Posted on May 4, 2012
In the LA Times there was an article by Jack Shakely titled, “The Worst Way to Judge a Charity.” In his article, Shakley writes about how people will give to charities who say they have low administrative costs and give the majority of their donation money straight to the people they are helping. The point that Shakely makes is that, “low administrative costs could indicate prudence and sound judgment at a charity, but they could just as easily indicate inadequate staffing, insufficient salaries or, shall we say, fudging.” The problem becomes when charities “fudge” the numbers and claim to have lower administrative costs than they do. They come off as more charitable than they actually are and the donors will still donate. National Center for Charitable Statistics has said, “For better or worse, the percentage of total expenses going to program costs is the most common measure of nonprofit organizational efficiency. Focus group research has found that donors expect worthy organizations to have low fundraising and administrative costs. Consequently, nonprofits frequently tout their low overhead ratios in their mailings to the donors.” I think it’s a good point that low administrative costs is no way to judge a charity. There are many great reasons to donate to a charity and low administrative costs shouldn’t be the only reason. Functioning at a different level, judging smaller non-profits may be different. This article brings up interesting points to consider.