WHERE DOES THE
CHARITY MONEY GO?
The answer is that there's not really one specific answer, as charities are working differently. You work hard for your money. So when you choose to donate your money to charity, how can you be sure the nonprofit organization will use your money properly? There are a couple of things for you to do and consider.
Do a Research
Take a few minutes to visit the charity profiles here on this site, as well as the nonprofit's website where you can view their annual report, financial statements, and information about how they're making an impact. Secondly, when looking for charities to support, we encourage donors to check with charity validators like BBB Wise Giving Alliance and Candid (formerly GuideStar), two of the most highly regarded charity validators in the nonprofit and private sector. Lastly, learn more about the Overhead Myth. It's understandable that you want to invest in a cause, not line a nonprofit executive's pocket. But the fact is that overhead — the percent of charity expenses that go to administrative costs versus program costs — is a poor measure of a charity’s performance. Overhead is a simple financial ratio that tells us nothing about a nonprofit's true impact or effectiveness. In fact, with clever accounting, a nonprofit can skew their ratio. It's far more useful to focus on true indicators of a nonprofit's performance: transparency, governance, leadership, and results.
The Nonprofit Starvation Cycle
That is not to say that overhead has no role in ensuring charity accountability. At the extreme, the overhead ratio can offer insight: it can be a valid data point for rooting out fraud and poor financial management. In most cases, however, focusing on overhead without considering other critical dimensions of a charity’s financial and organizational performance does more damage than good. In fact, many charities should spend more on overhead. When we focus solely or predominantly on it, we can create what the Stanford Social Innovation Review has called “The Nonprofit Starvation Cycle.” We starve charities of the freedom they need to best serve the people and communities they are trying to serve. So when you are making your charitable giving decisions, consider the whole picture. The people and communities served by nonprofits don’t need low overhead, they need high performance. Now, in the light of all this, here are some general areas where the money may be used:
Advertising/marketing costs
Additional fees and costs
Programs and services
Utilities
Admin costs
Rent/lease payments
Maintenance costs
It's important to research a charity before donating to ensure that your money is being used effectively and efficiently. Many charities have financial reports and transparency measures in place that disclose how they use donations. You can also check resources such as Charity Navigator or GuideStar to evaluate a charity's financial health and accountability.
