Checking Up On Charities

Feeling generous this holiday season? Tomorrow, December 3, #GivingTuesday kicks off the charitable season, when many focus on their holiday and end-of-year giving. Have you ever wondered, though, whether the charities you support are spending funds in the best way? More specifically, in your opinion, how much should a charity spend on those it purports to serve, and how much should it spend on itself?

The 2016 firing of the top two executives at the Wounded Warrior Project illustrates the question. Several years ago a client expressed interest in supporting a veteran-based organization in her will. When I asked if she had a specific one in mind, she thought for a second and said, “Well, something like the Wounded Warrior Project (WWP), perhaps.” I asked if we could look it up on Charity Navigator. When we did, it showed that nearly 40 percent of the organization’s revenues were being spent on itself, mostly for salaries, advertising and fundraising. When I served on the audit committee for my local United Way, the range of administrative and fundraising expenses for most charities was usually less than 10%. I asked which was the kind of charity she had in mind. She moved on to other candidates.

Obviously in her case, WWP’s advertising worked. It was top of mind for her, unprompted – an advertiser’s dream outcome. Any charity would have loved to be in that coveted spot.

Indeed, there are those who argue just that – charity advertising dollars, if spent wisely, do the greatest good. After all, if 60% of WWP’s annual take of $225 million is being spent on helping the wounded veterans they serve, that’s a lot of good being done, even if the other 40% is going back to the staff, advertising agencies, hotels, resorts, and airlines. Perhaps business-minded donors don’t mind charities being run like a business – wining and dining potential clients (donors), and rewarding its highest producers (fundraisers) with lavish trips. Perhaps those same donors eschew executive directors who take sparse salaries and employ minimal marketing staff.

If you are a potential donor of any stripe, the important point is to know your values in this regard. Ask the questions or do the research to make sure your favorite charity is a match in all of these areas: their message, their mission, and their methods of achieving both. Need help? Contact a local community foundation, check out Charity Navigator, or ask your favorite financial planner.

For more information on this topic, check out The Mindful Money Mentality.

Holly Donaldson

Holly Donaldson, CFP® runs an hourly and fee-for-service financial planning practice virtually from her Tampa Bay, Florida office. She also works with clients throughout the U.S. (except Texas) interested in retirement and tax planning advice without product sales or investment management. Holly is the author of The Mindful Money Mentality: How to Find Balance in Your Financial Future (Porchview Publishing, 2013) and publisher of the award-winning monthly e-letter, "The View From the Porch."

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