Charities are the fastest-growing sector of the North
American economies, but unlike investments in stocks and bonds, donors to
charities seldom check performance before they give money, argues Ken Stern in a new book, With Charity for All.
He knows from experience as the head of the Public
Broadcasting Service in the United States, and he pulls no punches, including
examples of poor management and donor decisions at PBS.
As the past president of an international relief and
development agency, I confess that I have also donated in blind faith that my
resources are making a difference for needy people.
I have to agree with Stern when he writes that “billions are spent without clear
guidance as to who and what works and who and what does not.”
Much of the book is a litany of spectacularly bad charities
– ones that reward their founders and chief executives with millions, but
deliver peanuts to the poor and needy, charities that compete in fields such as
hospitals and education whose track record is far worse than their private-sector
competitors (eg. coddling the wealthy and dumping the poor on others) and
government regulators and politicians who turn a blind eye to egregious abuses.
Stern’s most valuable contributions come with his recommendations
in the final chapter.
For example, he says government grants are the place to
start. They should demand performance data so they can direct their money to
who and what works best. That would certainly make a huge difference in how the
now-defunct Canadian International Development Agency and Canada’s Finance
Department have invested money in international relief and development.
Stern says government spending is rife with political
favouritism and bureaucratic inertia.
He offers an example where charities that have been
measured, and provide no improvements, against a highly-successful competing
charity, but the politicians continued to direct the lion’s share of money to
the incompetent charity.
He notes that the Obama administration, beginning next year,
says it intends to direct more money to charities that can provide solid
evidence of results.
He notes that most investors know they lack information and
wisdom, so they hire financial advisors and put much of their money into mutual
funds.
Why not do the same for charitable donations? He says there
ought to be a similar intermediate service in the charity world and points to
GiveWell as an example. Following the lead of the Gates foundation is another
suggestion.
He also says governments ought to check more thoroughly
before handing out certifications as a charitable organization whose receipts
qualify as tax breaks for donors, and the government ought to check
periodically to see what’s happening – or not happening.
The news media could also be helpful. In the wake of
disasters, such as Hurricanes Katrina and Sandy, the tsunamis in Japan and
Indonesia and the earthquake in Haiti, well-meaning people (and sometimes
fraudsters) have jumped in to start new charities and solicit donations; they
almost always gain sympathetic and uncritical news media attention.
They
seldom, if ever, follow up to check results one, two or three years later. Nor
does the news media conduct research to present choices among the hundreds of
well-established and reputable charities already on the ground in these
disaster locations.
Which leads to a point Stern emphasizes: most people give
spontaneously in response to a good story involving an individual. Think World Vision and child sponsorship, a deeply-flawed approach that rips families apart as parents give up their children for a better future as a "sponsored orphan".
And do you know whether a charity's individual really exists, or is the child just a fund-raising department's fictional creation?
Only
mega-donors undertake research into the charities they choose to support and,
even then they often fail to require data to demonstrate the results the
charity is achieving.
