You did what with my donation? When donors feel betrayed by charities

Alicia and I were one of many thousands holidaying on the NSW South Coast when the bushfires arrived on our doorstep. People we met there feared losing their homes and a good many in outlying areas did. We got out, we were lucky, very lucky.

In response to the current bushfire emergency in Australia people from all over the world have donated large sums of money to charities such as the Red Cross, St. Vincent de Paul, the Salvation Army, the RSPCA and so forth.

Most of us who donated expected our funds to be swiftly distributed to those—human and animal—who have lost most. That has not happened. Of the $115 million raised by the Red Cross for example only one third either has been distributed in the form of emergency grants or is in the process of being distributed. The rest will be kept aside for on-going relief and other future emergencies.

 When people learn that a charitable contribution they earmarked for a specific project was used for another cause, they feel betrayed - and often punish the charity, new research indicates.

Those donors were less likely to give money to the charity in the future or do volunteer work for the organization. They also were more likely to say negative things about the charity, according to the research published in the Journal of the Association for Consumer Research.

The findings held true even when their contribution was directed to another worthwhile cause, said the lead researcher.

What the researchers say: "The whole idea that a charity could activate a sense of betrayal is quite novel," said the co-author. "This wasn't fraud or embezzlement—the donor's money was still being used for good," he said. "But because the expectations were so high, they were upset when their donation was redirected."

This is certainly true of many of the donors to the current appeals.

The study comes amid the increasing popularity of donor-directed charities, many of which were formed or were operating in the bushfire crisis.

Instead of giving to a traditional charity that supports multiple causes, many people prefer to specify that their contributions will support a specific town that has been badly hit by the fires, or to a particular Rural Fire Service brigade or, more generally, a new well in a Tanzanian village or help a Costa Rican entrepreneur open a coffee business. As a result, contributions to donor-directed charities such as Donors Choose (which mostly funds education projects), and Kiva (specializing in small-scale loans to businesses in developing countries) have risen by 700 percent over the past decade.

The research involved three studies. Participants made $1 donations to specific projects in rural areas of India or Peru, then they were told the charity used their money for a different purpose.

Respondents were most upset when their money was directed away from projects considered essential for survival, the researchers said. If they wanted their donation to finance a drinking water project, for instance, and it was used for a library instead, they had higher feelings of betrayal than if the library donation was used for the drinking water project.

In both instances, however, the respondents chose not to support the charity with their next donation. Charities are viewed as "moral actors" by the public and held to high standards, the research indicates. That magnifies people's sense of betrayal when a charity re-directs funds.

"It's almost like finding out that a police officer has committed a crime," the lead author said.

"Donor-directed contributions are popular because they foster a sense of connection and impact," the lead author said. "But people feel betrayed if their money doesn't go to where they thought it would. The main takeaway is: Do what you say you're going to do."

So, what? Earlier research has shown that many charities (DT’s infamous foundation for example) spend donor’s money in ways that are not always what the donor wanted or expected. Or sometimes it just gets lost in general “administrative” costs. It’s probably a good thing that people require much more transparency now as to how their donations are utilized.