Donors are more interested in how a nonprofit’s funds are spent than in the results it achieves, according to a study released today.
About 46 percent of people surveyed by the BBB Wise Giving Alliance, a charity watchdog, said they base their trust in a nonprofit on its finances, which include the amount spent on overhead costs like salaries and fundraising versus allocations to its programs. Only 11 percent of donors said the results a charity gets from its activities engendered the most trust in that organization.
Nonprofits, by and large, have spent a great deal of effort measuring their impact and communicating the results to donors. The fact that donors still seem to care more about a charity’s overhead isn’t surprising, says Art Taylor, president of the BBB Wise Giving Alliance.
He says the emphasis on impact has received a lot of attention from charities.
"We have to make it more of a donor issue," he says.
BBB Wise Giving Alliance and two other groups that provide information on nonprofits, Charity Navigator and GuideStar, have called the suggestion that a charity is better run if it limits its expenditures the "overhead myth." They argue that charities are likely to have different expenses depending on their cause, geographic location, and how long they have been in existence.
"If you only look at finances, you’re going to miss a lot in terms of evaluating a charity’s trustworthiness," he says. "Trustworthiness is the reason people support us. They don’t support us because we are impact machines."
The survey reached 4,530 donors nationwide and had a margin of error of 1.45 percentage points.
Among the study’s other findings:
- Twenty percent of respondents said the most important thing they consider when deciding to make a gift is a nonprofit’s "overall honesty and ethics," while nearly 10 percent replied that they give based on how well known the charity is.
- About 41 percent said they perceive charities that spend less on overhead as being "well managed," and 34 percent said they consider those charities to be more effective.