How to give your money away—and make it count

 
SHARE
Catlane—Getty Images

A seemingly endless stream of needy causes compete for our attention and money every day. Our emails, mailboxes and phones are bombarded by charities asking for generous donations to help.

In a world made increasingly small by the speed of technology and communication, our ability to see and respond to the needs of those in some of the poorest parts of the world has never been easier—or sadly, as easy to exploit.

Every week generous people are tricked out of their money by fraudsters posing as charities. The Australian Competition and Consumer Commission revealed recently that Australians lost more than $90 million to scams in 2017, with much of it going to fake charities.

If the media is to be believed there is also an increasing number of legitimate charities using donated funds in unethical, inefficient and fraudulent ways (although there are no real statistics that confirm this).

To top it all off, the regulations that govern charities are constantly shifting with government policy—often to the frustration of both the charity and their generous supporters.

So, how do you ensure your donations are really going to make a difference? Here are just a few things to consider when you want to give your money away—and make it count.

Start at the top

By far the single biggest donor to international aid projects in the country is our own government. As a matter of international diplomacy and security our government spends a large amount of money helping foreign governments improve the living conditions for their citizens.

In Australia, the total amount of money given has dropped over the last decade. According to the devpolicy.org website, the Australian government was twice as generous in 1967–68 compared to today. This, along with the toughening of Australian immigration programs, is seen by many as a hardening of a once compassionate stance and a reflection of the rise of nationalism across the globe.

In many ways advocating and using your vote to support a generous aid program is the most powerful way of making a difference overseas. Charities, such as the Adventist Development and Relief Agency (ADRA) have been vocal in condemning the cuts and calling on the government to reflect a more generous and collaborative spirit to ending the suffering of those living in poverty.

“ADRA Australia strongly urges the government not to further decrease the aid budget,” said Paul Rubessa, CEO of ADRA Australia. “Australia as a nation is not doing its fair share: we are already the least generous we’ve ever been. Australia can afford to be more generous to our neighbours. A further cut to the aid budget will hamper the global effort to alleviate poverty and distress.”

But it’s not all cuts Down Under. Our Kiwi readers have seen modest growth in their government’s aid budget over several years. The upward trend is reflective of the country’s generally more liberal style of government. However, a little digging through the devpolicy.org website reveals the amount actually spent on aid is decreasing—New Zealand has under-spent its foreign aid budget and the world’s poor will not see the full amount that had been set aside for them.

Whether the trend is up or down, the bottom line for individual donors is this: more than ever governments’ international aid budgets are driven by politics not need. And it’s the poorest of the poor that usually lose out. We cannot rely on the government to support the causes closest to our hearts, or the countries that we connect with the most, which is why making your donated dollar count matters more than ever.

Wikimedia Commons

The tax man cometh

Since the first child sponsorship program began in 1920 to help children affected by World War I, the direct donor-to-child model has raised more money for international aid than any other initiative, and by a significant margin. So, it shocked many donors in Australia when they learned earlier this year that they can no longer claim tax deductions for donations to their sponsor child, or that, in order to preserve tax-deductibility, their charity would now direct donations to the child’s community rather than the child themselves.

Why the change? In the pursuit of the most effective and efficient ways of helping, both the Australian and New Zealand governments (along with many others) developed policies that encouraged people to give to the programs that years of experience and research had revealed to be the most impactful in bringing about change for people living in poverty.

It’s a change that reflects long-standing questions about the effectiveness of the child sponsorship model and the transparency of the agencies involved.

Donations to international aid from Australians are now split into two distinct categories; tax-deductible and non-tax-deductible. Charities are no longer able to offer tax deductibility for donations for projects focused on welfare, evangelism or political activities. Child sponsorship falls squarely into the welfare category. The resulting drop in sponsors and donations has brought a number of large child-sponsorship focused agencies to crisis point.

In a recent letter to donors, Wayne Ulrich, CEO of Asian Aid Australia, a Christian charity that, until recently, had a large child sponsorship program, outlined what kinds of projects can still receive tax-deductible gifts.

“To meet the guidelines (for tax-deductible activities), projects must encourage local community participation; improve the wellbeing of those in need; and produce sustainable benefits that will continue after the development assistance has ceased,” he said. “Programs such as improving community education, water, sanitation, agriculture, job creation, social enterprise, microfinance and emergency programs, are tax-deductible.”

So how important is tax-deductibility? Can you do without the small return to support a cause you believe in? It’s something every potential donor should consider. However, it’s also important to realise that child sponsorship, and other non-tax-deductible programs, have been categorised this way because they are no longer seen as the most effective way of bringing about real and lasting change.

Dropping off the map

When a massive tsunami struck Japan in 2011 the global community sprang into action, with millions of people rushing to donate to their favourite charity in response. Much frustration ensued as credit cards and cheque books were forced to be put away. Why? Because Japan was not listed on the highly regulated list of countries to which charities could send funds—nor had Japan put out a call for international assistance.

This scenario highlights two important reasons why some countries seem to disappear off the charity map:

  • Our government does not consider some countries needy enough to receive funds or, in other cases, consider the governments in a fit state to receive donated funds. As such the List of Developing Countries (as it is called) changes as countries such as India, Vietnam and others transition from “developing” to “developed” and are therefore excluded from the list.
  • Foreign governments hold sovereignty in their country. As frustrating as it may be, our generosity and good intentions cannot dictate what occurs on their soil—if they don’t want our help we can’t and shouldn’t force it on them.

Japan did eventually request assistance from the global community and donations from Australia and New Zealand could be taken and used. If anything, the change in Japan’s position simply goes to illustrate the dynamic nature of charitable work and giving. As many countries continue their development progress you may see your favourite projects drop off the charity map and your donations no longer able to be received. It’s a bittersweet situation, but one that signifies that the country and its communities are ready to thrive under their own steam and that it’s time to put your generosity to work elsewhere.

 Rubbery figures

The percentage of donated funds used for “administration” is one of the most contested figures in the charity world. Often, it’s a race to the bottom, with well-meaning donors assuming—and on occasion demanding—that a lower administration percentage results in a greater impact on the ground.

But it’s not always that clear cut. A small change in the way money is accounted for or reported on can have a drastic effect on a figure like the “administration percentage.” And it has no real reflection on how effective the charity is at delivering life-changing projects.

For example, a charity with a very small administration percentage may not have adequate management to ensure best use of funds or cost-efficient project operation. At the same time a charity with a high administration percentage may just be paying its senior staff too much.

So, instead of looking at percentages consider the needs the charity is addressing and the results they are delivering, evidenced by the changes in the lives of those they work with and the sustainability of the project activities into the future.

You’d be right in thinking that giving your money away has never been more complex, but by following a simple formula you can make sure your donations make a real difference—knowing why you want to give, how much you can give and who you are giving it to. (Check out our quick 5-point checklist on page XX.)

“We would encourage donors to do their homework about the organisation they choose to support,” says Paul Rubessa, CEO of ADRA Australia. “By choosing a reputable organisation that aligns with your values and can demonstrate impact, you can be confident your generosity will be multiplied to make amazing things happen.”

Bang for your buck – 5 steps for getting the most from your donation

  • Choose a small number of charities that align with your beliefs and values, not the ones that make you feel most guilty.
  • Check that the charities are registered with the Australian Charities and Not for Profit Commission (Australia) or the Charities Register (NZ) and are full members of ACFID (Australia) or CFID (NZ), the peak bodies for international development NGOs.
  • Check that the charities are fully accredited with DFAT (Aus) or MFAT (NZ), to ensure robust policies are in place to prevent issues relating to fraud, money laundering, terrorism and child protection.
  • Get to know the charity’s work and impact by downloading a recent annual report, reading newsletters or giving the charity a call.
  • Stay in touch by reading (or requesting) project updates.

How to avoid charity scams

Concerned you’ve given to a scam, or have been approached by a charity fraud? Scam Watch websites provide a list of known scams, suggested steps to take if you have been scammed and easy-to-use reporting tools to help ensure others are protected.

Australia: scamwatch.gov.au

New Zealand: consumerprotection.govt.nz/general-help/scamwatch