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The team from Charity Navigator, the nation's largest independent charity evaluator and leading donor advocate, shares their thoughts on emerging nonprofit-sector issues and offers tips to better inform your intelligent giving decisions.

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Wednesday, December 30, 2020

Building A Philanthropic Strategy in 2021

When we ushered in 2020 a year ago, none of us could have imagined what the next 12 months would bring.  We began the year with the usual and customary revelry, resolutions, and hopes for the future. Two months in, we were on the verge of what would be the beginning of an almost total nationwide lockdown.  It was a precautionary measure to slow the transmission of a deadly disease abbreviated as ‘COVID-19’.  We are now hopeful that, 10 months into the pandemic, we are turning a corner and nearing the end of an unprecedented set of circumstances.

2020 had extreme lows and highs.  There was enormous sadness for families who lost loved ones due to the virus, and millions who, as a consequence of the pandemic, became unemployed as businesses closed or implemented reductions in force.  Conversely, there was an outpouring of generosity, which we at Charity Navigator saw firsthand.  Charitable giving was above and beyond our expectations.  

As we reported several weeks ago, on Giving Tuesday 2020, Charity Navigator achieved a major milestone.  On that day, the total donated through our Giving Basket, a tool that empowers  visitors to Charity Navigator to donate to nonprofits in one easy checkout, reached $100 million.  While the $100 million was donated over the course of five years, on December 1, 2020, the outpouring of generosity resulted in a record-breaking day in a record-breaking year with an astonishing 34% increase in dollars raised for over 3,600 nonprofits.

Although we are hopefully optimistic, we cannot be presumptuous in our expectations that this year will see a repeat of the overwhelming financial support presented to nonprofits.  But, we'd like to harness what we saw last year to encourage donors to commit what they can, and in a manner that allows them to shift their thinking from being more of a casual donor to a committed investor in the causes they care most about.

Here’s what we’d suggest you consider as you map out your philanthropic strategy in 2021:

  • Be selective and intentional.  Narrowing down which organizations you want to support is a big decision. Reactive donations to a cause or crisis that resonates with you brings feelings of excitement, satisfaction, and pride.  We are often heartened by the outpouring of support for nonprofits on our Hot Topics lists, but, if you wish for your giving to be as impactful as possible, consider these steps:

    • Make a list of the types of causes you believe in.  Be broad if you have to, then narrow the list of causes to a handful.  Remember, you may want to save the world, but you cannot expect to do it all yourself. So, be selective.

    • Think about location.  Are you seeking to support nonprofits doing work locally in your community, for example, or one doing work in your state, region, nationally, or internationally?

    • Next, consider how much of your donation makes a difference, i.e., its impact, on the lives of those the organization serves.  Last fall, we began rolling out impact ratings on our nonprofit profiles with the intent to provide answers to the question, ‘What has the organization been able to accomplish with the financial support received from donors, and is it cost-effective?’  Based on our criteria and methodology, points are assessed for a rating. If an organization is transparent, impact information will be publicly-available, including on their website, in their annual report, shared in their newsletters, and on their social media channels.  We have learned through our own research that donors are now hyper-aware of impact and there is an expectation that nonprofits will be forthcoming with this information.   

    • Is the organization that you seek to support engaging?  By this we mean, do you feel that they provide you with opportunities to learn about what they’re doing?  Do they encourage external ideas and act on these ideas occasionally?  In other words, are they listening to you as a constituent?  Even if they are not in direct constant contact, do you feel that their communication leads you to believe that they’re improving on their programs and services so that there is a greater benefit?

  • Do your research, but without comprehension, it will be largely unhelpful.  Our website has a plethora of information beyond the profiles of rated organizations with their Form 990 data, but do you understand what it all means?  Remember, all charities do not operate the same and, therefore, all charities do not have the same financial distributions across their organization. There isn’t a Form 990 apples-to-apples comparison. What one charity spends on programs and services, administrative overhead, and salaries, may be different from another. You may be able to look at cause areas similarly, but size matters.  A relief organization with a $3 million budget is completely different from one with a $250,000 budget, even if they’re both providing services nationally and internationally in the same locations. Perspective is important. But there’s more. Charity Navigator also provides Tips for Donors, found on the top level navigation on our website, with recommendations lessening their chances of falling afoul to fraud, explanations about nonprofit operations and definitions, and general tax information.   Finally, making bold decisions about one's charitable giving is important on your philanthropic journey.  When faced with cautionary information, it is up to the donor to decide whether or not pursuing support of an organization remains in their best interest. Charity Navigator provides such cautions in the form of CN Advisories. The CN Advisory System provides information about alleged or confirmed illegal activity or ethical breaches, and the advisories in gradients of low, medium, and high are updated periodically.  The above are just a few examples of what should be a part of your standard research arsenal.

  • Become a sustaining donor and you’ll be a charity’s best friend.  It takes money to operate a nonprofit, even if they are staffed by volunteers. Organizations look ahead at their fiscal year, and they make assessments about their programs and services, what their expenses will look like, if there’s an emergency fund for unplanned circumstances, among other things. By having a donor that they can rely on month in, month out, they’re able to make better decisions.  When you see a request from a nonprofit asking for a monthly commitment, consider doing so.  This way, the organization knows how well their finances will flow during the year. A one-time-donation is always appreciated, of course, but automatic monthly giving or even quarterly giving (if this is an option) is even better. For example, instead of giving a one-time $60 donation, why not spread it out as a $5 donation over 12 months?  Sustained giving makes the organization feel secure, and for you as a donor, you’ll know your money is earmarked for all the good the charity has planned on the calendar. Who wouldn’t want to be a part of this?

A new year provides us all with a fresh start.  As you envision what you’d like to see or accomplish in 2021, we hope that you’ll consider making these choices with your philanthropy.  Nonprofits rely on donors to help them to achieve the goals they’ve set out in their mission, but, by operating as a partner, you become more invested in the mission itself.  Begin your journey on the Charity Navigator website for highly rated nonprofits (3- and 4-Star, as well as Encompass rated with scores of 75 and above) that resonate with your values and passions, and we wish you the very best in 2021.

Written by Stacy Steele, Director of Marketing and Communications at Charity Navigator.

As a 501 (c) (3) organization itself, Charity Navigator depends on public support to help donors make informed choices. Please consider investing in the future of Charity Navigator by making a donation today.  Donate now >>

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