AFR - Smart Giving

Choose a Gift That Matters, Australian Financial Review, 21 December 2010

With four days to go before Christmas, Australians everywhere are renewing our annual love affair with perfumed bath salts, tie sets and reindeer earrings.

But this season, why not break the family mould, and turn up with something that’s really going to turn heads around the barbie? In the name of aunt Phyllis, you can buy a chicken that will provide eggs to a family in Papua New Guinea. In honour of cousin Susie, you could pay a school teacher in a Ugandan refugee camp.

For dad, how about a pack of thermal blankets to assist kids sleeping rough in Kalgoorlie? And surely nothing would please grandpa more than knowing that his gift helped cover travel costs for a volunteer to provide business skills to Indigenous people in Wadeye?

As the average household grows increasingly affluent, more families than ever before have the opportunity to use Christmas as a chance to focus on people who are less fortunate. Yet my own analysis of charitable giving statistics suggests that the share of Australians who donate to charity has stayed fairly constant since the late-1970s. Economic growth creates the potential for us to become a more munificent nation – but rising incomes do not automatically translate into greater generosity.

Thanks to the internet, giving wisely is easier than ever before. Donate to a street-corner charity worker, and a good chunk of your money may go into paying their salary. But contribute online, and your hard-earned is more likely to get to where it’s needed. For quirky donation-gifts, it’s hard to beat KarmaCurrency.com.au which claims to have the largest registry in the southern hemisphere.

Locally, many charities are still running appeals for money and gifts for needy Australians. In my electorate, Gordon Ramsay of Kippax UnitingCare told me the story last week of a single mother with 3 children under the age of 10, who had lost all her children’s presents when floodwaters lapped around the base of her Christmas tree. When told that the charity could provide some new gifts, tears of relief rolled down her face.

But if you don’t have personal experience with a charity, how can you ensure that your gift goes where it will do the most good? Unfortunately, there are large disparities in effectiveness across charities, from those that rigorously focus their efforts on the neediest to organisations that aim to enrich their founders.

As Nicholas Kristof recently pointed out in the New York Times, rating charities is no easy business. A charity with a low ratio of administrative costs to total spending may be efficient – or it could just be underpaying its staff. A more useful guide is the share of the budget spent on fundraising. For example, the American Institute of Philanthropy (AIP) suggests that charities should not spend more than $25 to raise $100 in public support. The Institute also considers charities’ willingness to operate transparently, and marks down philanthropic bodies that hold excessive assets. In the most egregious cases, the AIP gives charities a grade of ‘F’.

Another major player in the US, CharityNavigator.org, looks at trends over time. Charities that are growing are marked up. Those that run a consistent deficit are rated down.  Like the AIP, CharityNavigator focuses primarily on a charity’s organisational effectiveness.

However, because charities can be streamlined but misguided, my favourite US charity-rating agency is GiveWell.org, which looks for evidence of program effectiveness and regular evaluation. GiveWell’s top-rated international charities are Village Reach and Stop TB (both global health charities), while its preferred US charities are the Nurse Family Partnership (early childhood intervention) and KIPP (school education).

If I could have a Christmas wish for the Australian philanthropic sector, it would be to see the development of our own charity-rating bodies that matched the depth and rigour of their US counterparts. Looking at the existing guides and websites that compile information about the Australian charitable sector, I get the sense that our raters need to be willing to ruffle a few more feathers in their search for the golden egg.

Yet don’t let the search for the perfect put you off doing good this season. There’s an outdoor toilet in Pakistan just waiting to be built in the name of uncle Albert. Just wait until you see the look on his face when he learns you’ve bought it for him.

Andrew Leigh is the federal member for Fraser, and the author of Disconnected (UNSW Press, 2010).