Philanthropy FAQ from New Philanthropy Capital - Spear's Magazine

Philanthropy FAQ from New Philanthropy Capital

New Philanthropy Capital answer some of your most pressing philanthropic questions

Questions

1.    What is the best way to start giving now I have set up my own charity account or charitable trust?
2.    Where can I get good information about which charity to support?
3.    What are the key questions I should ask a charity that I’m thinking of supporting or that approaches me for funds, to really understand whether they’ll make the best use of my money? Are admin costs a good way to assess charities?
4.    How do I know that the money I give to charities working in developing countries is not being wasted?
5.    I have been supporting a specific charity for the last 10 years. What is the best way to stop funding that charity?
6.    I am interested in meeting other donors with the same interests as me, to either share lessons or to identify co-funding opportunities. How do I find such donors?
7.    How old should my children be before engaging them in our family’s charitable activities?

Answers

1.    What is the best way to start giving now I have set up my own charity account or charitable trust?

The key to getting the most out of your giving, both in terms of personal rewards and social impact, is to select specific areas of interest to focus on, for example disadvantaged young people or the environment. Instead of being wholly reactive in your funding, maybe responding to requests from friends and colleagues to support random charities, instead choose some themes to your giving. This often means you’re more engaged with the issues and choose better charities as a result. Having focus areas will also enable you to more easily reject funding requests that come your way—it’s often hard to say no!

In order to narrow your focus, we suggest donors really think about what matters to them and choose charitable sectors accordingly. This might be related to a personal passion or interest (the environment, sport or the arts), or driven by a personal experience (a family member suffering from a particular illness). It could also be inspired by a specific event that has moved you (an earthquake or local floods). Or you could be really frustrated by a social issue that you want to tackle (knife crime in your local area, lack of clean water in rural Africa, rising youth unemployment). And you can always keep a strand of your charitable money aside to respond to requests or unforeseen events.

Once you have chosen some specific areas to focus on, it will make it much easier to choose effective charities to support and understand the difference that your funding is making. Ultimately, it will make the giving process easier and more rewarding.
 
 
2.    Where can I get good information about which charity to support?

The Charity Commission (www.charity-commission.gov.uk) is the best place for detailed information on English and Welsh charities. The website allows you to locate specific charities by name or charity number, or you can use the advanced search to narrow down a list of potential charities according to activity, beneficiary group, geography, or size. Financial information is available, alongside links to documents including annual reports and accounts. The equivalent information for Scotland is available online from the Office of the Scottish Charity Regulator (OSCR). For giving internationally, The Big Give (thebiggive.org.uk) allows you to find charities by country and activity or, for finding organisations closer to home, Local Giving (localgiving.com) lists quality-assured projects by postcode.

For hard-pressed donors, intermediaries are a time-efficient way to identify charities to support. Community Foundations are geographically focused charities which can assess and shortlist potential local projects based on your interests. Giving through a Community Foundation is tax efficient, allowing you to maximise your giving even to small community groups which are not registered for gift aid. Donor communities—such as The Funding Network (thefundingnetwork.org.uk) or London Funders (londonfunders.org.uk)—exist to share knowledge about local issues and organisations, and to introduce donors to projects.  

Alternatively you may wish to co-fund with an established local grant-maker. This is a useful way to benefit from the due diligence and experience of an existing funder, provides good connections to charitable projects, and a deep understanding of the relevant issues.
  
   
3.    What are the key questions I should ask a charity that I’m thinking of supporting or that approaches me for funds, to really understand whether they’ll make the best use of my money? Are admin costs a good way to assess charities?

Your first concern should be to establish that the charity is clear about its aims, and has evidence that it is achieving them. The charity’s own website is a good starting point, and an opportunity for you to assess whether its information is transparent and accessible. When you do make contact with the charity, it should be able to provide financial and operational documents relevant to your decision, and offer thoughtful responses regarding:

•    how their activities impact the lives of the people they help;
•    what success looks like for the charity, and how it knows this has been achieved;  
•    details of evaluations, and assessment of overall achievement;
•    honesty about any difficulties facing the charity;
•    important lessons the charity has learned from previous work;
•    how far the charity involves its beneficiaries in planning and delivering its services¬¬—this can be a good indication that the charity is attuned to changing needs; and
•    what this charity’s unique contribution is, and how it complements the activities of other organisations delivering similar services.

We do not think, however, that you should judge a charity on the level of its admin costs. Reported admin costs vary considerably, depending on how accountants choose to allocate costs, so they can be a misleading basis for comparison. For example, one charity may include a direct mail campaign in its admin expenditure, while another may account for this as part of its campaigning costs. More importantly, solely looking at admin costs doesn’t show you how effective a charity is. It doesn’t tell you the impact the charity is having on the people it works with, or even how efficiently it is run. Ideally your decision about whether or not to support a charity should be based above all on its results.

If you are giving a substantial donation, it would be wise to undertake a more detailed analysis of the organisation. New Philanthropy Capital’s Little Blue Book provides a more detailed framework for analysing charities and we also conduct due diligence on behalf of donors.
 
 
4.    How do I know that the money I give to charities working in developing countries is not being wasted?

It’s sometimes hard to know what your donation has been used for, and whether it’s being spent on the right things, especially when funding charities abroad. There are two key steps to helping you to check that your money isn’t being wasted. These apply equally to funding charities based in developing countries or in the UK.  

First, make sure you take the time to do some analysis on the charity before you donate—looking at a charity’s accounts will give you an idea of where funding has been spent in the past. If any evaluations have been done these can be useful for seeing the results the charity has already achieved. Speaking to others donors about their experiences of funding the charity can also be helpful, if possible. This can help to ensure that you are funding the right charities and that you can trust that the charity will choose the best way to spend your donation.

Second, you could also ask for monitoring information from the charity. There are several ways of doing this: if your donation is relatively small (eg less than £10,000 or only a small proportion of a charity’s total income), you could ask the charity to send you any documentation they have on what the charity is doing in the country you are supporting and any reports or evaluations they are doing for other funders.

If your donation is larger, you could agree in more detail how the charity will report back to you. One way of doing this is to agree specific milestones upfront with the organisation about what they will achieve with your funding and by when. Milestones can range from organisational tasks (setting a budget), to outputs (support 100 people per day by April 2014), to the changes that will happen in people’s lives (tangible improvement of the confidence of the people on the programme by 2014).

It is important that milestones are agreed between you and the grantee, and not imposed by one of the parties. You should agree how often you want the charity to report on these milestones at the start of the grant.

The key to knowing that your money hasn’t been wasted is knowing what it has achieved, rather than what it has been spent on. We would deter you from asking for detailed breakdowns of expenses and encourage you instead to seek to understand what the charity is achieving with your funding. Understanding the change that’s happened in people’s lives as a result of your donation is much more rewarding than knowing what every pound has been spent on.
 
 
5.    I have been supporting a specific charity for the last 10 years. What is the best way to stop funding that charity?

Getting hooked into funding a charity is easy, but extracting yourself gracefully can be more difficult. If the charity relies on your donation to fund a particular project or parts of the organisation, more caution is needed. Withdrawing this funding might lead the charity to scale back or shut down some of its activities. In a situation like this, it is wise to plan in advance for your exit to minimise the effect it has on the charity.

It is key to warn the charity some months in advance that you are going to withdraw support, so they have the opportunity to look for other funders or to look at scaling back their work. You may want to help the charity find replacement funding, for example, by putting them in touch with other funders who might be interested.

Providing forewarning can help to limit the impact, but the right time to think about your exit strategy is before you even start funding. From the outset, it is good to consider how long you would like to commit to supporting a charity so that it can achieve what it aims to, and how the charity will continue its work after you are gone.

Of course, you may be so pleased with the impact your charity is making that you decide to continue your support. But being clear with the charity about your intentions from the outset will help you to build a good relationship, avoid unexpected surprises and help you and the charity make the difference you both want.
 
  
6.    I am interested in meeting other donors with the same interests as me, to either share lessons or to identify co-funding opportunities. How do I find such donors?

Donors can feel isolated in their giving. While they may meet advisors or staff from charities, they can struggle to find opportunities to network with other donors facing the same questions and challenges as themselves.

Meeting others in a similar position can help donors feel more confident about their giving. Frederick Mulder, founder of The Funding Network (TFN) says ‘I always thought that, if there were other givers around, I might have known the right questions to ask’. TFN sees members gather regularly to hear pitches from projects, and then make pledges to those that interest them. As well as being fun, giving as a group makes members feel they can create more impact with their money.

While events run by charities are also a good opportunity to meet other donors, they are usually not the right environment for free and open discussions about giving. To talk more openly with other donors and share experiences, there are organisations like The Environment Funders Network, which brings together individuals and grant-makers to discuss environment issues and funding.

Philanthropy UK holds a list of regional funder forums, and The Funding Network provides information on joining or setting up a local group in your area. In addition, many Community Foundations host pooled funds and Giving Circles—vehicles  through which donors jointly determine which issues and charities to co-fund.
 
 
7.    How old should my children be before engaging them in our family’s charitable activities?

It is a very personal decision as to how and when to include the younger generation in your family’s giving, and all families differ in their approach. However we would encourage families to introduce their children from an early age (seven or eight) to the concept of giving—why it is important, what it can achieve and how much fun it can be. Giving can be a great way of building family traditions, passing on values through different generations and educating children about the responsibilities of wealth.  

There are different approaches that families take to involving their children, depending on their ages. Some families divide the main funds into various pots with each family member given discretionary powers to fund as they like. In a similar vein, some families, particularly with younger children, operate a voucher system where the children are given charitable vouchers to distribute to the charity of their choice.

Other families choose a more consensual approach, where all family members choose causes and charities together. A different model is where families decided on the overarching themes together but different family members build up specialisms in particular sectors, select and fund charities in their specific area and then report back to the entire trustee board on the impact.

There is no right or wrong way, but what is key to good family giving is to be clear from the outset about which approach you’re taking and the different roles for each family member.  And most importantly, let the younger generation find their own passions with their giving so that their interest is maintained for their lifetime and is passed onto their own children.



 

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