(The Humanitarian Social Network)
The LA Times published a great article about the folly of using administrative costs as *the* indicator for judging NGOs. It's nice to see a mainstream newspaper write about this:
I agree that overhead is, at it's very best, a blunt instrument for judging NGOs and charities.
But what would be better ones? What things could the average person see and get and understand without a significant investment in learning about the aid world? Or maybe that's the point - that there is no simple, quick, easy thing to look at?
Unfortunately, I don't think that there's currently one "simple, quick, easy thing" for the public to look at and judge a charity, but I feel like the movement toward increasing transparency and making more robust, comparable, and complex info about aid org operations available (ie via mechanisms like the International Aid Transparency Initiative and the Open Aid Partnership) could facilitate this. Of course, there needs to be a 'next step' to make this info into a "simple, quick, easy thing" that the average person could look at and understand easily, but I think making the data available is an important first step in that direction.
I think it should be a combination of factors and I am more inclined to want to work for a charity who has their (for U.S. based NGOs) their 990 forms acessible on their website in addition to an annual report. I think this whole issue goes back to the whole issues raised when Invisible Children became the charity du jour. Most people take what they are spoonfed without doing any research and if someone well known/famous says donate to "x" NGO/charity people will do without a thought or question.
To show just how terrible using admin costs as the indicator for judging NGOs, consider the recent case of HEDAC (Help Eliminate Disease and Addiction Canada). Its charitable status was recently revoked by the Canada Revenue Agency; in its release on the revocation, CRA said:
"For its participation and tax receipting abilities, the Organization received approximately $3.5 million in cash. Of this amount, the majority was paid to the tax shelter promoters as fundraising fees, to related third party companies as administrative fees and used for the personal benefit of the directors. The Organization devoted a mere $138,000 on its own charitable purposes." [My emphasis added.]
Yet in 2010, HEDAC was proudly trumpeting that it had been ranked the second best charity in Canada in terms of money going towards the cause by a financial magazine. http://hedac-ca.blogspot.ca/
I'm not saying that all charities with low admin rates are fraudulent, of course that's not the case, but if we're looking at admin costs alone, we make it easier to miss fraudulent activity.
More on this particular case here.
Woah, I hadn't heard about this. That's insane and infuriating, but a super powerful story to illustrate of why admin costs are not a good indicator. Thanks for pointing us to it!