“Charities must clearly indicate the leeway they have to finance” – Belgium

It sounds like an annual tradition: malpractice that comes to light in charity. This time it’s Poverello’s turn, one of the biggest homeless organizations. According to reporters from Knack, Le Vif and RTBF, Poverello is sitting on a mountain of money worth more than 10 million euros. Poverello seems to have relapsed into the hypocrisy that we have seen for centuries in the Catholic Church: defending the poor, while amassing a lot of wealth for oneself. This Poverello incident is bad for the image of the charitable sector. Hence the importance of emphasizing again: most charities are good.

Creating wealth doesn’t always have to be bad for a good cause. In an economic crisis there are more homeless people and donors give less money to homeless organizations. A homeless organization can then put money aside as a precaution to be more effective in the event of a new economic crisis. A charity may also decide to save money, waiting to research more effective projects, and then be able to then spend the extra money saved on the projects found to be the most effective.

So what’s the deal with Poverello? Lack of transparency. Organizations that accumulate significant capital should communicate about it transparently, with a clear political plan. This makes it clear to donors where and when the money saved will be used. Poverello underestimates the importance of such transparency.

But there is a more structural problem with charities: some charities receive more money than they can actually use. Other charities have been more overlooked and still have plenty of room for additional funding. These neglected charities are better able to convert an extra euro donated into, for example, an extra life saved. It is important that charities communicate clearly about the cash flow available to them. The tsunami in Japan ten years ago is a good example. Due to the media attention, emergency aid organizations suddenly received many donations for the affected coastal areas in Japan. It is to the credit of organizations such as Médecins Sans Frontières for having sent their donors the message that they had indeed already received enough money for the victims in Japan. The extra donations could no longer be usefully spent. These humanitarian organizations asked their donors if they could use the money they received for reconstruction in Japan for other projects elsewhere in the world. The charitable sector gains credibility when charities dare to say that they have already received enough money for a particular problem.

This Effective altruism is an international movement which seeks the most effective charities. Typically, for example, the bigger a problem, the more that problem can be solved, and the more neglected it is, the more profitable the charity that is tackling that problem. Some overlooked charities focus on big problems that have workable solutions. And these charities can easily achieve ten or even a hundred times more good with the same euro.

It is not always clear to a donor which charities are the most effective. Because a small minority of charities are much more effective than the vast majority, this knowledge of effectiveness is very important. The extent to which the problem has been overlooked plays a major role in this regard. A good example is the effectively altruistic organization Give well, which annually gives its best recommendations from the most effective charities. A few years ago, one of those recommended charities, the Against Malaria Foundation, suddenly received a lot of money from wealthy philanthropists. Because this charity could not quickly increase its capacity, it could no longer quickly convert an extra euro donated into a positive result. They told GiveWell about it, which is why GiveWell has taken this charity off its list of recommendations for a while. In the meantime, this organization has been able to expand its activities to other poor countries, they again have room for additional donations and they are back on the list of top recommendations. All of this was only possible thanks to the high degree of transparency of these organizations. In the GiveWell example, one might think that thousands of additional children’s lives have already been saved thanks to such transparency.

You are always looking for a good cause for an end of year gift: on the website of Efficient Altruism Belgium you will find an overview of the most effective tax-deductible charities.

Stijn Bruers is research assistant in economics at KULeuven and president of Effective Altruism Belgium

It sounds like an annual tradition: malpractice that is exposed in charity. This time it’s Poverello’s turn, one of the biggest homeless organizations. According to reporters from Knack, Le Vif and RTBF, Poverello is sitting on a mountain of money worth more than 10 million euros. Poverello seems to have relapsed into the hypocrisy that we have seen for centuries in the Catholic Church: defending the poor, while amassing a lot of wealth for oneself. This Poverello incident is bad for the image of the charitable sector. Hence the importance of stressing again: most charities are good. Creating wealth doesn’t always have to be bad for a good cause. In an economic crisis there are more homeless people and donors give less money to homeless organizations. A homeless organization can then put money aside as a precaution to be more effective in the event of a new economic crisis. A charity may also decide to save money, waiting to research more effective projects, and then be able to then spend the extra money saved on the projects found to be the most effective. So what’s the deal with Poverello? Lack of transparency. Organizations that accumulate significant capital should communicate about it transparently, with a clear political plan. This makes it clear to donors where and when the money saved will be used. Poverello underestimates the importance of such transparency, but there is a more structural problem with charities: some charities receive more money than they can use effectively. Other charities have been more overlooked and still have plenty of room for additional funding. These neglected charities are better able to convert an extra euro donated into, for example, an extra life saved. It is important that charities communicate clearly about the cash flow available to them. The tsunami in Japan ten years ago is a good example. Due to the media attention, emergency aid organizations suddenly received many donations for the affected coastal areas in Japan. It is to the credit of organizations such as Médecins Sans Frontières for having sent their donors the message that they had indeed already received enough money for the victims in Japan. The extra donations could no longer be usefully spent. These humanitarian organizations asked their donors if they could use the money they received for reconstruction in Japan for other projects elsewhere in the world. The charitable sector gains credibility when charities dare to say that they have already received enough money for a given problem. Effective Altruism is an international movement seeking the most effective charities. Typically, for example, the bigger a problem, the more that problem can be solved, and the more neglected it is, the more profitable the charity that is tackling that problem. Some overlooked charities focus on big problems that have workable solutions. And these charities can easily achieve ten or even a hundred times more good with the same euro. It is not always clear to a donor which charities are the most effective. Because a small minority of charities are much more effective than the vast majority, this knowledge of effectiveness is very important. The extent to which the problem has been overlooked plays a major role in this regard. A good example is the effectively altruistic organization GiveWell, which annually gives its top recommendations from the most effective charities. A few years ago, one of those recommended charities, the Against Malaria Foundation, suddenly received a lot of money from wealthy philanthropists. Because this charity could not quickly increase its capacity, so it was no longer able to quickly convert an extra euro given into a positive result. They told GiveWell about it, which is why GiveWell has taken this charity off its list of recommendations for a while. In the meantime, this organization has been able to expand its activities to other poor countries, they again have room for additional donations and they are back on the list of top recommendations. All this was only possible thanks to the high degree of transparency of these organizations. In the example of GiveWell, one can suspect that thousands of additional children’s lives have already been saved thanks to such transparency. You are always looking for a good cause for a holiday gift: on the website of Effective Altruism Belgium you will find an overview of the most effective tax-deductible charities.