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Sunday, May 6, 2012

worst way to judge a charity organization

Donating to charity is a worthy action. But which charity? Would it surprise you to know that the criterion that is most often used to decide that question is also the most unreliable? Would it surprise you more to know that many charities are aware of how flawed the criterion is and play it like a violin?

A few months ago a friend of mine who runs an international relief agency phoned me complaining about another charity.

"Do you know what they're doing?" he fumed. "They're buying medicine in Canada for 10 cents a pill and booking the American retail cost of the medicine as an in-kind contribution. Do you know the retail value? Seven bucks a pill. They're padding their in-kind contributions by millions of dollars."

I hung up a little perplexed at first. It wasn't like the organization was buying pills for a dime and selling them for $7; it was giving them away. Outside of inflating its donations for bragging rights, I couldn't see the harm. Then it hit me.

I went to the organization's website and there it was, one click off the home page: Nearly 90 percent of its donations in 2011 went directly to the group's programs. Its administrative costs? Just 5 percent of the budget. But if the agency was inflating in-kind contributions, it could hike the value of its donations to make its administrative costs seem smaller.

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