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Is The Notion of Efficiency Alien to Charity?

Comments, Criteria, Definitions, Methodologies, Read

there are minimum requirements for recognized non-profit organizations. But can their efficiency and effectiveness also be rated?

At effektiv-spenden.org Sebastian Schwiecker, founder and managing director of UES – Gemeinnützige Unternehmergesellschaft (haftungsbeschränkt) für effektives Spenden, tries to give very specific answers to the question of how you can achieve the greatest possible effect with your donation, i.e. where you can help most for each euro.

He believes that the mission of his company is unique in Germany. Although there are two institutions, the German Central Institute for Social Issues (DZI) and PHINEO that assess charity organizations, Sebastian Schwiecker points to fundamental differences in the approach to effektiv-spenden.org.

The DZI, founded in 1893, has been awarding the DZI donation seal since 1992. To obtain this, an organization must undergo an annual audit. If the DZI standards are adhered to, the organization receives the DZI donation seal for the next 4 quarters. The following three are the main points:

  • The fundraising campaign is true, clear and factual.
  • The donations are used purposefully, economically and economically.
  • The organization has functioning planning and control.

Sebastian Schwiecker does not question, that these are criteria that must be met by an organization that wants to provide sustainable, highly effective aid. However, they are not sufficient, says Sebastian Schwiecker, since it would be necessary to examine the effect achieved by the respective aid organization and to put this in relation not only to the costs, but also to other organizations. The DZI does not do either. The information available online about the organizations with the DZI donation seal is limited. On the profile of the World Vision organization, whose total income in 2018 was more than 114 million euros, the full paragraph on the use of funds reads as follows (translated from German):

The share of advertising and administrative expenditure in total expenditure is appropriate according to the DZI standard (“appropriate” = 10% to less than 20%). The effectiveness of the use of funds is checked, and the results are documented and published.

The DZI itself does not examine the effect achieved, Sebastian Schwiecker criticizes and considers the publicly available information as very scarce with less than 500 words per audited organization. For comparison, Sebastian Schwiecker mentions the evaluations by GiveWell on which the recommendations of eeffektiv-spenden.org are based. Here even some of the often more than 100 footnotes are longer than the complete organizational profiles on the DZI website.

Due to this superficial view and the – in the eyes of Sebastian Schwiecker – large number of organizations with the DZI donation seal, most recently well over 200, interested donors are only given limited orientation. Sebastian Schwiecker cautions that the designation of the DZI as “donation TÜV”, which is often used in the media, may be appropriate, but one should be aware that the task of the TÜV is to exclude unfit vehicles from road traffic and not to judge what is best in relation to its costs.

The situation is different with the PHINEO consulting company founded in 2009. Since 2010, it has been awarding the so-called Wirkt-Siegel, which differs from the DZI donation seal primarily in that it carries out a “differentiated assessment of the potential for impact and the quality of the project”. On the one hand, PHINEO concentrates exclusively on projects that are active in Germany. In this way, the most effective approaches from the perspective of effektiv-spenden.org are excluded from start, although even more than in Germany might be achievable with every euro in very poor countries. On the other hand, PHINEO does not compare the audited organizations with one another, argues Sebastian Schwiecker.

If a donor does not want to be satisfied with contributing to positive change at all, but rather pursues the goal of moving as much as possible and as effectively as possible with the resources used, the Wirkt-Siegel offers little support, Sebastian Schwiecker points out, although he admits that he could not claim scientific objectivity for his approach. “But we are firmly convinced that ceterus paribus it is better to help more people than less. To do this,” reads his website, “one has to start by asking the right question, which is who should I support to maximize my impact? So far, nobody in Germany has done that. We want to change that!”