Don’t earmark your donation

Posted on February 5, 2010 at 1:39 pm

Although it’s common advice for donors, earmarking or restricting charitable donations is not a good idea. Instead of ensuring that your money is well spent, it can actually prevent the organization from using your donation where it can do the most good and may force them to overspend in areas where there is less need.

Is it an UNMET need?

Just because there is a need for for something, such as medical assistance, doesn’t mean it can’t be handled locally. Thailand has a very good public health system and the local hospitals were not destroyed in the tsunami. Although thousands of people were injured in the tsunami, local doctors and nurses were able to care for the injured themselves. A group of nurses sent over from Korea found themselves unhappily relegated to handing out aspirin for everyday maladies because they weren’t needed for anything more. Even in situations where the need does exceed local capacity there may be enough other organizations working to meet the need that it is no longer an unmet need.

Providing assistance in excess of need

Earmarking funds can force organizations to provide assistance far in excess of what is needed. After the tsunami disputes between neighbors were caused by the differences in the size of houses built by different organizations. When I met I met with researchers trying to determine how to get organizations to coordinated better they told me of one organization in Sri Lanka that was building what they described as mini-mansions. This was done because the organization had too much money earmarked for the number of houses they were building, so they were forced to overbuild to ensure that all the earmarked money was spent according to donor directives.

Other areas may have greater needs

In Indonesia problems arose because people living in the very poor inland areas often had greater needs than the people living in the richer coastal areas hit by the tsunami. Because donations were earmarked specifically for tsunami victims, many organizations could not expand their programs to meet the needs in neighboring areas.

More money may be donated than can be spent

An organization may receive more money than they can spend after certain disasters. There are limits to the amount an organization can grow and do, especially if there is a perceived need to spend the money within a few years. I respect Doctors without Borders/MSF for being willing to state publicly that they cannot guarantee that they can do any more programs than they already have the money to fund and additional donations may be used in other countries. There are likely other organizations that have also surpassed, or will surpass, the amount of money they can actually use for this particular disaster. If this is the case, not earmarking the funds will allow them to use the funds for disasters or complex emergencies that do not receive the same media coverage and therefore the same outpouring of generosity.

If you don’t trust the organization, don’t donate

If you don’t trust an organization to use your money to meet the greatest need, why would you trust them with other professional decisions. If the organization hasn’t earned your trust, then don’t donate. Find an organization you do trust and allow them to decide how your donation can do the most good.

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Podcasts:

Administration Costs and Earmarking Donations – co-hosted by this blog and GiveWell

Related Posts:

Making Merit

Good donorship and some early lessons from the earthquake response in Haiti

Don’t choose a charity for Haiti based on administration costs

Bad donor advice perpetuates bad aid practices

Cost efficient aid is not necessarily effective aid

Charity ratings based on administration costs can do more harm than good

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