Holding Charities Accountable

How do you know if your favorite charity is spending its donors money effectively? In many cases, charities are unwilling to provide this information or, worse, are completely unprepared to answer such questions.

Suppose you are concerned about children in Africa dying from preventable diseases. You want to donate money to a charity that is working to reduce the toll. But there are many charities doing that. How do you choose?

The first thing that many people ask about charities is, “How much of my donation is spent on administration?” In the United States, that figure is readily available from Charity Navigator, a Web site that has five million users. But the information is taken from forms that the charities themselves complete and send to the tax authorities. No one checks the forms, and the proportions allocated to administration and program expenses are easily massaged with a little creative accounting. 

Worse still, that figure, even if accurate, tells you nothing about the charity’s impact. The pressure to keep administrative expenses low can make an organization less effective. If, for example, an agency working to reduce poverty in Africa cuts staff with expert knowledge, it is more likely to end up funding projects that fail. It may not even know which of its projects fail, because evaluating them, and learning from mistakes, requires staff – and that adds to administrative costs.

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