Report, Mark O'Neill: SCMP
A charity chief says simply throwing money at good causes is no way to help the world’s needy, Mark O’Neill reports.

Making money can be hard, particularly in the current economic climate. However, one could be forgiven for assuming that giving it away would be easy. But that conclusion wouldn’t be altogether correct.

“The poverty gap is widening in many countries, particularly in the poorest countries,” said Christopher Lavender, director of the Kadoorie Charitable Foundation. “At the same time, there is an accumulation of enormous private wealth, especially in the financial sector. Yet the mechanisms that presently exist for people wishing to donate money are, in many cases, inefficient.

“People with very large sums of money cannot give it to small NGOs, because such organizations are unable to handle such large amounts. So they give it either to international NGOs, many of which can be unwieldy and bureaucratic, or worse, to government departments in developing countries with all consequent problems of the ‘diversion’ and misuse of funds. How to find a more efficient mechanism is, in my opinion, one of the biggest challenges facing the philanthropic community.”

But Lavender, whose foundation is one of Hong Kong’s most pioneering yet low-profile donors, says he has an answer. Philanthropic exchanges should be established around the world to offer a more effective way for rich people to donate their money, he says. They would give donors a choice of pre-screened projects and a way to monitor that their money is put to good use.

Under his proposal, the exchanges would be run by managers who would present projects they have already assessed, to donors according to their individual preferences in sectors such as health care, education and the environment. Donors would choose among sectors and geographical regions. The exchanges would be autonomous, funded by the donors that use their services, and governance would be provided by an independently selected board of trustees.

Once donors had decided to fund a project, they would be given regular reports, audits and financial assessments of their progress and a post-funding evaluation of their effectiveness, much as if they were businesses in which they had invested. They would also be encouraged to visit the project and see first-hand the difference their money was making to people’s lives.

“They would be such philanthropic exchanges all over the world. They would focus on a region or a country, advertise their wares on the Internet and build up clients at the same pace as they could identify suitable projects for them,” Mr. Lavender said.

Two companies already offer a service similar to Mr. Lavender’s proposal: New Philanthropy Capital in London and Geneva Global in Boston. They give individuals and companies advice on how to give and how to measure the effectiveness of their donations.

“In the US, of the US$295 billion donated in 2006, only 6.5 per cent went abroad,” says Geneva Global’s website. “Incredible investment opportunities in the world’s least developed countries continue to be overlooked. Many of these are grass roots projects offering the promise of exceptional return on investment, measured in the highest number of lives changed per dollar in significant and lasing ways.”

Geneva Global says it has managed more than US$60 million in client grants since 1999, and to have changed the lives of more than 5.8 million people.

“A survey in Hong Kong last year found that 37 per cent of people who gave to charity did not know or care how their money was used,” Mr. Lavender said. “This is irresponsible – and if it involves large donors, it is hugely irresponsible.

“Public reaction and generosity at the time of natural disasters can sometimes be overwhelming and the funds raised often cannot be translated into practical assistance on the ground in the time frame required. In the worst cases, such as the Indian Ocean tsunami of December 2004, funds raised and received for Sri-Lanka exceeded US$3 billion, but nine months later the vast majority of this had not been spent, owing to government bureaucracy and interested parties close to government trying to benefit from the granting of contracts. Even four years later this money has not been accounted for – certainly publicity.

“Donors have little knowledge of or control over, how their money will be spent. As Andrew Carnegie said, ‘It is more difficult to give money away intelligently than it is to make it in the first place’.”

When the Kadoorie Charitable Foundation reviews a project for possible funding, it conducts due diligence and thorough review of its budget. It carries out a risk analysis and assesses the likely sustainability of the project once funding stops. It if concludes that the project is not sustainable, it will not approve funding.

Once a project is approved, the recipient has to agree to a set of financial conditions before signing a memorandum of understanding, after which the funding begins. The foundation disburses money every six months following submission of a twice-yearly report and statement of accounts for the previous period.

For small NGOs without accountants, the foundation often recommends financial management software designed for NGOs, such as Mango and Conical Hat.

One funding partner in Guangdong did not use a first payment of HK$1 million it had requested for 41/2 months. The foundation demanded the money back, plus the interest earned on it, explaining that funds were only disbursed when they were needed.

The foundation monitors projects by making regular visits to ensure the recipient is managing the implementation as agreed in the project proposal and memorandum of understanding. It also places great importance on post-funding evaluations to assess whether the projects it funds are sustainable.

“Good-communication with the donor is critical, but many NGOs neglect this fundamental need and can compromise the building of confidence and trust with the donor,” Mr. Lavender said.

Many recipients of grants from the foundation are small NGOs. “Small is beautiful,” he said. “The bigger international NGOs are more complex, with frequent staff turnover and complicated reporting lines. One donor who wanted to address Aids in India gave $500 million to the Ministry of Health. It is difficult to imagine that such large sums will be used efficiently – and for the purpose intended – in developing countries.”

Like a business, the foundation wants to ensure it is getting a return on its investment. In Hong Kong, it funds training for visits by “clown doctors” and volunteer artists to hospitals that care for sick and terminally ill children.

“The investment is modest,” said Mr. Lavender, “but if you visit the hospitals and see the clowns and artists at work, you will see the rewards are very tangible in the job they bring to the children.”

The foundation is also funding a study of chronic disease on the mainland with the aim of improving heath care over the next 20 years. It is being conducted by the Clinical Trial Service Unit of Oxford University and the Ministry of Health’s Centre for Disease Controls. Nearly 40 per cent of the Kadoorie Foundation’s donations go to China and, as in other countries, it adapts its approach to the political and regulatory environment.

“The government is reluctant to open civil society, as it is worried about social mobilisation for charity causes,” said Ronald Li, manager of the foundation’s China activities. “There are hundreds of tiny NGOs some registered as academic units or attached to the health system for protection. We try to work with mid-sized NGOs of 20 to 30 people.”

The foundation also provides funds to international NGOs on the mainland and agencies of the government. “The government was more liberal after the Sichuan earthquake, when it witnessed the role of volunteers. But it is very worried about people getting money and resources and how to regulate them. It prefers that money goes to government-controlled institutions. The development of private charity in China is a very slow process.”