Charitable Donation Advice
Charitable Donation Advice is a recurring education effort. Your small donation is a big deal, and we want to help you make better donations for the causes you care about most.
Why You Don’t Want to Use Overhead Ratio to Evaluate a Charity
The overhead ratio is meant to measure how much of a donation is spent on the charity’s programs versus on administrative (salaries, office space, etc) and fundraising costs. An overhead ratio of 93% means that 93 cents of every dollar is going to that charity’s program.
Theoretically, the higher the ratio, the better the charity and the more money spent directly on programs the greater the impact of your donation.
Unfortunately, it doesn’t work that way.
- Overhead ratios don’t tell you if the charity’s program is making an impact or what kind of impact it’s having. You could donate to a charity with a great overhead ratio, but if the program doesn’t work, it’s still a wasted donation.
- Charities need to invest in tools and expertise to make them more effective. Your donation could actually make more of an impact with a charity with a low overhead ratio who had invested in technology to better identify who needs help than one who gives aid to anyone because they don’t have the means to evaluate applicants.
- An estimated 75% of charities calculate their overhead ratios incorrectly, so it’s almost impossible to understand how any one charity is calculating their ratio and how it compares to another charity.
So, ignore overhead ratio and focus on impact. Making better donations is easy when you know what to look for and what to ask.
I’ve written a 3 Level Evaluation Guide that will help you quickly and confidently evaluate charities so you can make better donations this holiday season. Click the button below to get your copy of the Holiday Giving Survival Guide.