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Donating to a Non-Profit: How to get the most from your dollar

SeekingAlpha is a forum for investment ideas, but sometimes the best investment one can make is a donation to a non-profit organization. Making a positive difference is as easy as donating to the correct organization, not to mention donations are tax deductible. In choosing the perfect firm for donation of your hard earned capital, this author has found that many investors hold a common misconception.

In the for-profit universe, money is the goal. The profit-seeking firm builds a strategy designed to maximize profit for shareholders. In the non-profit world, money is just an input. Impact is the ultimate goal. It does not matter how much money is raised if this cannot be translated into action. With this in mind, here are four questions a discerning philanthropist should ask before committing funds to a non-profit:

 
What are the firm's overhead and administrative costs?
It is important to determine what percentage of your donation is going towards the utilities bill of an office headquarters or employee salaries?
 
How efficiently will your money be used?
The best firms are self-evaluating, and some offer metrics (when applicable) describing exactly what each dollar will accomplish.
 
Does the firm have a proven track record of results?
Is there a clear channel by which money is leveraged, or is there an opportunity that a portion of the donation could be diverted by unforeseen costs?
 
What will be the total impact of your donation over time?
This is the “teach a man to fish” issue. Does the donation provide a one-time benefit, or does it have a lasting impact? This is the difference between offering free food to a starving child, and investing in agricultural infrastructure for his/her geographical area. The latter would be a more efficient allocation of funds because it would potentially continue to provide food indefinitely.

 

An example of a Non-Profit firm, which excels at turning donation dollars into real world results is the Smile Train.

The Smile Train

This non-profit organization provides free reparative surgery for cleft lip and palate to underprivileged children internationally. Cleft Lip and Palate are birth defects in which the lip or palate is not properly connected together or split at birth. This can be permanently corrected with a cosmetic surgery to close the cleft. Without this corrective surgery, young children in poorer countries are unable to eat, drink, or speak properly. The output goal of this firm is to provide as many free surgeries as possible. The output is measurable, it costs $250 to provide one child with surgery and ancillary treatments such as dental work and speech therapy. Administrative and overhead costs are paid for by board member contributions, leaving public donations to be used towards surgery.

The Smile Train accomplishes more than 100,000 surgeries a year with only 42 paid employees worldwide. Operations are already established in more than 77 countries. Smile Train has trained more than 60,000 surgeons in more than 140 countries over the last decade. By doing this, the Smile Train empowers third world countries to provide surgeries on their own. In addition to providing lasting impact, this strategy of using local doctors greatly reduces costs. Previously, the prevalent strategy was to fly American doctors in to perform each surgery, only to send them home again.

This organization does not try to be all things to all people. It has a single focus to which it devotes all of its efforts. The Smile Train has become better at turning the input of money into the output of cleft surgeries for children than any other organization.

 

Note: This is not an attempt to elicit donations to a specific organization; examples used are for illustrative purposes only. This author’s goal is to enable readers to achieve maximum impact from their charitable donations. 



Disclosure: This author runs a charitable satellite fund dedicated to the Smile Train.