Nonprofits struggle with public perception
With reports that the former deputy national executive director of Girl Scouts takes home $648,790 a year and that the director of the American Cancer Society’s clears nearly $500,000, public distrust of non-profit organizations is growing.
A 2004 Brookings Institution study found that 11 percent of Americans think nonprofits do a good job of spending their money wisely.
The study found that confidence in charity is 10 to 15 percent lower today than it was the summer before Sept. 11.
On Nov. 22, a Craig Daily Press reader wrote in a Speak Up column that people should do their homework before signing a check to a charity.
“United Way takes a percentage right off the top, then it gets funneled down. The new Boys & Girls Club has been getting grant money right and left. … A percentage of any money that is donated to them goes directly to the national Boys & Girls Club, and it all doesn’t stay here in Moffat County.”
Misconceptions such as those create hurdles for charitable organizations, Moffat County United Way Director Corrie Scott said.
One cent of each dollar raised by Moffat County United Way goes to the national organization and buys services and support for the local United Way, Scott said.
The money comes out of United Way’s administrative budget, which was 14 percent of the agency’s total 2005 expenditures.
“I take huge pride in the fact that I can say that when I’m campaigning,” Scott said.
Johnathan Godes, director of the Boys & Girls Club of Craig, said the club’s contribution to its parent company is the best investment it has made.
Last year, $2,500 went from the local Boys & Girls Club to the national offices. All of that came from grants and not from local donations.
In exchange, the Boys & Girls Club was awarded $250,000 in grants it would not have been eligible for without its connection to the national organization.
“We’re pretty happy with that 1 percent investment,” Godes said. “With a little over $2,000, we leveraged $250,000 dollars.”
Ahead of the curve
The Better Business Bureau Wise Giving Alliance, after conducting independent research on donor expectations, recommends that charities spend at least 65 percent of their total annual budgets on programs and less than 35 percent on administrative or fundraising costs.
The American Institute of Philanthropy, a well-known charity watchdog, has broader limits. It recommends that an organization spend no more than 40 percent of its budget on administrative costs.
Moffat County United Way has stricter guidelines. Scott said its funding committee expects the agency’s administrative costs to be less than 25 percent.
Scott said she’s rarely seen a local organization spend more than that.
A necessary expense
“Fundraising and administrative costs are real expenses needed to manage the nonprofit, evaluate performance, ensure legal compliance and develop new services,” said Thomas H. Pollak, study co-leader and senior research associate at the Center on Nonprofits and Philanthropy. “Yet many people automatically believe that the lower the costs are, the better the nonprofit uses donations.”
Pollak said misperception provides significant incentive to under-report costs or lump them into program expenses, which people are more willing to fund.
That puts nonprofits that report accurately at a competitive disadvantage and means donors may be basing decisions on inaccurate information, Pollak said.
Independent Life Center Director Evelyn Tileston said she weaves administrative costs into programs if there’s a direct tie.
For example, she determines the amount of time she spends on projects that are outside the scope of her director duties. She considers that part of her salary a cost of providing that program.
Administrative costs at the Independent Life Center are less than 20 percent.
An increasing need
Tileston said it’s getting more difficult for nonprofits to get funding for administrative costs.
“Foundations are great when you want to fund a program, but many don’t want to fund the people to do the programs,” she said.
Tileston said reports of inflated salaries or misappropriation of funds among national nonprofits makes her leery, too. But she said she understands that sometimes, there’s a need.
“You’re talking about a person who runs a multi-million dollar corporation. You need to compensate them the way the private sector would or you don’t get anybody who has those skills,” she said. “If you don’t want to pay a good salary, you don’t get a good person.”
Scott said that funders have come a long way in the past 10 years and are more willing to help an organization pay its administrative costs.
“They’re recognizing that people who are employed there need to be paid for what they do,” she said.
Christina M. Currie can be reached at 824-7031, ext. 210, or email@example.com.
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