1/05/2015

Giving--Is the organization worthy?

Lately I have seen facebook posts encouraging people to give or not give to various organizations. When I read the information, I was frustrated because the posts often were emotional and without clear sources for their information.  If facts were presented, I had no way to verify their accuracy.

Since my husband has worked as a consultant for nonprofit ministries for years, I decided to ask him for his opinion.

First, I wanted to know if it is a bad thing for operating expenses to be a high percentage of the amount raised.  Surprisingly, he didn't think so.  He said that it really depended on how much was raised. If an organization has low operating expenses of $100,000 and raises $500,000, it has a 5 to 1 ratio and has $400,000 to spend.  If a second organization has higher operating expenses of $500,000 and raises $1,500,000, it has a 3 to 1 ratio but has a million dollars to spend.  Even though the overhead for the second organization is much higher, it can spend more on serving the needs of others.

Secondly, I asked about the fairness of paying a CEO a high salary.  He said that a good CEO is worth the money. (Basically, you get what you pay for.) 

He mentioned three sources of accurate information on nonprofits:  http://www.guidestar.org/http://www.charitynavigator.org/, and http://www.ecfa.org/

However, the above organizations can not measure everything.  When deciding whether to give to an organization, one also has to look at the goals and how well they are being met.  This is not easy to measure because it depends on getting evaluations from the people the group is helping. So it is good to find out how well the organization performs when meeting the needs of others.

In conclusion, carefully examine the organization but don't just look at the percentage of money spent on overhead as compared to actual ministry.  Decide whether the goals of the group match your desires and then do your best to find out how well the nonprofit meets those goals.  

1 comment:

Benjamin Bryan said...

That's interesting, it makes sense that the more funds an organization has to spend the more operating expenses they'll need to incur to manage it. One thing I'd be curious on is what a typical minimal dollar amount one should give to actually benefit the organization. One thing I've noticed is if you give to an organization once you get put on a list where they send you lots of letters asking for more money and that's going to cost the organization. For example, if one gives a one time gift of $100 is that beneficial to them or is the overhead of processing the gift and sending a bunch of mail asking for more gifts going to cost more than the original gift amount. I'd just be curious to know what the general break-even amount is to make the gift worthwhile.