Tuesday, May 20, 2008

Charities and Transparency

Dr. Asher Meir discusses the ethics of charities' expenses (link). He states that people expect charities to have expenses but need to be informed when those expenses are out of the ordinary:

Where do we draw the line? Based on statistics I have seen, reputable organizations typically spend about 20% on fundraising, though a significant minority spend as much as 50%. It's hard to draw a hard and fast line, but in my opinion if fund raising takes up more than 30% of the budget donors should be informed.

Click here to read moreI can't think of any cogent objection to this rule. If the organization claims that there is no need to disclose because, say, 40% is a perfectly reasonable amount, then by the very same token they have nothing to fear by disclosing this. If by contrast they say it is not fair to make them disclose this because it will deter donors, then they are basically admitting that donors don't know where their money is going and are effectively being misled, actively or passively, as to the true use of their donations.

If your fundraising costs are unusually high for a good reason, then by all means explain the reason to donors. If donors are poorly informed about the costs, then educate them; for instance, you could show them that many reputable organizations have high fund-raising costs. The professional you hire can tell the donors very frankly: I'm getting 50% of funds collected, because I'm making initial contact with donors, or because my expenses are very high, etc.
See also this post.

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