NCPA - National Center for Policy Analysis

The "Return" On Charitable Giving

December 22, 2000

Americans are remarkably generous when it comes to charitable contributions. But if we think of giving as an investment, and the results of the charity as a product, how successful has the investment been?

  • Seven of ten households made a contribution of some sort in 1999.
  • Charitable giving surpassed $190 billion last year.
  • Overall, the non-profit sector -- charities, foundations, social welfare organizations -- accounts for more than six percent of the nation's economy.

But because the results are not tracked, it's hard to know how well the money is being spent. Observers believe that as donors switch from traditional do-good charities to nonprofit businesses designed to provide social services such as job training, donors will expect businesslike outcomes in exchange for their gifts in the form of return and performance.

One organization, the San Francisco-based Roberts Enterprise Development Fund, developed a formula that measures the outcomes of non-profit businesses.

  • The calculation includes the program's costs (grants and contributions) and benefits -- such as money saved on homeless shelters, health care, food stamps, etc.
  • The result is a set of indices called the Social Return on Investment.

While analysts agree that not every charity can be measured precisely, those that can provide some measure of benchmarking are bound to have an advantage.

Source: Editorial, "Push For 'Return' on Charity Helps Those Who Give, Get," USA Today, December 22, 2000.

 

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