We regularly hear of donors who won’t give to a charity unless it spends 80% or more on its programs. At SeriousGivers.org we have a different take on this subject.
Our caution to donors: If an organization spends more than 80% on programs, that means it is spending less than 20% on administration and fundraising. While an organization might be proud of minimizing administrative and fundraising costs, we believe that well-run organizations must spend meaningful resources on administration and fundraising. So, we suggest donors investigate further to make sure that the organization is not
- having administrative or fundraising costs paid from an outside source or
- underspending on important parts of its operations or
- mis-categorizing administration or fundraising costs as program costs.
While reported program spending above 80% might be reasonable in a charity’s specific circumstances (if, for example, it has capable and well-managed volunteers performing administrative duties), it should be discussed directly with and satisfactorily explained by the charity’s management.
Program spending percentages should not be used standing alone. They should be part of an overall evaluation of a charity and its performance. A charity spending an apparently suitable percentage on programs, where the programs themselves accomplish little, is by no means an effective charity.
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