Economics question on charities

[watchamadoodle]

Sorry if mathematics isn't the best sub-forum for this question.

Currently when I am choosing a charity, I look at the percentage spent on advertising and administration. If those percentages are low, then I consider the charity better.

Sometimes I wonder if high advertising or administration might be a sign of good management instead of bad management.

Any thoughts?

EDIT: A charity with higher advertising might have a higher growth rate of donations each year. It seems like the growth rate of each charity needs to be a factor when comparing the percentage of advertising and administration? Maybe the amount of charitable goods delivered in this year should include a prediction of all future charitable goods? So a growing charity might have a higher percentage of advertising when divided by that years charitable goods, but it would have a lower percentage of advertising when divided by all future years' charitable goods?

[Surgenator]

The administration size depends on how much a the group does. For example, working in multiple countries requires more admistration to deal with the regions laws and logistics.

I always was suspecious of charities that do lots of advertising. Some in necessarily to spread the word. So more advertising gives more money to the charity work per person/task. But there is a limit where the adverticing starts removing the money per person/task.

[The Grand Nudger]

Put all of that out of your head. A charity might spend what you consider to be an exorbitant amount on administration because those people make each charitable dollar go farther. Talented people cost more money.

If, for example, I have $100 dollars
-Org A spends 20 on the cause, 80 on admin, but every dollar buys 2 cookies....you have 40 cookies.

-Org B spend 80 on the cause, 20 on admin, but every dollar buys a half a cookie...you have 40 cookies.

Which org would you feel more comfortable with donating to...or is it a wash? Keep in mind that the proportion of admin to cause -is- ad copy. Don't buy it wholesale. Remember, -you're- the one giving to a charity, these people do it for a living.
(goes the other way as well, they might spend more on talent even if they get precisely the same or even less out of -each- dollar because that talents draws in more dollars overall)

[Cato]

There's so much more to consider than the raw overhead expense, although I question charities that can't keep it below around 30%.

The following is a link to Charity Navigator. Have a look under the methodology section. There are some FAQs on the left side that will guide you to detailed information on what they consider and how they rate charitable organizations. I find the site very useful when trying to differentiate between comparable organizations.

http://www.charitynavigator.org/

[watchamadoodle]

Put all of that out of your head. A charity might spend what you consider to be an exorbitant amount on administration because those people make each charitable dollar go farther. Talented people cost more money.

If, for example, I have $100 dollars
-Org A spends 20 on the cause, 80 on admin, but every dollar buys 2 cookies....you have 40 cookies.

-Org B spend 80 on the cause, 20 on admin, but every dollar buys a half a cookie...you have 40 cookies.

Which org would you feel more comfortable with donating to...or is it a wash? Keep in mind that the proportion of admin to cause -is- ad copy. Don't buy it wholesale. Remember, -you're- the one giving to a charity, these people do it for a living.
(goes the other way as well, they might spend more on talent even if they get precisely the same or even less out of -each- dollar because that talents draws in more dollars overall)

That's an excellent point about measuring in cookies instead of dollars spent on cookies.

This makes me wonder if a better form of charity would be to simply transfer money to the needy people and let them buy what they need from wherever they want? I know there are problems with this approach. The needy people might not share the donor's values, so the money might be spent on things that the donor considers foolish or wasteful.

BTW How could a person know how many cookies are being delivered by a charity? The accounting and auditing is all measured in dollars.

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There's so much more to consider than the raw overhead expense, although I question charities that can't keep it below around 30%.

The following is a link to Charity Navigator. Have a look under the methodology section. There are some FAQs on the left side that will guide you to detailed information on what they consider and how they rate charitable organizations. I find the site very useful when trying to differentiate between comparable organizations.

http://www.charitynavigator.org/

Thanks, I've seen that site, but I've never read the FAQ you mentioned.

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The administration size depends on how much a the group does. For example, working in multiple countries requires more admistration to deal with the regions laws and logistics.

I always was suspecious of charities that do lots of advertising. Some in necessarily to spread the word. So more advertising gives more money to the charity work per person/task. But there is a limit where the adverticing starts removing the money per person/task.

Thanks. I hadn't considered the international complications.

[The Grand Nudger]

That's an excellent point about measuring in cookies instead of dollars spent on cookies.

This makes me wonder if a better form of charity would be to simply transfer money to the needy people and let them buy what they need from wherever they want?

Do you think those people would get at least as much, if not more, than the people who are paid to squeeze your pennies -from your pennies-? If so, sure.

I know there are problems with this approach. The needy people might not share the donor's values, so the money might be spent on things that the donor considers foolish or wasteful.

Values don't mean much if we're talking charity. Either what they do works or it doesn't. If Lucifer himself ran a squared away soup-kitchen I'd cut him a check.
(Habitat and God's Pantry are my two go-to's, I don't usually have money, but I have labor and food - your situation is likely different, just giving examples - both are overtly religious..fair to say they don't share my values)

BTW How could a person know how many cookies are being delivered by a charity? The accounting and auditing is all measured in dollars.

Most track those stats for their own purposes, ask for them. If they don't, or simply don't wish to go into it...I'm sure someone else will be willing to take your money. When it comes to charity, the donor holds every card.

[vorlon13]

I don't know how feasible due diligence in assessing the quality of the grantees would be.

An example:

I donate $1000 to cancer charity A and they fund a research grant at Harvard Medical College

-or-

I donate $1000 to cancer charity B and they fund a research grant on the power of prayer on cancer at Liberty University



You can understand my concern, besides high over head and excessive advertising, a charity could just piss money down a rat hole, and we wouldn't necessarily know.

Also, a poorly supervised/managed charity might have an employee embezzle $300,000 to fund a perpetually losing gambling habit (has happened around here more than once, BTW) and that is fucking annoying too.

[Creed of Heresy]

Best thing to look at, if available, is a ratio of how much money per dollar goes to the cause's actual efforts.

[watchamadoodle]

Best thing to look at, if available, is a ratio of how much money per dollar goes to the cause's actual efforts.

Thanks. That is what I've been doing, except that Rhythm made a good point in his reply: the dollars spent on administration might (and should) make the charity's efforts more efficient. Similarly, the dollars spent on advertising should leverage your dollar into more future donor dollars.

Of course it's possible for charities to become public works programs for charity workers.

I was wondering about something like a mutual fund for charities. This would allow the fund manager to examine the operations of each charity in detail on the donors' behalf. The only organization that comes to mind is the United Way, but I see they have had some scandals.

William Aramony, CEO of the national organization for over 20 years, retired in 1992 amid allegations of fraud and financial mismanagement, of which he was subsequently convicted. He was sentenced to 7 years in prison and fined $300,000.

Ralph Dickerson Jr., a former CEO of United Way of New York City, was found to have used $227,000 in United Way funds for personal expenses during 2002 and 2003. He later agreed to reimburse the organization.

Oral Suer, CEO of the Washington, D.C. chapter, was convicted of misuse of donations in 2004. He pleaded guilty to theft of almost $500,000 and is in prison.

http://en.wikipedia.org/wiki/United_Way_of_America

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I don't know how feasible due diligence in assessing the quality of the grantees would be.

An example:

I donate $1000 to cancer charity A and they fund a research grant at Harvard Medical College

-or-

I donate $1000 to cancer charity B and they fund a research grant on the power of prayer on cancer at Liberty University



You can understand my concern, besides high over head and excessive advertising, a charity could just piss money down a rat hole, and we wouldn't necessarily know.

Also, a poorly supervised/managed charity might have an employee embezzle $300,000 to fund a perpetually losing gambling habit (has happened around here more than once, BTW) and that is fucking annoying too.

That's how I feel too. I was also annoyed to discover that these charities make it very easy to set up a monthly donation through the internet, but they make it extremely difficult to reduce or discontinue that donation. Instead of point and click through the internet, it requires signed forms, phone calls, faxes, mail, etc. That's obnoxious IMO.

[The Grand Nudger]

It may be obnoxious, but it's great business; leveraging human laziness to extract a little "charity".