Think Philanthropically

It is a wonderful thing to fund a worthy cause, but sometimes a generous donor should refuse a request for funds. Almost every non-profit organization can claim to be underfunded relative to the challenge they want to address. Needs are always far greater than the resources that are at the immediate disposal of most organizations. Donors have to be able to assess if their gift, large or small, is linked to a well defined objective? Is the defined objective realistically attainable by the organization? In other words, what evidence will provide assurance to a donor that their gift is impactful?

“A significant infusion of money adds complexity
– it does not eliminate problems.”

It can be challenging to know where to give but there are a number of warning signs that should alert donors to the need to say “no” to a request for funds. 

1. Absence of credibility – It is wise to conduct a brief investigation because not every request is what it seems to be. Does the organization actually do what they say they are doing? Are they well run? What are other people saying about them? A non-profit organization may not be perfect, but if it its claims are suspicious or if it has a questionable reputation a donor ought to steer clear.

2. Gaps in key financial information – When important financial information is obscured or unclearly presented it can be a warning sign. Non-profit organizations need to be able to prove that they exercise financial disciplines. They also need to be fully transparent in their financial reporting – just like a publicly traded corporation. Donors should not be afraid to request a copy of a non-profit’s audited financial statements or an outline of a current operating budget.

3. Ambition beyond demonstrated capability – It is cause for caution if there is a large delta between what an organization has done in the past and what it proposes to do in the near term. Some organizations will present proposals that show how a large influx of funding will propel their services to much greater heights. A significant infusion of money adds complexity – it does not eliminate problems. A non-profit that is used to operating at a specific level of funding cannot instantly acquire the skills needed to manage resources or deliver services at a much higher level. Raising money is sometimes a lot easier than developing the skill set required to run an organization and manage larger or more elaborate services. Applying for funding can be difficult. Establishing competent management processes and hiring experienced staff teams in a non-profit setting is a whole lot more difficult. 

4. An unclear link between activities and outcomes – It isn’t enough to say, “give us money that will help kids” or “donate to rescue kittens”. A non-profit has to be able to show that they are doing things that produce tangible results. Donors should beware of aspirational statements that are not tied to a very clear set of carefully planned outcomes. A slogan isn’t a strategic action plan! Most non-profit organizations highlight their activities – what they do or plan to do. Funding the “doing part” is OK. Activities are wonderful things but they ought to lead somewhere.

“Donors should not be afraid to request a copy of a non-profit’s audited financial statements or an outline of a current operating budget.”

Donors play an extremely important role in the philanthropic ecosystem. According to Statistics Canada, charitable organizations issued $10.6 billion in charitable tax receipts in 2020. The median donation per donor was $340. Most of the people who read this column are able to donate more than $340 annually.  Nobody wants to waste money; therefore, it is very important that donors who seek to make a real difference know when it is wise to simply say no. 

Sam Watts serves as the CEO of Welcome Hall Mission  He serves on several non-profit boards and is an appointed member of the National Housing Council of Canada. He is the author of Good Work…Done Better

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