** 2005-06 Audit / 990 forms are now available.



When evaluating charities, it is important to understand why some can apply 80% or more to their cause and others apply less. The answer to this question is not quite as obvious as one would think and the high percentages advertised are not always what they appear to be.

Consider the following example:

A large national Charity, we will call them charity 'A' applies 80% of their funding to their cause. Their funds are raised by a combination of government and corporate grants. The mission of charity 'A' is to fund smaller local charities like charity ‘B’, based on program, demographics, need etc. On the surface, giving to charity 'A" seems like a good idea because their percentage is so high.

Is this really true ?

Government and corporate funding have associated administrative costs. This cost can be as high as 70% in some cases. A good example would be the administrative cost associated with welfare which is about 70%. But this is just the beginning. Assume for a moment that charity 'A' funds charity ‘B’ and that charity ‘B’ applies 60% of this funding to its cause. What percentage of the original donated dollar is applied to the cause? The math is quite simple. Assume the original donation was $1.00. Charity 'A' receives $ .90 in from a corporate grant that has an administrative cost of 10% and assume that charity 'A' applies 80% of that to charity ‘B’ that applies 60% of to their cause. 90% of $1.00 = $0.90 Corporate administrative cost. 80% of $0.90 = $0.72 Charity 'A' administrative cost. 60% of $0.72 =$0.43 Charity 'B' administrative cost.

What appeared to be 80% is in reality only 43%.

If a one dollar donation were made directly to charity 'B' , $0.60 would be applied to their cause.
What appeared to be 60% is in reality 60%.

This is not a worst case scenario, it is more than likely a best case scenario.

Another important item is how a charity raises money. This can greatly impact the percentage applied to their cause. An example of this would be a charity that is funded by a single annual grant. The fundraising cost in this case would be extremely low. However the granting organization will have an administrative cost which will tend dilute the donated amount.

Grass roots organizations on the other hand that depend entirely on private donations in small amounts will have higher fund raising costs. This is because of telephone, mailing, labor, paper, accounting, and other costs. Please keep in mind that when you donate to a charity you are supporting their cause and not giving directly to the needy. This means that part of your donation will be used to keep them in operation. 

We at GOLDEN YEARS feel that the most important factor to consider when giving to a charity is the salary or its top officers. If they are earning in the $100,000+ region we question their reason for being.

Our top executive officer earns $7,600 per year. She works part time and this is her only source of income besides social security.

In July of 1998 our top executive annual salary was reduced to $7,600 form $21,000 due to her partial retirement and Social Security.
In July of 2005 our top executive annual salary was still $7,600.00.

The balance of our payroll expense is divided between six part time workers.

Golden Years Inc. Bensenville Illinois USA
This page was last modified Saturday November 04, 2006