The Everyday Philanthropist

CHAPTER 21Overhead Measures Hide Unfair Differences in Accounting

The percentage of your donation that goes to the cause depends entirely on how a charity defines the cause in their accounting. And the percentage that went to overhead depends entirely on how they define overhead. When you give to the soup kitchen, you may think that soup, and only soup, is what should be accounted for as “going to the cause.” But the charity may decide that the money they spend on advertising about how much soup they serve is “going to the cause.” If you don't know that, then you and the charity will have very different ideas about how much money went to the cause.

For example, if a big disease research charity stages a 10K walk and props up its reputation by telling participants, “Only 30% of donations went to expenses and 70% went to the cause!,” the average person will think that 70% went to medical research. In reality, if the charity off‐loaded half of their event expenses to “the cause” (e.g., if 60% of donations, not 30%, really went to expenses, but the charity labeled half of those expenses as part of “the cause”), then only 40% of donations actually went to medical research, not the 70% that the public thinks. If the charity doesn't tell you that very clearly, that's a betrayal.

I favor a broad definition of the cause. I think 100% of what charities are doing, if in good faith, is cause‐related. But I have a problem with not telling the public loud and clear what that definition is. ...