Very few nonprofits hand out cash to people. Instead, they provide services. Those services could be just about anything: nutritious food for people who can’t afford to feed themselves, live theater, counseling for people who have been victims of domestic violence, shelter for unwanted animals, job training for people desperate to enter or re-enter the workforce, day care activities for people with severe disabilities, and on and on and on.
Many of these services are designed, overseen or provided by professionals — people who have the training and experience to provide specialized services. These nonprofit professionals are just like those in any for-profit profession: they have spent a lot of money on their education and training, they have bills to pay, they have health care costs, they want to be able to buy homes and put their kids through school, they need a retirement plan, etc. And to keep the best people, nonprofits have to pay competitive salaries (and their competition isn’t just nonprofits — its businesses as well).
All of these organizations have rent to pay, equipment and supplies to buy (copy machines, computers, paper, furniture), insurance and utlities to pay for, and on and on.
What about any of these costs isn’t related to program costs? A copy machine may mean the difference between serving 1000 people as opposed to just 100. A trained social worker with a Master’s degree may mean the difference in providing a job counseling program and not providing one at all. A paid, full-time manager of volunteers may mean the difference between involving 100 volunteers and just a dozen or less.
With all that in mind, I have a lot of skepticism for claims that nonprofits give too much to administative costs, as well as for grading systems that are focused mostly on financial reports and not-so-much on the results of a nonprofit’s work. Some nonprofits have told me that they have been forced to hire a revolving door of short-term consultants instead of full time employees because, the way sites charity rating organizations or the way funders count administrative costs, a consultant can be counted as a program cost, but an employee, doing exactly the same work, is considered administrative.
As the Nonprofit Quarterly put it recently, “With one holiday giving article after another urging donors to do their homework on charities, it would be nice to believe that those that set themselves up to inform donors would take care not to do harm.”
Here’s some of the many criticisms of these charity rating sites:
- Nonprofit Quarterly re: Catholic Charities of Fort Worth protesting their rating the BBB.
- Fort Worth Better Business Bureau Gets Low Grade For Charity Reviews
- Is Charity Navigator the ‘National Enquirer’ of Watchdog Groups?
- Charity Navigator’s Big Move
- Charity Navigator Maligns Human Rights Campaign
- Head of L.A.-area BBB resigns amid scandal
Here’s my advice: when evaluating a charity, look for accredication by professional bodies, such as the Council of Accreditation. Look for membership in national or international networks. Look at what the organization says it does; don’t just look at activities – look at results. Look to see if they involve volunteers — not because volunteers are “free” and replace paid staff but, rather, because volunteers prove community investment in the organization. If you don’t see this documented on the organization’s web site, email the organization and ask for it.
But remember that many large donors refuse to fund administrative costs, and that means the organization may not have the funding to hire the staff that would be needed to provide the level of detail regarding its programs you and others may want — because, you know, that’s an administrative cost.