Nonprofit Chronicles

Journalism about nonprofit organizations and their impact

priceIt’s strange, when you think about it. Most things have a price. A big box of Cheerios costs $3.98. A 1 lb. bag of Starbucks Breakfast Blend costs $12.95. An iPhone 7 costs $649.

But when we donate to charities, what are we buying? And at what cost? That’s more difficult — indeed, it’s often impossible — to know. So how, then, can we compare charities, the way we compare Cheerios to Wheaties, Starbucks to Dunkin’ Donuts or an iPhone to a Samsung Galaxy?

Alas, we can’t.

This makes it harder than it should be to steer our donations to the nonprofits that do the most good.

I’ve been thinking a lot lately about this question of costs. (Please see below: I would love to hear from readers about this.)  Recently, I had the opportunity to discuss it with a couple of staff members at a global federation of nonprofits called WaterAid. Sarah Dobsevage is director of strategic partnerships at WaterAid America and Vincent Casey is senior WASH (which stands for water, sanitation and hygiene) advisor at WaterAid International in London. WaterAid is a global federation of nonprofits that collects money in rich countries and spends most of it in 38 poor countries, working with local governments and nonprofits to “transform the lives of the poorest and most marginalized people by improving access to clean water, sanitation and hygiene.

As I’ve written before (see my 2015 blogpost, Water Taps and Information Gaps), there are dozens, perhaps hundreds, of charities that provide water and sanitation to the poor. Among those listed at GuideStar are charity: water, water.org, Water for People, Bread and Water for Africa, Living Water International, Millenium Water Alliance, One Drop Foundation, World Help, and Water is Life. Big anti-poverty NGOs including Care, Catholic Relief Services, Save the Children and WorldVision operate their own WASH programs. They’re funded by governments, foundations, companies and the rest of us.

The problem for anyone who wants to support providing water and sanitation to the poor is figuring out which nonprofits are effective and efficient. Can transparency around pricing help solve that problem? Or, paradoxically, could pricing get in the way of smarter giving? 

The first thing to know about providing clean water to the global poor is that it’s more complicated that you’d think. The engineering behind hand-dug wells, drilled wells, rainwater catchment systems, gravity-fed schemes, water purification systems and latrines is relatively straightforward. But complexities arise because every place is different, support from local governments, toilets or hygiene training may or may not be part of a program and, most important, sustaining access to clean water is crucial. Improve International, a small NGO which monitors the sector, says “poor functionality and failure rates for water systems are still high after decades of development.” Maybe the smart money in the WASH sector should go to those organizations that push governments to deliver clean water to their citizens. But how do you put a price on that?

Dollars and non-sense

WaterAid, it turns out, does plenty of government advocacy. But, as Sarah Dobsevage explained to me, some donors hanker to know what they are buying with their donations. That leads to this claim, found on the statistics page of the WaterAid America website:

Just $24 can help provide one person with access to clean water

Hmm. No source is given. Does the estimate take into account work on sanitation and hygiene, or just clean water? Does it include the costs of maintaining sustaining a well or tap over the years? The costs of advocacy? And what does “can help” mean, anyway?

I told Dobsevage that I was skeptical about that  number.

“I’m equally skeptical about that number,” she replied, to her credit.

Coming up with a figure like that isn’t hard. You can take the budget of a water charity, and simply divide it by the number of water points installed or the number of people served. “You can always slice and dice numbers and come up with a nice average,” Dobsevage said. 

The trouble is, water nonprofits do different things in different places, so the figure is meaningless. “It’s not like we’re providing services the way a utility would, where they have names of people and they know much they use,” Dobsevage said.

And yet most water charities make similar claims.

charity: water says:  “$30 can bring clean water to one person every month.”

One Drop says, more vaguely: “$100 can create winning sustainable conditions in which a person’s circumstances are positively changed, providing empowerment and self-reliance.”

Care promises to deliver a three-month emergency supply of water for $30.

Save the Children offers”gifts of joy” that include a school water point for $2,000.

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World Vision: “Your gift of $50 provides one person with clean water that lasts!” Or not.

water.org says: “On average, it costs about $25 to provide safe water to one person.

World Vision says: “Your gift of $50 provides one person with clean water that lasts!”

Water.org is one of the few NGOs to explain its price, saying: “This cost is derived from the total organizational costs divided by the total number of people served during the fiscal years of 2010-2013. This equals $23.23, however for the purposes of our messaging we round up to $25.” In the fine print, World Vision says: “We promise to honor your generosity and use your donation in the most effective way possible… Each item is representative of the gift category in which it appears and donations will be used to provide assistance where it is needed most within that category or to address a similar need.”  

Put simply, these prices are more about marketing than they are about costs. Years ago GiveWell described pitches like these — popular ones are about sponsoring a child or buying livestock for a poor family — as “donor illusions.”

Dobsevage says the understandable desire of donors to see just what their money is buying, and at what cost, can lead to budgeting contortions. Corporate donors can be especially demanding, she told me.

“Some of them expect a ridiculous return on investment, quote, unquote,” she said. “They want to see $10 per person. They like the flash. They want the marketing…All that means is that the organization is absorbing the other costs. It doesn’t actually change the costs.”

Getting beyond prices

But, if donors can’t engage in comparative shopping for a well or buy clean water for a poor little boy for a year, how can we evaluate an NGO like WaterAid? Even after talking with Dobsevage and Casey, and digging into the website, I came away with more questions than answers.

Because WaterAid operates in so many places, it’s hard to know where to begin. When Dobsevage mentioned a program in Nicaragua, I was curious to know more because I’d recently traveled there. On Nicaragua’s remote Caribbean coast, WaterAid says it trains local people to disinfect wells, drill boreholes, construct rainwater catchment systems and install rope pumps and eco-friendly toilets. This vocational training, in theory, should create a cadre of skilled workers who can serve their communities for years to come. But will the skills training stick?

To its credit, WaterAid America commissioned an external evaluation of its program in Nicaragua and published a warts-and-all summary. The program scored well overall, but evaluators identified weaknesses including “the absence of an explicit policy-advocacy function” and the failure to document findings in Spanish; both were a result of limited funding during the program’s early years. This is a reminder that even well-established interventions depend on execution; much of what any NGO does is done through local staff and local nonprofit partners, whose competence can vary widely from place to place.

Third-party evaluations are standard operating procedure at WaterAid, Casey told me, which is a good thing. WaterAid also routinely monitors projects to see if they continue to provide sufficient quantities and qualities of water, another good sign. I also learned that WaterAid is one of five organizations that belong to Agenda for Change, which has developed a set of principles intended to deliver WASH services to everyone on the planet by 2030. That tells me that WaterAid looks beyond wells and water taps to find ways to deliver systemic, lasting change; its partners in Agenda for Change are Aguaconsult, IRC, the Osprey Foundation and Water for People, all respected players in the sector.

Finally, WaterAid has been backed by well-staffed foundations, including the Bill & Melinda Gates Foundation and the Conrad N. Hilton Foundation, which presumably do a good deal of due diligence on their grantees. How do they do it, I wondered? I asked the Gates and Hilton foundations to share their evaluations of WaterAid with me, albeit on short notice. Both declined.* It’s a continuing shame that foundations don’t share their learning as a matter of course. (See my 2016 post, When foundations are uncharitable.) Philanthropy needs more insight and information, not less.

Seeking a little help from my friends

I’ll conclude this post with two broad questions, and invite your responses in the comments.

First, would it in fact be helpful if more nonprofits provided more data about the costs of what they do? A few NGOs are radically transparent about costs. GiveDirectly, Watsi, and Donors Choose come to mind, and surely there are others. I find their approach to be refreshing and reassuring. Can it be more widely applied? Should it be? Or are will this only fuel the dreaded “overhead myth.”

Second, if cost comparisons are too crude a way to compare charities, why can’t donors, particularly institutional donors, come together to evaluate charities in ways that go deeper than Charity Navigator, but not as a deep as GiveWell? Some people have tried–you can read my posts about Dean Karlan, Kat Rosqueta and Angela Campbell–but their work has been slow to gain traction. I could imagine a group of meta-charities that focus on specific causes, as Animal Charity Evaluators does, or others that organize regionally, to identify and promote the most effective local nonprofits in Washington, D.C., or San Francisco.

As I’ve written before:

There are thousands of nonprofit organizations in the US. Some do great work. Many do not. Wouldn’t it be good to know which is which?


* If Gates or Hilton decide to share their evaluations of WaterAid with me, I will update this post and make a note in the comments.

4 thoughts on “WaterAid: What do we buy, and at what cost, when we give to nonprofits?

  1. Farron Levy says:

    Hi Marc,

    I’m thrilled you’re continuing to push this area of inquiry, as I believe it has the potential to unlock a great deal of social value. A few thoughts:

    – Yes, the lack of appropriate cost/performance metrics in the sector often means donors seeking smart investments are left flying blind. An important related problem: without these metrics, nonprofits can’t evaluate their own operations to determine what is working well and what isn’t – or what innovations exist in the sector that they could adopt. It’s a classic market failure, and it’s a huge obstacle to social value creation and continuous improvement.
    – This condition has long been perpetuated by both nonprofits *and* donors, each of which continue to deal in the currency of outputs and anecdotes, or fuzzy PR-level outcomes, instead of the metrics we really need. Change, I believe, will require educating both sides to act.
    – Advocacy interventions can be incredibly powerful if they result in the right policy change. The challenge – from a measurement perspective — is that advocacy often has significantly more uncertainty and longer timelines associated with it than direct-service interventions. So, the results (an “expected value” of X thousands of live improved in Year Y) can feel a lot less tangible and compelling than a direct-service program you can implement immediately and see results from in weeks or months. But both, I’d argue, should be measured in the same outcome terms (e.g., lives improved)
    – GiveWell and ImpactMatters are doing some great work. They produce information the sector desperately needs, but as you’ve noted, they are hard models to scale (very resource intensive). Shameless plug: we recently launched a platform – http://www.trueimpact.com – we hope will help complement such efforts. In short, it’s designed to serve as universal social impact reporting tool, guiding nonprofits to demonstrate the value of their individual programs in standardized (and transparent) outcome terms, that includes incorporating full overhead and in-kind costs. The results can help guide donor decisionmaking as well as nonprofit benchmarking and best-practice sharing. I’ll let you know how it goes. 🙂

    Thanks again for this post, and for all of your work in this space, Marc.

    Like

  2. Susan Davis says:

    Thanks Marc for bringing attention to this important issue (which I wrote about here http://www.improveinternational.org/2014/02/19/25-will-give-a-person-water-for-a-little-while/) At the end of the day, nonprofits do what they get money to do, which often paints them into an unsustainable corner. Nonprofits need to be transparent with donors about more than just what their dollar is “buying.” They need to be transparent about what happens if work is done quickly, on the cheap, and with completion of a project the only measurement of success. It’s great that you mention the Agenda for Change, which is trying to change the conversation.

    Like

  3. mlytton1 says:

    There seems to be a disconnect between 600 million villagers living in India and $30 bringing clean water to one person every month. Talk about a drop in a bucket. Hygiene solutions at scale are not going to be achieved by charities and individual donors. But Marc is asking the right questions about charities.

    Like

  4. I think that it’s hard for nonprofits to lock themselves into committing to a given outcome for grassroots donations when these are most frequently used for general operational expenses. This is usually understood, and often done without the courtesy of the disclaimer provided by World Vision–a credit to their transparency to let their donors know that the spirit of the gift will be honored, though the donation may be used otherwise.

    Nobody wants to pay the inglorious costs of a nonprofit’s plumbing bill, or the plane ticket for the program officer, or in the case of domestic charities, quotidian postage, internet access, water for the cooler, staples, or software licensing fees. Yet, these are all difficult to fund if you don’t have sufficient program-based revenue, or large grants/contracts that cover general operating costs. Every donor likes to fund a concrete, discrete outcome–but I think that Kevin Starr has it right: “Unrestricted money makes an organization work smoothly, enables innovation, and provides fuel for growth…It unlocks potential and allows people to get down to business and do what they’re best at. It makes it possible for great organizations to weather crises without losing momentum…many worry that if they give an organization unrestricted money it will be wasted or used inefficiently. The solution is pretty simple: If you don’t think an organization is smart enough to use your money well, don’t give them any.”

    It’s a great question of accountability: what is a donor really buying with their donation? And certainly not all Nonprofits will steward it equally faithfully…but, can there be some kind of donor version of “Trust, but verify?”

    donatio caveat emptor?

    (Source: https://ssir.org/articles/entry/just_give_em_the_money_the_power_and_pleasure_of_unrestricted_funding)

    Liked by 1 person

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