05/24/2010 03:19 pm ET Updated May 25, 2011

A Troubling Disconnect: When High Profile Charitable Ventures Offer No Real Information

This post was co-written by Dr. Robert Penna, an independent nonprofit consultant and an advisor to Charity Navigator.

Recently, we had an experience that reminded us of the troubling state of how charitable donations are often made. Robert approached Ken, asking for a contribution to a charitable event. Robert and his family believe deeply in the event's cause to cure a disease that claimed the life of someone Robert knew. Although Ken's heart went out to Robert's family and he was highly motivated to make the donation, before Ken would agree to doing so, he did some due diligence to learn more about the charity this event supports. He looked up their website and, just as expected, there was the familiar face of their nationally known celebrity spokesperson, with a message making a "personal" appeal for charitable support. Prominently displayed also were the logos of several immediately recognizable corporate and institutional sponsors. So far, so good.

But then Ken tried to dig a bit deeper and found that, past some vague lines stating that "we support" various efforts, there was no specific information available. Turning to the Charity Navigator web site database of rated charities, Ken found that they had no information about this organization either. Finally he checked for a federal IRS 990 information report or state registration; and again found nothing.

What was Ken to do?

It is widely known that people give for a variety of reasons, many of them emotionally based in a direct relationship with a cause or organization, a relationship with the person doing the asking, or simply a comfort level with the spokesperson or image of the charity. But all charities are not alike and charitable donations, large or small, should be considered investments. Viewed in that light, the decision to support many charities should be questioned if you cannot get some basic information about how the organization operates and utilizes its funds.

How are you to know where your money really goes, and whether contributions to charities really are sound social investments that will bring a reasonable return that can be substantiated? Considering the billions given in charitable donations every year, the idea that there may be ongoing misallocation of all that money is frightening. Shouldn't it be going to the most efficient and effective organizations? Of course!

Since its inception, Charity Navigator has worked to provide the donating public with guidance regarding the fiscal strength and management of charities. We will soon be moving towards reporting on transparency, accountability and effectiveness as well. But even we cannot report on organizations that do not report anything! Left with that reality, we offer this caution: just as the name and face of a celebrity or corporate sponsor endorsing a product cannot be taken as evidence that a for profit company's management and policies are sound or just, neither can a similar endorsement be taken to imply that a charity is fiscally sound, wisely managed, or provides a social value (i.e., meaningful and lasting change in communities and people's lives). Wise social investors (donors with their eyes wide open), who want and intend for their donations to make a difference, depend upon information in their social investment decisions.

We are not suggesting that emotion should or ever will be completely removed from the equation. It is often emotion, a heartfelt attraction to a cause, which brings a charity to our attention. But for any cause, there are usually numerous players in the field. The informed social investor makes sure that his or her donation goes to the ones that will do what they say they will, the ones who are open about how they make decisions and utilize the funds. Their message to this type of investor is "We have nothing to hide and here's data on our effectiveness."

A celebrity endorsement is no substitute for factual information, and a high profile does not guarantee either good management or effectiveness. The only things that can provide that assurance are openness and information, and we believe it is time for all charities worthy of your support to provide both.

So at the end of the day, Ken did not make the donation that Robert asked him to, but they both agreed that it was understandable he didn't. They also agreed to look for a more worthy charity to support for the cause, as well as to write this article!