How Much Donation Money Goes to Management in Charities?

Some charities give more money to their CEOs than their cause.

Some charities give more money to their CEOs than their cause.

If you've seen the television ad that shows hurt puppies and kittens looking at the screen while a sad, slow song plays in the background, you might have felt the need to give money to help those animals right away. You may have felt the same way when you saw commercials about starving children who need a few dollars a month to let them live. To make sure your donation is going to the cause rather than to executive salaries, a little research can put your mind at ease.

Spending Ratio

A good way to make sure a charity is spending most of its money on the cause it serves rather than executive salaries is by researching how much the charity receives and comparing it to how much the charity spends on its cause. This is called the charity's spending ratio. Keep in mind that charities that cost more to run may have higher expenses overall. A good rule of thumb is that a charity should use 65 percent or more of its donations on its stated cause. According to the Consumer Watch website, a related ratio is the "dollars to fund-raising expenses” ratio. As a general rule, fund-raising expenses should be kept under 35% and much lower if possible. You should decide for yourself what percentage makes you comfortable with donating. Websites such as Guidestar, Charity Navigator and the Better Business Bureau's Giving Alliance provide this information.

High-Paid CEOs

The website Charity Navigator provides a list of 10 charities that pay their CEOs more than $200,000 a year while also spending less than 60 percent of donations on the services that they are supporting. In other words, more than 40 percent of any money you donate to these charities goes to to administration, fundraising and management. The top-paid CEO on the list works at Young America's Foundation and receives $525,961 a year as of 2013. Number two on the list is the American College of Obstetricians and Gynecologists, which pays its CEO $455,587 a year.

Low-Paid CEOs

The average annual compensation for over 5,000 charities rated by Charity Navigator is $150,000 as of 2013. The site lists the top 10 highly rated charities that give 80 percent or more of their donations to the causes they work for, while paying their CEOs less than $100,000 a year. Number one on this list is Mission Waco Mission World, which pays its CEO $39,239 a year. Number two, World Care, pays its CEO $45,000 a year. The top paid CEO works for Brazos Valley Good Bank and earns $59,518 a year as of 2013.

Other Considerations

The spending ratio isn't the only way to measure a charity's effectiveness at ensuring donations are used effectively. You also can look at the ratings and reviews provided by people who've worked for the charity and people who donated to it. Websites like Great Nonprofits, My Philanthropedia and Yelp provide this information. You can also review the organization's website to see if it states specific goals or abstract ones that are hard to pin down.

 

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