Managing Your Donors’ Money

Larry Tucker

As a nonprofit leader, you have a responsibility to your clients, your community, your board, your staff and your donors.  

Have you thought about the donor perspective lately? Donors want us to make good use of their investments in our organizations. In many ways, we are expected to run our nonprofits like a business, that is, to fulfill a mission and maintain a financial statement that people will want to continue to support.  

I took a look at Charity Navigator (www.charitynavigator.org) again to remind myself of the benchmarks they set to separate effective nonprofits from less effective nonprofits. The website is a treasure trove of financial data about charities nationwide. The organization recognizes differences among different types of nonprofits and makes it clear that they are simply comparing results within these types.  

Some interesting findings from their casino online site:  

  • “7 out of 10 charities…spend at least 75% of their budget on the programs and services they exist to provide.”  
  • The median administrative expense as a percentage of total budget across all charities is 9.5%, but still recognizing that there are differences among charities.   
  • The median fundraising efficiency (that is, how much it costs to raise a dollar) among all charities is ten cents. Community foundations and food banks are much lower. Public broadcasting and media are much higher.  

Based on Charity Navigator’s data, here are some red flags that would be worth some time exploring at your organization:  

  • Does your organization spend less than 75% of its budget on the programs and services it exists to provide?
  • Are your administrative expenses (not counting fundraising expenses) more than 10% of your budget?  
  • Are your fundraising expenses more than 15% of your budget?  
  • Does it cost you more than ten cents to raise a dollar?  

While there may be very good reasons for variances from these norms, your donors would expect that you have reviewed and considered these financial markers.

 Author:  Larry Tucker,  Executive Coaches of Orange County,  www.ECofOC.org