When you donate to charity, you want your donations to go toward a good cause, not the CEO’s pocket. Donating to major organizations can often feel like a leap of faith, as you don’t know exactly where your money or goods will end up. So, how much of your donations actually go to charity?
At Easy Donation Pickup, we want to help givers like you feel confident when donating to charity. Below, we cover what you need to know about how charities allocate their donations.
No Charity Allocates 100% of Donatins Directly to Their Cause
The truth is, no charity can donate 100% of the goods and funds they receive. A small percentage of what you donate will go toward the organization’s overhead costs and administrative expenses.
Some people take this news as a red flag. You must consider that even the percentage of your donations going toward administrative costs still supports a good cause by keeping the organization up and running.
If you donate cash to charity, most organizations keep a small percentage to fund various needs. If you donate goods, often charities will sell any of the goods deemed unfit and then use the profits for administrative purposes.
Factors Affecting the Percentage of Donation
How much of your donations actually go to charity? Some charities allocate 60% of donations to their cause, preserving a large portion of funds to pay staff high salaries, while others allocate 95% of their goods and funds to people in need.
A charity’s allocation percentage depends on its overhead costs, administrative expenses, and the amount of fundraising it receives. If it has high costs and few donations, it will only be able to donate a small percentage of its funds to its cause.
Overhead Costs
Charities try to maintain fundraising efficiency, keeping costs as low as possible. Despite this, organizations still need resources to keep programs running smoothly, maintain teaching tools, further bolster marketing efforts, and more. The costs add up.
Overhead costs might include:
- Office space
- Advertising
- Fundraising costs
- IT infrastructure
- Accounting fees
- Legal fees
- Insurance
- Taxes
- Performance management systems
- Internal and external audits
Even though these items don’t seem like they’re contributing to the charity’s cause, they allow the charity to operate smoothly and collect donations to help people in need.
Administrative Expenses
Aside from the basic costs required to keep the business running, people need to get paid fairly. When considering donation allocation, administrative expenses are often the most variable factor.
Some organizations choose to allocate a large portion of funds to upper-level management salaries. Trustworthy charities invest in staff training and development, pay everyone fairly, and donate the rest to the cause.
Fundraising
When analyzing how much of your donations actually go to charity, many often overlook the charitable contribution impact of fundraising. When a charity succeeds with fundraising, it can allocate more of its donations to its cause.
For example, say your charity has overhead and administrative costs that total $100,000 per year. Now, imagine you collect $1 million in donations this year. You would be able to allocate 90% of your donations to your cause.
Let’s say next year, though, you only collect $500,000 in donations. With this lower fundraising result, you’d only be able to contribute 80% of your donations to your cause, even though your overhead and administration costs didn’t change.
How Industry-Leading Charities Allocate Donations
Many mistakenly believe that major charities must keep large portions of their funds to pay CEOs millions each year. Let’s look at a few industry-leading charities to see whether or not this is true:
- American Red Cross donates 90%
- Doctors Without Borders donates 85%
- St. Jude’s Children’s Research Hospital donates 82%
- Feeding America donates 98%
- United Way donates 85%
- The Nature Conservancy donates 71.2%
- The Michael J. Fox Foundation for Parkinson’s Research donates 88%
You may be shocked by how much of donations actually go to charity, given the recent scrutiny that charities like the American Red Cross have faced. What you may not realize is how the American Red Cross contributes to its cause.
For example, after the 2010 earthquake in Haiti, the American Red Cross collected over $490 million in donations to support communities in the area. Four years later, though, NPR and ProPublica claimed that the Red Cross only managed to build four new homes with these funds. In reality, the Red Cross used the majority of its $490 million to fund over 50 aid projects across Haiti.
With that being said, many major charities do have much higher overhead levels, resulting in lower contributions. For example, the George Bush Presidential Library Foundation allocates about 30% of donations to administrative expenses, the American Printing House for the Blind keeps 34% for administrative costs, and American SCORES preserves one-third of donations for fundraising and administrative expenses.
In some ways, low costs allow more funds to go to the cause. On the other hand, some argue that higher administrative costs offer smoother operations and a better impact, allowing the charity to collect more donations. Ultimately, the total amount donated to the cause displays the success of the charity.
The Role of Watchdog Groups in Assessing Charities
Watchdog groups collect unbiased financial information on charities around the U.S. and overseas so you can assess the organization’s legitimacy and trustworthiness before donating. Here are a few places you can find some charitable giving transparency:
- CharityWatch: Promotes philanthropy accountability, financial efficiency, and trustworthy governance by offering information on hundreds of charities, listing active warnings when necessary
- Charity Navigator: Reviews thousands of organizations across the world, offering alerts for misconduct
- Give Well: Connects you with a list of the top efficient charities based on what causes you want to support
- GuideStar: Reviews IRS-recognized tax-exempt organizations by collecting 990 IRS forms and lets users leave comments for full transparency
How To Donate in Other Ways
If you’re still concerned about how much of your donations actually go to charity, consider supporting causes in other ways:
- Donate acceptable goods: When you donate unacceptable items, the charity will sell your donation and use the money for various purposes. If you’re donating goods, be sure your items match the acceptable goods list so they can go directly to people in need.
- Volunteer your time: Rather than donating items, you can volunteer your time to help people in need.
- Give directly: Any time you donate, you should give directly to the organization rather than providing payment details to phone callers or advertising scams.
Questions You Can Ask Before Donating
You should research any charity you’re considering supporting by asking questions like:
- How much of my donation will go to the cause?
- Does the charity have any complaints or poor reviews?
- Does the charity take action and see effective results in their relief programs?
- Are donations to the organization tax-deductible?
- If it’s a nonprofit, is it actually a charity? If so, what is the nonprofit fund utilization status?
Looking for Somewhere To Donate Your Goods? Consider Easy Donation Pickup
Now that you know how much of your donations actually go to charity, consider donating to a trustworthy cause, like the National Veterans Foundation. At Easy Donation Pickup, we accept a range of items to be donated directly to the cause. Schedule your pickup today by filling out our Easy Donation Pickup form or calling us at (855) 628-8387.
