Can You Spare a Few Dollars for a Good Cause?

How about 1.5 million dollars?  Because that’s what it’ll take to pay the 2009 annual salary of the Boy Scouts‘ CEO.  That’s right, he receives (I cannot use the word “earns”), $1,577,000 for his efforts.  If I’d known there’d be big money leading a paramilitary-looking youth group …

But it’s not just the Boy Scouts’ CEO who’s rolling in the donations of folks willing to contribute to a good cause.  The Museum of Modern Art’s CEO is paid $1.26 million.  And I thought the “arts” crowd was wealthy!

The Wildlife Conservation Society only pays it’s CEO $628,000.  Those folks are animals!  Have they no shame that their CEO is having to live in a tent at a campground?  And show up at MOMA’s fundraisers so he can eat free off the buffet table?

Yes, it’s that time of year again when the United Way comes around asking me to pledge to their campaign. And for folks like me who think a contribution should actually go primarily to programs and services and not administrative costs, there are some resources to guide my decisions.

Such as Charity Navigator’s recently released annual survey of CEO pay at the top 5,500 U.S.-based charities.  This report slices and dices charitable CEO pay in all sorts of ways.  Quite revealing.

If you’re interested in averages, then it’s the Mountain West that brings up the rear with about $127,000.  The leader of the pack is of course the Northeast, with $194,000.  But averages are misleading.  I wish they’d have used the “median” for each region instead.

Another interesting perspective is by the charity’s purpose.  Health charities’ CEOs aren‘t too healthy, with a $161,000 average.  Even Arts/Culture/Humanities pay their CEO a respectable $204,000 average.  They say knowledge is power, but it’s also very green with an average of $263,00 for Education charities’ CEOs.

All these high salaries contribute to high administrative costs.  That’s very important to me.  Because if I’m donating my money, I hold charities to a much higher standard than the private sector.

So of course I’ll not be contributing to the Masonic Homes of California, which has an administrative cost rate of 45%.  Nor to the Association of Firefighters and Paramedics, which manages to spend all of 3% of its $3 million budget on programs and services.  Then there’s the National Breast Cancer Foundation, whose board of four relatives with the same last name is pulling down from $80,000 to $126,000 each. (But then they say that charity begins at home…)

As for the United Way, I have a 33-page booklet which lists each organization’s administrative costs. I can’t believe how some of these charities stay in business.  Donors must be overlooking the administrative cost factor for the “feel good” factor that they’re “helping the unfortunate.”

In my area, for example, Catholic Charities of Northwest Florida has just under 19% administrative cost.  The local Urban League is at 18%.  Ronald McDonald House Charities of Tallahassee is 20.5%.  The Florida Special Olympics is at 23%.

Many health charities are anemic in keeping administrative costs low. Children’s Cancer Assistance Fund is 19%.  Florida Alzheimer’s Foundation is just over 23% and the Autism Society of Florida is just under that.  The Multiple Sclerosis Foundation is 24%. Breast Cancer Relief Foundation is almost 30%!

Conservation groups don’t always conserve your donation.  Administrative cost for the Alaska Conservation Foundation is almost 24%;  it’s 22% for the Clean Water Fund; 23% for Defenders of Wildlife.

But there are a number of charities putting most of your money to use outside the office. Bless the Children, Help the Children and International Relief Teams use over 99% of their funds for services.  As does the Salvadoran American Humanitarian Foundation.  Soles 4 Souls uses over 98% of its funds to provide shoes worldwide.

In the end, the decision is often personal not logical.  When my father was diagnosed with terminal liver cancer, he was able to live out his last few months at home thanks to his local hospice.

We know a number of folks who have benefited from our local hospice.  And we’re all going to die, so if it’s not going to be sudden then Susie and I may very well need hospice one day.  So, for many years now, I’ve always contributed to the local hospice even though it’s administrative rate is about 13.5%.

And that’s where my donation is going this year too.  But next year, I may just donate directly to them and avoid the United Way’s 15% “middle man” administrative cut.  I don’t care about how my employer “looks” in the United Way campaign; getting the most money to services is what’s important.

Speaking of “looks”, the United Way campaign kick off at my agency had a Hawaiian theme.  In keeping with the theme, there were a number of contests.  I won the men’s  “Best Hawaiian Shirt” contest with an authentic shirt I bought at Hilo Hattie’s when we were in Hawaii many years ago.

My prize was a Chick Filet basket with free sandwich and milkshake coupons and numerous logo items, such a pen and keychain with mini-flashlight. My favorite is an insulated lunch tote.  With a small freezer pack in there, I can bring my lunch to work and not need to put it in a refrigerator, which seems to be quite full these days.

shirt

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11 responses to “Can You Spare a Few Dollars for a Good Cause?

  1. This is quite an eye opener. When we get donation requests over the phone, we always ask first what percentage actually goes to the charity. It’s often not much if they’ve hired a professional fundraising company to do the calling. So we don’t often actually donate to those causes. But administrative costs are not something I’ve thought to question, especially within the United Way campaign. It’s so well known, that I guess I have never thought to dig deeper. Thanks for the heads up.

  2. P.S. VERY cool shirt. Interesting glasses 😉

  3. Spencer:
    In the private sector, it’s fairly straightforward to define a “well run company.” There are metrics such as long term return on equity, share price, and revenue growth. Although attempts have been made to quantify what “well run” means in the context of charities, it is much more difficult.

    I am always appalled when executives at a badly-run organization are overpaid.

    But If you believe that a charity is “well run,” (however YOU define it,) why do you have a beef with a highly paid management team? Don’t you want charities to compete for top talent with other organizations? Or do you believe that it’s an oxymoron for well-run charities to pay their talent competitively?

    • > Don’t you want charities to compete for top
      > talent with other organizations?

      Actually…NO. Why do they need “top” talent? What’s wrong with “good” talent?

      Seems to me, you make a “choice” in your life. If you choose non-profit or government, then it should be with the understanding that you should not expect private sector style compensation. It is about “service” not money.

      Plus, I’m not a big believer in the role of management in results. Particularly in government, which often has a rotating cast of upper management based on politics and little understanding of programs, program history, etc.

      Results usually come from mid-management, which often has a longer tenure, and of course the workers who make it all happen… the ones who produce products or provide services.

      All the strategic plans, etc. are useless if you don’t have capable front line workers who can make it happen.

      Yes those charities seem to take a different attitude about “top talent” when it comes to paying rank and file. I’d rather see the rank and file pay “competitively.”

      I do not accept the idea that if a non-profit paid it’s CEO “only” in the six figures, that it will not accomplish it’s mission as effectively as if it paid the CEO in the seven figures. Has that ever been empirically established?

      All that well-paid top management at AIG and Bear Stearns and look what happened. I could have done that “well” and I’d have done it for a lot less! 😉

  4. Having worked for not for profits for 15 years I can tell you have not. The Annual Report is often a work of fiction as it frequently has “in kind service” accountants doing the audits. The auditing firms do not assign their top auditors to the audits ( as they are not actually beng paid) so the management team has considerable flexibility in accurately reporting the Administrative costs. .i e. program costs can easily absorb admin overhead just to make the numbers look sweet and only an experienced auditor can pinpoint the reality.

    The true measurement of a nfp is its accomplishments not its administrative costs.

    Economic impact analysis can be eye opening. Assigning metrics and evaluting success is critical.

  5. I do not accept the idea that if a non-profit paid it’s CEO “only” in the six figures, that it will not accomplish it’s mission as effectively as if it paid the CEO in the seven figures. Has that ever been empirically established?

    Yes. This has been established. Let me give you a trite example: If you pay a CEO $0 per year, you will get fewer applicants than if you pay a CEO $10,000,000 per year. As you increase or decrease the marginal amount, the number of applicants will increase or decrease. It’s then up to the Board to select the best candidate for the job. There are ample examples of incompetent CEO’s destroying an organization, and brilliant CEO’s growing/improving organizations. (The Board can also hire a highly paid CEO who does a dismal job — but let’s not confuse Market Economics with the Board’s mistake.)

    All that well-paid top management at AIG and Bear Stearns and look what happened. I could have done that “well” and I’d have done it for a lot less!

    You are correct that even highly paid people can do stupid or bad things. However, I don’t see you suggesting that if the CEO of Bear Stearns was paid $1 per year, the story would have been any different.

    I will pose a slightly different question — which is “How do you know if a charity is doing a “good job?” (Think, ACORN.) And, why exactly should not-for-profit organizations not pay taxes on their real estate, their investment portfolios, and their net income? (Harvard sure resembles a for profit corporation, for example.)

    • > Yes. This has been established.

      “Trite examples” are not empirical studies.

      > If you pay a CEO $0 per year, you will get
      > fewer applicants than if you pay a CEO
      > $10,000,000 per year.

      Presumptuous on many counts, including that money is the prime motivator, which I believe has been disproven. Also, quantity does not mean quality even if there are 10,000,ooo applicants.

      > How do you know if a charity is doing a “good
      > job?”

      In most cases you do not. In my case of the local hospice, it is anecdotal. And since I really don’t know, I just have to hope that a low admin % is better than a higher one becasue at least more money is going to services, whether or not ut is doing the job.

      > why exactly should not-for-profit
      > organizations not pay taxes on their real
      > estate, their investment portfolios, and their
      > net income?

      Because wussy bleeding heart types believe we should give them a break on the idea that that money might go to the “needy” and not bonuses for the CEO? I don’t buy that. If these non-profits can pay CEOs big bucks they sure can pay, and should, pay taxes.

  6. Ptfan1 makes an interesting point, but like you Anarchist, I don’t want any money I donate to end up as part of somebody’s paycheck.

    Most of what I have goes to help support my nieces and nephews with their extracurricular activities. But I would certainly choose the local hospice as well. I’ve seen what they do first hand and I could not have taken care of my terminally ill uncle without their assistance.

  7. As you say, it’s often a personal rather than a particularly logical decision. The last two times I donated to a charity it was to the Humane Society of the U.S. and to NPR…

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