Holding Charities Accountable for Their Accounting

May 4th, 2011

schoolboys-afghanistan.jpeg
(photo credit: isafmedia)

“People like to read the books,” says Daniel Borochoff, president and founder of the American Institute of Philanthropy in Chicago. “But the expense statement tells a story, too. Not as entertaining, but perhaps just as revealing.”

This seems like an appropriate follow-up to yesterday’s post about operational costs… A prominent organization dedicated to building schools and increasing access to education in Afghanistan – the Central Asia Institute – has recently gotten some bad press about its alleged money mismanagement.

Well, not money mismanagement exactly… more like financial nondisclosure. State auditors, donors, and charity ratings organizations have been surprised to find that more than half the CAI’s annual budget was spent in the U.S. instead of being sent overseas to pay for bricks and pencils.

Now, no one’s being accused of embezzlement – but it does seem like, at the very least, the organization’s finances were pretty incompetently handled. This is a great example of why it’s so important to do your homework before you give. Most charities are required to make their financial statements public, and you can use sites like GuideStar.org to help you get a better picture of where a nonprofit’s money is really being spent.

It’s also a pretty good example of how important it is to be on top of your finances. Even if you’re a great person (or organization), someday you’re going to be held responsible for the money coming in and going out of your account. SPEND.GROW.GIVE. will help you keep track, but you can get involved by setting a budget and sitting down with your advisor to talk about where you want your money to go.

What happens when aid organizations are destroyed?

May 3rd, 2011

Cullman-Alabama-EMS.jpeg
(photo credit: southerntabitha)

We’ve written before about how to give smart in the wake of a disaster, and unfortunately the situation just keeps coming up. While not as devastating as the earthquake and tsunami that devastated Japan in April, the string of tornadoes that tore up the American South last week has left hundreds dead and thousands homeless.

One of the pieces of advice we passed on is to stay thoughtful when you’re practicing “crisis philanthropy.” One way to do that is to focus your giving on organizations with a local presence in the affected area. But what if there are none left?

That isn’t exactly the situation in Tuscaloosa, but the Salvation Army – a local charity giant – lost two buildings in the tornado, both of which could have really helped with relief efforts. We thought this might be a good time to point out the differences between program costs and operational costs, which are the two types of expenses you’re funding when you write a check to your favorite charity.

  • - Program costs refer to money spent on the projects you hear about during fundraisers – feeding the poor, building temporary housing for flood victims. The exciting stuff.
  • - Operational costs (sometimes called overhead) refer to more boring stuff – the electric bill, the salary of the person who answers the phone, the new office downtown.

People tend to want their money to go to program costs because it makes them feel good about themselves. But in most cases, paying for operational costs is just as important. Who will administer lifesaving vaccinations if an organization can’t afford to pay clinic staff? And who knows how much more prepared local organizations could have been had they had the extra cash to spend on additional locations or a disaster preparedness program?

What happens when disaster aid organizations are destroyed?

May 3rd, 2011

Cullman-Alabama-EMS.jpeg
(photo credit: southerntabitha)

We’ve written before about how to give smart in the wake of a disaster, and unfortunately the situation just keeps coming up. While not as devastating as the earthquake and tsunami that devastated Japan in April, the string of tornadoes that tore up the American South last week has left hundreds dead and thousands homeless.

One of the pieces of advice we passed on is to stay thoughtful when you’re practicing “crisis philanthropy.” One way to do that is to focus your giving on organizations with a local presence in the affected area. But what if there are none left?

That isn’t exactly the situation in Tuscaloosa, but the Salvation Army – a local charity giant – lost two buildings in the tornado, both of which could have really helped with relief efforts. We thought this might be a good time to point out the differences between program costs and operational costs, which are the two types of expenses you’re funding when you write a check to your favorite charity.

  • - Program costs refer to money spent on the projects you hear about during fundraisers – feeding the poor, building temporary housing for flood victims. The exciting stuff.
  • - Operational costs (sometimes called overhead) refer to more boring stuff – the electric bill, the salary of the person who answers the phone, the new office downtown.

People tend to want their money to go to program costs because it makes them feel good about themselves. But in most cases, paying for operational costs is just as important. Who will administer lifesaving vaccinations if an organization can’t afford to pay clinic staff? And who knows how much more prepared local organizations could have been had they had the extra cash to spend on additional locations or a disaster preparedness program?

Strategies for Change Part 3: Direct Service

May 2nd, 2011

Welcome to our new series, showing you how the changes you want to see in the world actually happen!

Strategies for Change, Part 3: Direct Service

May 2nd, 2011

Welcome to our new series, showing you how the changes you want to see in the world actually happen!

Check out our other SfC shorts:

Strategies for Change: Introduction
Strategies for Change, Part 1: Activism
Strategies for Change, Part 2: Advocacy
Strategies for Change, Part 4: Education

Student Loan Debt Exceeds Credit Card Debt for the First Time in History

April 29th, 2011


(credit: scui3asteveo)

Q. What’s the difference between defaulting on your student loans and defaulting on your credit card debt?

A. If you fall into a hopeless debt spiral because you can’t pay back your credit card company or your mortgage, you can declare bankruptcy and get a clean credit slate after a few years. If you default on your student loans, you can never escape. Ever.

Unfortunately, it looks like a lot of college grads are about to find themselves with a black mark on their permanent records. Your credit history, unlike that mythical permanent record your teachers threatened you with in 4th grade, can really affect your opportunities in life. It can determine whether or not you get a credit card, a school or car loan, or a mortgage on a new home. Some employers even check credit reports to get the dirt on potential new hires.

Check out this article on good.is for more fun details and a glance at the ever-increasing Student Loan Debt Clock!

See also: this depressing article on “mal-employed” college grads.

Also see also: this list of the “20 most useless college majors,” which shows the limited mid-career earning potential for chemistry majors, among other obvious low-paying career tracks (hello, art history scholars!) Of course, being “useless” financially doesn’t mean your degree of choice won’t make your heart soar like an eagle. We recommend you use your own criteria for success when making major career choices. And don’t default on your student loans.

Student Loan Debt Exceeds Credit Card Debt for the First Time in History

April 29th, 2011


(credit: scui3asteveo)

Q. What’s the difference between defaulting on your student loans and defaulting on your credit card debt?

A. If you fall into a hopeless debt spiral because you can’t pay back your credit card company or your mortgage, you can declare bankruptcy and get a clean credit slate after a few years. If you default on your student loans, you can never escape. Ever.

Unfortunately, it looks like a lot of college grads are about to find themselves with a black mark on their permanent records. Your credit history, unlike that mythical permanent record your teachers threatened you with in 4th grade, can really affect your opportunities in life. It can determine whether or not you get a credit card, a school or car loan, or a mortgage on a new home. Some employers even check credit reports to get the dirt on potential new hires.

Check out this article on good.is for more fun details and a glance at the ever-increasing Student Loan Debt Clock!

See also: this depressing article on “mal-employed” college grads.

Also see also: this list of the “20 most useless college majors,” which shows the limited mid-career earning potential for chemistry majors, among other obvious low-paying career tracks (hello, art history scholars!) Of course, being “useless” financially doesn’t mean your degree of choice won’t make your heart soar like an eagle. We recommend you use your own criteria for success when making major career choices. And don’t default on your student loans.

A Surprising Challenge to the Future of Solar and Wind Power

April 28th, 2011

solar-panels-in-snow.jpeg
(credit: Mike Weston)

According to the International Energy Agency, cutting carbon dioxide emissions in half by 2050 will require almost half the world’s energy to come from sustainable sources (like sun and wind, instead of oil and coal).

These alternative energy sources are getting cheaper and more popular in the U.S., but the New York Times has just revealed a little-known fact about the solar and wind energy we’re learning to love: it’s backed up by coal power.

That’s right. Because the sun isn’t always shining and the wind isn’t always blowing, energy from clean sources can’t consistently meet the needs of our power-hungry populace. So when output dips on the wind farms, it has to be supplemented by old-fashioned power sources.

And the power plants of yesteryear just aren’t built for that kind of one-and-off output. The bottom line: Either alternative energy has to advance to the point of not needing supplementation, or traditional power plants need to spend a lot of money updating their equipment.

We wonder… could there be some financial incentive that would get the old energy companies to play nice with the new ones?

A Surprising Challenge to the Future of Solar and Wind Power

April 27th, 2011

solar-panels-in-snow.jpeg
(credit: Mike Weston)

According to the International Energy Agency, cutting carbon dioxide emissions in half by 2050 will require almost half the world’s energy to come from sustainable sources (like sun and wind, instead of oil and coal).

These alternative energy sources are getting cheaper and more popular in the U.S., but the New York Times has just revealed a little-known fact about the solar and wind energy we’re learning to love: it’s backed up by coal power.

That’s right. Because the sun isn’t always shining and the wind isn’t always blowing, energy from clean sources can’t consistently meet the needs of our power-hungry populace. So when output dips on the wind farms, it has to be supplemented by old-fashioned power sources.

And the power plants of yesteryear just aren’t built for that kind of one-and-off output. The bottom line: Either alternative energy has to advance to the point of not needing supplementation, or traditional power plants need to spend a lot of money updating their equipment.

We wonder… could there be some financial incentive that would get the old energy companies to play nice with the new ones?

If sustainable energy is your thing, make a statement. Start your Mission Statement in Learn to Give.

A Refreshing New Wall Street Scandal

April 27th, 2011

Raj-Rajaratnam.png
(credit: REUTERS/ Shannon Stapleton)

Ah, spring! Baby birds stretch their wings, trees release deadly spores, and Wall Street awakens from its long post-Ponzi slumber. You know, Ponzi. Scheme. Ponzi scheme. Madoff?

This guy.

But we digress. Today’s news is about Raj Rajaratnam, the founder of a successful hedge fund called Galleon Group. He’s been accused of insider trading – this is, unfairly using information from outside sources in order to make a big profit for his company (and himself).

Here’s what you need to know about Bernie and Raj:

  • 1. Madoff has already been tried, convicted, and sent to prison for 150 years. Raj is just on trial – and he’s still innocent until proven guilty. If he is proven guilty, though, he’ll be in the clink with Bernard for up to 25 years.
  • 2. Madoff ran a Ponzi scheme, in which he collected money from new investors and handed much of it over to existing investors, calling it a return on their investment. In other words, he just moved the money around instead of investing it. It involved a huge network of people, funds, customers, billions of dollars, and many, many handshakes.
  • Galleon Group is accused of insider trading by using a small network of tipsters from different companies. These tipsters [allegedly] shared valuable corporate secrets with Galleon, and Galleon [allegedly] used that information to make a killing on the trading floor. All very fine line behavior.

Now you know. Stay tuned!

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