How We Value Charitable Contributions Matters

How We Value Charitable Contributions Matters

Oct 01, 2020 Debi Ghate

Recently, Forbes released a philanthropy score for “The Forbes 400,” a group of billionaires whose charitable giving it tracks. In an article authored by Jennifer Wang, Forbes laid out its thinking behind the rankings, which provided interesting insight into how the publication views what’s important in charitable giving. It was encouraging to see how seriously editors took the process and methodology, and having such a ranking is useful for a number of purposes, such as understanding who has prioritized philanthropy as part of their current work.  

Notable, though, is what the scorekeepers decided not to count toward a billionaire’s overall philanthropic record: (1) contributions to a donor-advised fund, due to a lack of donor disclosure or distribution requirements; and (2) monies pledged but not yet paid out. Unfortunately, this makes the scores less meaningful, essentially minimizing anonymous giving and the value of long-term investment—the kinds of commitments nonprofits routinely report as being necessary for innovation, problem-solving, and sustainability. 

As Sandra Swirski, a key Roundtable charitable giving tax policy expert, points out: “It’s important to understand where charitable dollars are deployed, so that gaps can be identified and donors can choose which to fill. The Forbes 400 philanthropy score does a nice job calculating some philanthropic dollars put to work by billionaires.  But just some.  Forbes’ methodology excludes, among other things, gifts to donor-advised funds and gifts from these funds that are anonymous.  By picking and choosing which charitable gifts are worthy [to be counted], the folks at Forbes are creating a hierarchy of charity.  In this hierarchy, for example, a charitable gift to a soup kitchen is worthy of counting, but a charitable gift to a donor-advised fund set up to explore a new site for a soup kitchen is not. When arbitrary standards are used to decide what goes into a philanthropy score, it devalues the very important work being done with those dollars.”

As proponents of philanthropic freedom, we would welcome having the benefit of a true philanthropy score based on the total charitable dollars committed to by this generous group of Forbes 400 billionaires. And we’re grateful that they have an interest in helping to solve today’s—and tomorrow’s—problems.