Feeling generous this holiday season? Or perhaps you had your year-end tax review and some more deductions are in order. Research shows charitable giving increases during the holidays. Have you ever wondered, though, whether the charities you support are spending funds in the best way? More specifically, in your opinion, how much should a charity spend on those it purports to serve, and how much should it spend on itself?
The 2016 firing of the top two executives at the Wounded Warrior Project illustrates the question. Several years ago a client expressed interest in supporting a veteran-based organization in her will. When I asked if she had a specific one in mind, she thought for a second and said, “Well, something like the Wounded Warrior Project (WWP), perhaps.” I asked if we could look it up on Charity Navigator. When we did, it showed that nearly 40 percent of the organization’s revenues were being spent on itself, mostly for salaries, advertising and fundraising. When I served on the audit committee for my local United Way, the range of administrative and fundraising expenses for most charities was usually less than 10%. I asked which was the kind of charity she had in mind. She moved on to other candidates.
Obviously in her case, WWP’s advertising worked. It was top of mind for her, unprompted – an advertiser’s dream outcome. Any charity would have loved to be in that coveted spot.
Indeed, there are those who argue just that – charity advertising dollars, if spent wisely, do the greatest good. After all, if 60% of WWP’s annual take of $225 million is being spent on helping the wounded veterans they serve, that’s a lot of good being done, even if the other 40% is going back to the staff, advertising agencies, hotels, resorts, and airlines. Perhaps business-minded donors don’t mind charities being run like a business – wining and dining potential clients (donors), and rewarding its highest producers (fundraisers) with lavish trips. Perhaps those same donors eschew executive directors who take sparse salaries and employ minimal marketing staff.
If you are a potential donor of any stripe, the important point is to know your values in this regard. Ask the questions or do the research to make sure your favorite charity is a match in all of these areas: their message, their mission, and their methods of achieving both. Need help? Contact a local community foundation, check out Charity Navigator, or ask your favorite financial planner.