just blindly give money to anyone without researching first. I personally am more than willing to give, but even with all the research I am hesitant on giving to most charities because I feel a lot of the money is wasted on advertising and the such. I know it is still a business but really. I am more turned on to crowed funding sites because at least the money goes directly to the person asking for help. Sites, like helpahope.org take it a step further and actually validate the legitimacy of the people asking for help. Maybe if some charities did not send me so much crap in the mail maybe I would be more open to give.

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