Donor Responsibility and the Myth of Run-Over Shoes and Shiny Pants

"When you tell someone you work for a non-profit," a former boss of mine said, "they expect you to have run-over shoes and shiny pants."

The notion is that folks who work for charities must, by nature, be living on the fringes of poverty themselves. 

But that is counter-intuitive. Non-profits should be run by dedicated, bright-to-brilliant, entrepreneurially-thinking leaders, who can implement cost-effective, impactful programs.

The downside: These people are not cheap to come by.

The upside: Their dedication will allow them to work for a somewhat smaller salary than their peers in the private sector, and their intelligence and entrepreneurial spirit set them apart as people who can "do more with less," who can create new strategies that are not bank busters, and who spawn and develop loyalty among subordinate staff.

I am always taken aback when I talk to folks outside the non-profit arena about Administrative and Fund Raising [AFR] costs and other overhead charities must bear. The passing grade for the Federal Government for participating in the giant Combined Federal Campaign used to be 25%. [The Feds have now lifted that regulation.] The Better Business Bureau (aka Give.Org) uses a higher rate of 35% AFR.

These stringent guidelines mean that 65% to 75% spent on programs is an acceptable amount.

Which is why I am astounded when I speak to (potential) charitable donors who expect percentages in the high 90's to go to programs.

Why? We don't expect workers in the private sector to work like Bob Cratchit, squinting by candle light, sitting at rickety desks, and pleading for another scupper of coal for the fire to keep the ink from freezing.

Non-profits need to keep the lights on. They need to attract and hire the best and the brightest, so the services the charities provide are fiscally and programmatically sound. Sweat shops do not attract dedicated, smart employees.

What a donor should look for in a charity is transparency. If you don't lthe AFR seems high, ask why. There are many, many reasons why the AFR could be out of whack, including the economy.

But don't write a charity off just because administrative expenses don't, at first blush, meet your expectations.

Conversely, don't presume that a charity with low administrative expenses is efficient. They may be spending 99.9% on ineffective programs. And if the programs are ineffective, so are the charities.

So, at the end of the day, there's only one way to be sure your contribution is used well: Do the legwork. Find out how a charity allocates its resources. That's the donor's responsibility.