November 06, 2015

Donors, Consider Whether the Charity You’re Supporting Is Already Rich

If you walked down the street and came across two people begging for your loose change — a woman in rags, and a man in a tuxedo standing next to his Porsche — to whom would you be most likely to give?

Everyone’s impulse is to give to the woman in rags.

We’re now in the "giving season" — the last three months of the year, when many individuals make a significant portion of their charitable donations, but also when that sensible decision to consider the poverty (or wealth) of the potential recipient somehow gets ignored. We would never give cash to a stranger who is vastly richer than we are, but we do it all the time when we write checks or make online donations to nonprofits.

Look no further than The Chronicle’s latest Philanthropy 400 ranking of the charities that raise the most money from private sources — from the $3.87 billion raised by the United Way, to the $64 million raised by Harlem Children’s Zone. Total giving to these 400 nonprofits was $97.64 billion — an average of $244 million each, in just one year.

Which raises a question: "Are these the 400 entities that most need all those donations?"

Think about it. When was the last time you considered the wealth of a charity to which you were giving? Probably never.

This is true even though the wealth of charities is available for everyone to see on the Internet. Every nonprofit is required to file an annual IRS Form 990, which provides voluminous financial information about the organization, including its net assets (i.e., total assets minus total liabilities). GuideStar posts all of this information for free.

By reviewing those forms you can see, for example, the net assets of the American Cancer Society ($1.3 billion), the American Heart Association ($863 million), and the Nature Conservancy ($5.7 billion). Interested in giving to the Land Stewardship Project, which supports sustainable agriculture, primarily in the Midwest? Its net assets are $2.8 million. How about Martha’s Mission Cupboard in Morehead City, N.C.? Net assets: $178,400.

Of course, the wealth of organizations is only one factor to consider when deciding where to donate. You need to consider an organization’s mission, the number of people it serves, its sustainability plan, the effectiveness of its services, and many other issues.

Finding cures for cancer, combating heart disease, and saving the environment are hugely important causes, and the organizations undertaking those mammoth tasks necessarily need to accumulate significant funds to be effective.

But a nonprofit’s wealth is something you should know, and consider.

This issue of donations to wealthy nonprofits was brought to the fore in June, when it was reported that hedge-fund manager John Paulson had given $400 million to Harvard University, which already has a $36 billion endowment (and hundreds of millions more in other assets).

The donation created a storm of criticism, and was condemned as an example of the extremely wealthy giving to the unbelievably wealthy — and getting a tax deduction for doing so.

Mr. Paulson’s defenders argued that he has the right to do whatever he wants with his money, and that society is better off with the funds being used by Harvard than sitting in Mr. Paulson’s own ample bank account.

Both assertions are true, but they beg the question of whether, in a world filled with such widespread suffering and poverty, Mr. Paulson could have accomplished more by directing his largess elsewhere.

All donors should ask the same question about their contributions — and those of us in the nonprofit world should encourage them to ask.

Let’s all do what we can to urge Americans to remember that during this giving season it’s important to think of the rags and the tuxedo, and to do some homework before giving.

David Nocenti is executive director of the Union Settlement Association, which has provided education, wellness, and community-building services in East Harlem since 1895.