Recently an article “Inside the hidden world of thefts, scams and phantom purchases at the nation’s nonprofits” published in The Washington Post highlighted issues of financial accountability among nonprofits. The report examined embezzlement, fraud, and other irregularities at more than 1,000 nonprofits.
The Center for Investigative Reporting identified America’s 50 worst charities based on the money they diverted to for-profit solicitors over a decade. The reporters observed that there is a considerable gap between the total funds the charities collected and the amount spent on their actual cause. The CIR report implies that the charities with high overhead spending in the name of fundraising and other program expenses are dishonest. However, some philanthropists classify the program expenses such as salaries, advertising, research, fundraising, as overhead and consider these expenses to be legitimate for the large charities. They reiterate that if we cut down on these expenses, that are actually an investment toward achieving the charity’s defined fundraising goals and help solicit donations, we are likely to fall short on our goals.
When it comes to donating money individual donors will mostly give to charities close to their heart or those referred by the friends and family. Whereas for some donors it is not a simple matter to pick a charity that deserve their donation, and therefore they look at a nonprofit’s financial information to see how best the charity utilizes the funds it receives, most importantly, if they are keeping their overheads low.
On the other hand, a small charity is more likely to have low overhead and it may take some years for donations to grow enough to reduce the percentage spent on overhead. Therefore, small donors prefer new or underfunded efficient charities with low overheads’ where there funds will have greatest impact.
.. Hina Faraz