Finding and Funding Effective Nonprofit Organizations
“To give away money is an easy matter, and in any man’s power. But to decide to whom to give it, and how [much] and when, and for what purpose and how, is neither in every man’s power—nor an easy matter. Hence it is that such excellence is rare, praiseworthy, and noble.” Aristotle
Over 2,000 years ago, Aristotle already had an answer for people who ask today: “How hard can it be to give away money?” It is indeed quite easy to just give money away; but as many philanthropists have experienced, giving money away in a thoughtful and effective manner can be quite challenging. In particular, finding and funding effective nonprofit organizations is no easy matter.
Out of 1.5 million nonprofit organizations in the U.S., there are more than one million to which donors can contribute tax-deductible donations.¹ That number is growing every day. In the midst of a rapid expansion of the nonprofit sector, there are periodic high-profile scandals and reports of financial mismanagement of nonprofit organizations and philanthropic institutions. At the same time, societal needs continue to increase while government and other resources to address those needs have decreased.
All of these external factors have resulted in greater scrutiny of nonprofit organizations and an increased emphasis on nonprofit and philanthropic effectiveness. In this environment, many individual donors are asking “How can I be sure I’m giving to an effective organization?” And “How can I be a more effective philanthropist?
The purpose of this overview is to assist donors with the process of identifying and funding effective nonprofit organizations. In order to be successful, it is helpful to answer the following questions:
- How do I want to be engaged in my philanthropy?
- What kinds of organizations do I want to find and fund?
- What is “nonprofit effectiveness”?
- How do I find an effective nonprofit organization?
- How do I conduct due diligence on a nonprofit organization?
- How can I effectively fund an effective nonprofit?
- How can I be mindful of the power I have as a donor?
The rest of this article discusses each of these questions, including potential strategies to help you find and fund effective nonprofit organizations. A recommended resources section at the end of this publication provides additional information to further your learning.
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¹ NCCS Project Team. The Nonprofit Sector in Brief 2019. Urban Institute. June 2020.
Acknowledgement
The Goldman Sachs Philanthropy Fund acknowledges the author of this article, Melinda T. Tuan, an independent philanthropic consultant.
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