We are currently updating our review of Nurse-Family Partnership National Service Office (NFP NSO) (one of our top-rated charities). We did our main review of NFP NSO in 2008 and since then we have continued to develop our research process, and in particular our approach to assessing room for more funding, i.e., how much more money a charity can productively use. At this point we feel that NFP NSO has room for more funding only over the long term, and that potential donors should take this into account.
This conclusion is not final, but it seems like an observation worth sharing now. We plan to publish our updated review of NFP NSO, including our final take on its need for individuals’ donations, later this year.
Details: In 2007, NFP NSO launched a campaign to raise money so that NFP NSO could become, over a ten-year period, self-sustaining on the fees it collects from local NFP programs. In 2007, NFP NSO successfully got commitments of approximately $50 million for this purpose, the full amount it sought (see Annual Report 2007 (PDF), page 31, and our phone conversation with NFP NSO (DOC)).
Since then, NFP NSO has revised its cash flow projections, making the projections less optimistic in light of the weak economy. It has shared these cash flow projections for our eyes only. The projections anticipate that donations will be needed for several years to cover the gap between earned revenues (from local NFP programs) and expenses, and that it will take until 2021 to get to the point where earned revenues cover 98% of all expenses.
From these projections, it appears to us that existing commitments can sustain NFP NSO through 2015, at which point the organization will likely need more donations in order to continue operating. It also seems likely to us that any additional donations in the meantime will be essentially “held for a rainy day,” i.e., saved for the point at which they are needed to cover this gap. Because NFP NSO’s goal is to become self-sustaining on earned revenue, it seems unlikely that it would use more donations to directly increase the reach of its program (e.g., through providing its services to local NFP offices for free or reduced prices).
We feel that NFP NSO is an outstanding organization, with a stronger case for its effectiveness than any other organization we know of doing work on U.S. equality of opportunity. Therefore, we very much hope that it raises the funds that are necessary to continue operating, and in plenty of time. However, it seems important to note that its need for more funds - and ability to translate them into more outcomes - is fairly far off, when compared to that of (for example) VillageReach. (Note that we don’t mean to compare NFP NSO to VillageReach in terms of outcomes, or in general. We’re simply contrasting longer-term vs. shorter-term room for more funding.)
Note: NFP NSO reviewed and approved this post prior to publication.
It should be noted that there may be tax advantages to delaying a donation in the case where an organization is not going to spend the money right away. When an individual donates appreciated property, tax rules may permit a deduction for the full value at the time of the donation, without requiring payment of capital gains tax. Compare this with the option of donating early, where the deduction is for the (smaller) value at the time of the donation and the organization still does not pay any capital gains tax.
Naturally, all the normal disclaimers apply: This is not tax advice, I am not a tax advisor, you should consult a tax professional who is licensed to practice in your jurisdiction, and all tax rules have an exception (including this one).
Cheers,
–Ian
In any “room for more funding” analysis, it might be helpful to clarify whether the baseline assumption is that the previous year’s donors all donate the same as they did in the previous year, or alternatively is the baseline that nobody donates anything to that charity (and thus the organization presumably shuts down).
Presume that a charity is deemed by GiveWell as doing high-impact, valuable work, but that it has little “room for more funding”.
If all of a charity’s donors responded to the “no room for more funding” analysis by not donating anything to the charity at all, then they wouldn’t be able to fund their current operations, and this we would all agree would be bad, right?
My sole point here is to try and sharpen the semantics around the idea “room for more funding” and clarify how it should inform the decisions of someone who has donated to a given charity in the past.
David - good point. The way we generally do “room for more funding” analysis is to start with the charity’s projected budget and activities, and ask how its projected activities would change if its expenses came in higher than anticipated. Thus, we’re effectively focusing on the case for more funding over and above what the charity expects from non-GiveWell-related sources. We generally assume a baseline of $0 in GiveWell-attributable funds (we don’t assume that last year’s GiveWell-related donors will repeat).
When we say a charity has no “room for more funding,” we suggest interpreting this as “If I’m giving primarily based on GiveWell’s analysis, I shouldn’t give; if I’m an existing supporter of this charity for reasons other than GiveWell’s analysis, it may be a good idea to continue my support.”