The amount a charity spends on fund raising and administration is important. No one wants to support a charity if most of your donation is going to pay fund raising expenses and staff salaries. It’s why this website tells you how much a charity spends on overhead.
But overhead should just be one of many factors you consider when you decide which charities to support.
Recently many people in the charity world have been talking and writing about the need to get away from judging a charity solely based on its overhead percentage. We’ve been making this point for decades.
Some charities have extremely low overhead. Often this is because they are solely or primarily run by volunteers. That can be a very good thing. But who organizes the volunteers? Who recruits new volunteers? Which volunteer is willing to do the books? Which volunteers are willing to raise the money to buy supplies?
There are limits to how much volunteers can accomplish without some staff and organizational support (space, computers, etc.)
Beyond the question of whether a charity needs staff and an organization, there are many factors that affect how much a particular charity spends on overhead. Some charities almost inevitably are going to have higher overhead:
- Younger charities often have higher costs because they don't have a base of loyal donors built up over many years of work. Or they aren't as well known as older charities.
- Smaller charities often have higher costs because the basic administrative expenses -- management, accounting, office space, etc.-- make up a bigger portion of a smaller budget.
- Charities that appeal to very specific groups of people -- those with a rare disease or minorities or residents of a certain community -- may have higher costs because it's harder for them to raise money from the general public. At the same time, organizations with a natural and loyal constituency -- such as the alumni of a college -- may find it easier to raise money.
- Groups that do controversial work may find it harder to raise money because many people prefer to give to organizations doing the type of charitable work that seldom generates controversy, such as feeding hungry children.
- Groups that rely completely or mostly on volunteers obviously will have very low costs. Gifts to them can go a long way. But relying on volunteers can lead to problems such as high turnover.
