by Mary Ann Mcgivern

Created on: July 01, 2010

A cause is work that pours forth from a passion for doing good. Causes appeal to our emotions and invite us to help. Mostly, they invite us to give money. But how do they spend that money? Any tax-exempt nonprofit must file a Form 990 with the IRS. We can look up how much money they take in and how they spend it. Probably they also issue an annual report. But will we understand the Form 990? Will we understand from the report how they actually spend their money?

Whether we understand how they spend money depends on whether we understand what is needed to do the work.

THE PROGRAM

The program is the work that the good cause accomplishes. A neighborhood health clinic might list half a dozen programs: mother and infant; early childhood; wellness; geriatrics; and family practice. Within each program are staff salaries, cost of x-rays, cost of sterile procedures, etc.

An animal shelter veterinarian salary is part of program costs, along with test kits for heart worm and vaccinations for distemper. A mentally ill jobs initiative may include the cost of operating a workshop or coffee shop – including the supervisors' and case workers' salaries as well as client salaries, breakage and bookkeeping.

Part of understanding how causes spend money is recognizing that programs fold in a lot of costs, but not all the costs. And sometimes they make the salaries obscure, if not exactly hidden.

SALARIES

The biggest expense for any cause that is accomplishing its goals is salaries. Imagine a cause: curing diabetes; housing the mentally ill; sheltering stray animals. These are not just abstract causes; they are jobs, difficult jobs, demanding full-time staff to do diabetes research, or to listen to sick people and find landlords willing to shelter them, or to catch a wandering dog and determine if he is lost, hurt or possibly vicious.

Sure there's the one-time expense of outfitting the research lab or building the animal shelter. But the day-to-day ongoing biggest line item in the budget is salaries. If the cause is worthwhile, it needs staff. Probably the staff is not very well paid. But their wages amount to significantly more than office rent or dog food.

ADMINISTRATIVE OVERHEAD AND FUNDRAISING

Causes need housing too. They need to pay the rent and the electric bill. They need web sites and Internet connections. They need to sort and answer the mail, record the donations, maintain the financial records.

Causes also need staff time to administer the programs. A homeless shelter may depend on volunteers, but someone has to be sure there are enough volunteers tonight and next week and next month. Someone has to lock up. Someone has to supervise to ensure that the volunteers are kind and are able to respond to the clients' needs

Sometimes a program carries a percentage of overhead, but sometimes overhead is hidden because of a fear that overhead looks like waste or a belief that donors will give to program but not to overhead. Some foundations will not fund salaries or overhead or ordinary operations. The Better Business Bureau is often a watchdog that protests high overhead.

Fundraising is also often hidden or underestimated.

MAKING YOUR EVALUATION

However, a vigorous and growing organization, staffed with passionate workers and volunteers, needs a strong administration and development office. Good work needs support.

So if you want to understand how the people who work on your cause spend your money, don't accept a simple ratio of program and administration. Look first at the outcomes. If the staff are doing excellent work and the salaries are modest, that means administration and development are doing their job well too. Your money is being well spent.

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