There’s a long article in yesterday’s Wall Street Journal (see? I’m catching up) about philanthropy and public charities, repeating the oft-heard complaint that it’s hard to know how and where to give when there’s so little information out there about the effectiveness of the programs and organizations being funded. Says author Sally Beatty:

These debates obscure the bigger problem: There is no system for measuring and reporting charity results. Simply put, “most charities that seek to be charitable could easily pass almost any test for simple charitable status and still not be very effective in their charitable efforts,” said Eugene Steuerle, a senior fellow at the Urban Institute, in a series of papers he released this summer.

A number of philanthropy leaders are starting to address the need for greater accountability. In a series of independent proposals, they’re trying to set up voluntary standards for charities to follow in assessing their operations and results. The proposals are still in the planning stage, but they offer a good snapshot of the concerns more nonprofits should address.

The article goes on to mention four stakeholders (individual foundations and service organizations catering to foundations) trying to develop a universal standard for effectiveness measurement.

I wish them luck. As SOM Professor Garry Brewer talked about during his ORGEFF presentation last month on environmental organizations serving Yellowstone National Park, the more that grantmakers can work together to create (and adhere to) common standards, the more efficient the reporting process will be and the more money can go towards the mission. However, I do wonder where the arts fit into all of this. I am wary of any universal system that claims to measure the value of arts organizations to society, since so much of what they do is not easily captured on paper. I’m not saying it’s impossible, just that I’m not sure we’re collectively smart enough yet to figure it out.

The WSJ article also advocates for more transparency in charitable activities:

Too many charities fail to make information about their accomplishments, struggles, boards and executive staff easily available online. As a first step, charities should offer detailed financial and management information on their Web sites. Easy access to such information is crucial for helping donors form reasoned opinions about a charity’s mission, effectiveness and leadership.

This comes the week that the Chronicle of Philanthropy shines a spotlight on GiveWell, a newcomer to the foundation scene founded by 26-year-old Harvard grad and former hedge fund pro Holden Karnofsky (who, incidentally, was a panelist for the Yale SOM Philanthropy Conference). Holden’s a bit of a firebrand, as the article acknowledges toward the bottom, but he has created a remarkable organization that blows just about any other foundation’s claim to transparency out of the water. On GiveWell’s website, you can find not only information about grantees and their activities, but the reasoning process that led to the funding of some grantees and not others, detailed evaluations of claims made in the grant proposals, actual documents provided by applicants, and even internal correspondence dealing with issues such as setting the staffs’ own salaries.

What I like about this model is that it takes the responsibility for disclosure out of the hands of the nonprofits. Organizations can ask for their application materials to remain confidential if they like, but of course they look better if they can share them with the world. More importantly, though, the transparency on the part of applicants is more than matched by transparency on the part of the funding organization. Articles like the WSJ’s seem to take almost a punitive view of nonprofits, making them put all the cards on the table so that we can weed out the bad, bad organizations that are wasting good rich people’s money. GiveWell, by contrast, gives prominent recommendations to organizations that impress them and more or less ignores the rest without making unsupported judgments about them.

The Chronicle also did a chat with Holden today as well. If this isn’t a clash of generations I don’t know what is! Do read it, it’s very entertaining. I especially appreciated this exchange:

Question from Coach Adam, Race wioth Purpose:
There is little free market competition in the not for profit sector; large organizations focus primarily on defending their donor bases and acquiring new donors rather than working together to solve issues that arguably multiple organizations claim to be committed to solving. (A notable exception could be Robin Hood because of the direct support of its board.) How can we expect to be successful (as defined by having a measurable impact) when so many organizations are working in silos and concerned about another organization taking their donors?

Holden Karnofsky:
I think the nonprofit community legitimately has good people in it – morally better people than other communities. I think we’re capable of going beyond myopia about our own paychecks, and pursuing our missions instead of bottom lines (as we’re supposed to, legally). For some reason that isn’t happening now when it comes to sharing information, but I think it can, and if it does, people will stop asking how nonprofits can be more like for-profits and start openly wishing that for-profits had as much openness, honesty, and sharing of information as nonprofits.

Nice.

  • Michael

    Ian,
    I am past pres. Of a non-profit—a jazz musician’s coop, in addition to a now dormant non-profit. In the past, if I could not find matching grants I lost the funding of the original funding stream. No one cared what my group did—it was measurable, observable & successful—all that counted was matching grants. This is an arts group, just like your example. Is this still true?
    Michael Moss

  • Ian David Moss

    Hmm…I would say yes and no. On the one hand, “matching grants” has sort of gone out of style as a term, except for the very highest-end grants such as for endowments and such. Nevertheless, it’s rare to find an organization that will fund 100% of a season or project – so in practice you still have to look elsewhere to make up the difference. The good news is that for organizations with small budgets (which is what this sounds like), the process is a lot more decentralized and, depending on where you are, applicant-friendly. Good examples of this include the Fund for Creative Communities and Manhattan Community Arts Fund (both administered by the Lower Manhattan Cultural Council) in NYC, and the American Composers Forum’s Subito grant in Philadelphia.