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Overheads

Not too long ago, I received an email entitled: “Donating – Interesting, ever wonder where that donation money goes?” It talks about some of the bigger, more well known charities in the world, and some of the salaries they pay out. You can read the 2010 email here, along with some clarifications and updates to the information.  Whether those exact facts are true or not, there is a feeling that many organizations spend too much on their own self-perpetuation, and too little on their charitable purpose.

It’s a difficult situation because the truth is that to get things done, you do need to spend money on things like an office, computers, transportation. People who do good work and who put their time and energy into working deserve, just like people who don’t work for charities, to be fairly compensated for their work. But where do you draw the line?

Canadian charity law says that charities have to spend 80% of their previous year’s income on charitable activities and Global Philanthropy.ca has a great article here that really gets into the finer details of the advantages and disadvantages of overhead costs.

Still, every year Forbes.com looks at America’s ten biggest charities and makes a list of the 10 Least Efficient. Some of the figures are pretty shocking. The Veterans of Foreign Wars of the U.S. raised $55 million last year and spent more than two fifths (40%) on fundraising costs. The Educational Broadcasting Corp. (WNET) raises money through telethons but less than half goes towards programs, which doesn’t include the salary of the head of the group, who gets paid more than half a million dollars a year. Sadly, Operation Smile, a group that provides free surgeries every year at Mae Tao Clinic, is on the list as the fifth least efficient charity of the year. It’s also sad to see the American Diabetes Association on there at number eight.

In Canada, MoneySense has a charity ranking system which is similar to that employed by Forbes. The Red Cross, it says, spends $33 to raise every $100 in donations it brings in. In February this year, the CRA revoked the charitable registration of the Pediatric AIDS Canada/US group, after finding that they spent $3.26 million of their $5.06 million income on fundraising and administrative fees and just $1.8 million on charitable activites. That means that if you donated a dollar to them last year, they spent $0.21 of it on programs!

Room to Grow is lucky because we have some supporters who specifically want to help us cover the costs of operating. World Education Thailand has donated a room in their staff house for use as our office. We had several people help with donations of computers over the past year. Women with a Mission and Thai Children’s Trust helped provide the costs of rolling out new programs over the past year, including buying a motorcycle to monitor and implement Mushroom Houses and covering the stipend of the staff to do it. As a result, although our total overheads in 2010 were 8% of our operating costs, just 3% of individual donations went towards the costs of petrol, office supplies, salaries and other administrative fees.

We’re really happy to be able to send as much of each donation we can directly onto children on the border and we are so thankful to everyone who helps us be able to do just that.

1 comment

  1. Adam

    Oh, that’s a nice idea – donating to specifically cover admin costs, so that other donations can go directly to programs.

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