Often times, when a person is picking a charity to donate to or volunteer for, they look at only a few things. What the charity does, and where it does it. If they like pets, maybe they volunteer or donate to the ASPCA. Or, if they want to keep their efforts a little closer to home, they volunteer or donate to their local Humane Society or shelter. One of the things that they very infrequently look at is how much of the money they donate is really going to the cause.
Main Street had a nice list a few days back about the charities with the highest administrative costs. Top of the list is a charity by the name of the American Tract Society. 68% of the donations that they receive go towards paying administrative costs. Or, 32% goes towards the actual charitable work that they do. To create their list, they used a tool called the Charity Navigator. They compile the actual numbers via the IRS filings and put together a sort of watch dog group for charity costs.
One of the things that I noticed is that many of the charities on Main Streets list are smaller charities, which could account for some of the costs. A smaller charity doesn’t gather the bigger donations from as wide of a base as some of the larger charities and so has a higher administrative cost percentage. Even so, the next time you decide to give to a charity, it might bear taking a look at the tool at Charity Navigator and see if that charity is a “bad” charity.
photo credit: puritani35
Shane Ede is a business teacher and personal finance blogger. He holds dual Bachelors degrees in education and computer sciences, as well as a Masters Degree in educational technology. Shane is passionate about personal finance, literacy and helping others master their money. When he isn’t enjoying live music, Shane likes spending time with family, barbeque and meteorology.
What you mentioned at the end has always been my largest complaint about Charity Navigator – it is automatically biased against smaller organizations. I hope that they develop a better metric that will take the size of the organization into account.
Exactly, Khaleef. There has to be some correction for fixed costs. A charity that brings in 50k a year will have the same base cost for some services as one that brings in 5 million.
BB,
Another thing to consider is that Charity Navigator only accepts charities that make $50k or more a year. So, a small charity like ours, can not even be listed or evaluated by their metrics. Another resource is GuideStar.org.
Keep up the good work,
Eric