February 14, 2008

Many Americans Say Charity Overhead Costs Are Too High, Study Finds

Sixty-two percent of the public thinks that charities spend too much money on overhead costs such as fund raising and administration, according to a new study, a belief that could make it harder for charities to raise money.

On average, people said they thought that charities spend about 36 cents of every dollar they receive on overhead, substantially more than the 22 cents the public feels charities ought to spend, according to Ellison Research, in Phoenix, which conducted the study.

Those assumptions make it tough to raise money, even for charities that spend little on overhead, because people’s beliefs influence their giving and people who assume charities aren’t efficient are less likely to donate to new organizations, according to Ron Sellers, president of Ellison Research.

“People who believe nonprofits are spending too much on overhead will tend to make that assumption about any nonprofit they come across,” he said.

The study, which surveyed 1,007 adults in 50 states, had a margin of error of 3.1 percentage points.

Most of those surveyed — 61 percent — believe charities should spend between 10 cents and 29 cents of every dollar they raise on overhead. Ninety percent agreed that charities should spend less than half of the money they bring in on overhead.

But respondents differed widely in their estimates of how much they think charities actually spend on salaries, computers, and other costs. Nearly one-quarter believe charities spend less than 20 cents of every dollar on their expenses — and almost as many think charities spend 60 cents or more.

Younger donors are more inclined than older ones to trust charities’ spending according to the study: 70 percent of those age 55 and older said charities spend too much on operating costs, compared to 64 percent of those 35 to 54 and just 44 percent of those under 35.

In addition, almost twice as many blacks (20 percent) believe charities actually spend too little on overhead, compared to 10 percent of whites and 10 percent of Latino-Americans.