Analyzing an Organization's Totals & Trendlines: The Art of Philanthropic Due Diligence (Part 1)

"We've reached a total of 2.5 million people." I read claims like this one from many nonprofit organizations. The sheer size of the number is intended to impress potential donors. However, totals don't tell the whole story. One family ministry that has reached 2.5 million people in the last 34 years actually is in decline. The number of clients served has been dropping by thousands since 2006. In more alarming fashion donations have increased 18% during that time (significant for a $40 million operation) while clients served has declined 7%. Those trendlines tell the story that matters today. The organization's heyday has come and gone.

An informed practitioner of philanthropic due diligence is not easily taken by totals. The most valuable data is found in a time series not a "total" column.

Totals & Trendlines for a Healthcare NGO

A Healthcare NGO recently reported that they served 550,000 patients with donations of $1.1 million in 2009. So for every $2 donation 1 patient was served. Do these statistics mean that donors could increase the number of people served at $2 per patient? Not exactly.

In 2006 the Healthcare NGO was reaching 435,527 patients annually. In the last 3 years the NGO has increased the number of annual patients by 106,000 to an annual number of 541,124 patients (actual number is lower than their rounded numbers above). That is 24% growth from 2006 to 2009. In that same time period the NGO experienced a 117% growth in annual cash contributions from $570,000 to $1.24 million (actual cash contributions were higher than their rounded numbers above). If adding new patients only cost $2, then the NGO would have actually increased patients served by 335,000 people from 435,000 in 2006 to 770,000 in 2009.

The data in a time series tells the real story. It may have cost $2.29 per patient in 2009, but it cost $6.31 to add a new patient in 2006-2009. Another $100 donation would reach 16 more people not 50 more if they continue their historic paradigm for growth. That number is not bad. It is just important to be transparent.

Lesson for Smarter Giving

The next time you see a claim about the millions of people a nonprofit organization has served in one year or in its entire history, tread carefully. The total number might mislead you. The trendlines will tell you what their growth capacity is and if their actual impact is declining at present.

If you learn to find trendlines rather than totals, you are beginning to learn the art of philanthropic due diligence.