Author: Victoria Dimond
- When deciding which charity to give to many supporters examine administrative costs per dollar fund raised.
- This approach misses the point of a charity: to have a large positive impact, not to have low administrative costs.
- A better way to assess charities is to investigate what impact they are having per dollar fund raised.
Charities are often compared based upon how low their administrative costs are. For example, see the graph below of some of Australia’s largest international development charities. This type of comparison is based on the argument that funds donated should not be wasted on big salaries or expensive advertising campaigns, but going to help those in need.
However this approach misses the point.
Rather than comparing charities based on how much of each dollar is being spent on administrative costs, a better way is to consider how much benefit each dollar brings about: the impact each dollar is having.
Innovations for Poverty Action (IPA) is a not-for-profit organisation that researches the impact of development projects. Using IPA’s analysis, the graph below compares the impact of different projects aimed at increasing school attendance in developing countries.
The graph shows that $100 spent on school attendance can have a very different impact depending on what project the money is spent on. An information project that raises awareness about the benefits of education to parents and children has the largest impact. In this case, $100 spent results in an additional 21 years of education (i.e. helps many kids stay in school for longer). However $100 spent on Cash Incentives for families only keeps one child in school for an additional 11 days. Considering the impact of projects when supporting a charity can make a world of difference to those in need.
Another organisation that assesses charities’ impacts is internationally recognised not-for-profit Givewell. In addition to their own evaluations of hundreds of charities, they have a online do-it-yourself kit that you can use for the charities you are looking at giving to: http://www.givewell.org/charity-evaluation-questions
Get greater bang for your buck in terms of impact, not low administrative fees.
Innovations for Poverty Action, 2014 <http://www.povertyactionlab.org/policy-lessons/education/student-participation>
The data in the first chart of this blog was sourced from the individual charities websities on 23rd June 2014.
Information about Author: Victoria Dimond has a variety of experience in international development. She has volunteered and interned with many not for profits in the sector including Oaktree, Vgen, Global Poverty Project and GiveWell. Victoria has also spent time volunteering in Kenya and Uganda.