Who Gets The Money? — 14th annual edition

From ANIMAL PEOPLE, December 2003:

Starting on page 15 is our 14th annual report on the budgets,
assets, and salaries paid by the major U.S. animal-related
charities, plus miscellaneous local activist groups, humane
societies, and some prominent organizations abroad. We offer their
data for comparative purposes. Foreign data is stated in U.S.
dollars at average 2002 exchange rates.
Most charities are identified in the second column by what
they do and stand for: A for advocacy, C for conservation of
habitat via acquisition, E for education, H for support of hunting,
I for supporting the eradication of “invasive” feral or non-native
species, L for litigation, N for neutering, S for
shelter/sanctuary maintenance or sterilization project, U for
favoring either “sustainable” or aboriginal lethal use of wildlife,
and V for focus on vivisection.

As most listed charities do some advocacy and education, the
A and E designations are used with others only if advocacy and
education use more of the charities’ time and budget than other roles
for which they may be better known. Charities of obvious purpose may
not have a letter. While many charities pursue multiple activities,
space limits us to offering no mre than three identifying letters.
Most of the financial data we cite for U.S. organizations
comes from Internal Revenue Service Form 990 filings, usually
covering fiscal year 2002. Form 990s from most U.S. charities are
available–free–at <www.guidestar.com>. The data for foreign
organizations, and for some U.S. organizations whose 2002 Form 990
is not yet available, comes from published balance sheets.
Because Guidestar plans to add the financial filings of
British charities early in 2004, which will make newer data
available than could previously be obtained, ANIMAL PEOPLE this year
is waiting until the Guidestar British section debuts to cover
British charities, other than those which have voluntarily sent
their financial information to us. We anticipate publishing the data
from a full roster of British charities in spring 2004.
Who Gets The Money? enables donors to evaluate charities
using three different standard fiscal measures.

Receipts vs. program

The yardstick most used by charity heads is the balance of
donations plus program service revenue and unrelated business income
(such as receipts from running a thrift store or selling t-shirts)
with program expense.
The ideal is that the program budget should equal the funds
raised or earned within the year, while interest on reserves should
cover the cost of raising the money. Capital-intensive special
projects, e.g. building a shelter, should be funded by grants and
If donations plus program service receipts fall short of
program cost, the program may be uninspired or poorly promoted.
If donations plus program service receipts far exceed program
cost, the program budget for the next year should be larger–but
some charities hoard rather than use a surplus, to have more
interest available to use to raise funds. (See “Budget vs. assets,”
next page.)
This yardstick favors charities that are old enough to
attract large bequests. If younger charities try to build reserves
big enough to pay interest equal to their fundraising expense, they
run a high risk of becoming direct mail mills, perpetually trying to
raise more, to invest more, to bring investment income closer to
their ever-climbing cost of attracting donors. Program service may
become a seeming afterthought, and the main accomplishment of the
charity may be enriching direct mail contractors–especially if the
initial fundraising investment was borrowed from a direct mail firm,
as often occurs, with rising debt keeping the charity in bondage.

Program vs. overhead

We assess the balance of program versus overhead spending by
using a standard borrowed from the Wise Giving Alliance: charities
should spend at least 65% of their budgets on programs, excluding
direct mail appeals. This standard is stricter–and more indicative
of priorities–than IRS rules, which allow charities to call some
direct mail costs “program service” in the name of “education.”
The “Fundraising & Administration, as Declared” line in our
tables states each charity’s administration and fundraising costs as
declared to the IRS. The next line states those costs as they appear
to be, if we ask of each mailing, “Would this have been sent if
postal rules forbade the inclusion of a donor card and a return
envelope?” If the answer is no, the mailing should properly be
considered “fundraising,” not “program.”
Differences between the declared and adjusted balance of
program and fundraising/overhead spending appear in boldface.
Charities which collect interest on large endowments tend to
have lower overhead because they can do less fundraising.
Charities which use mostly volunteer labor and donated
supplies by contrast may have “high” overhead, as much of their
program work may not appear in cash accounting.
The practice of ascribing direct mail to program service
instead of fundraising reflects the common but erroneous belief that
“good” charities have the lowest fundraising costs relative to
program service.
But calling direct mail “program service” in the name of
humane education has devalued the idea of humane education so much
that fundraising for real humane education and outreach has become a
very hard sell.

Budget vs. assets

Parentheses, in the asset lines, indicate a deficit.
Shelters and sanctuaries tend to have more tangible assets (property
and equipment) due to the nature of their work. Often total assets
add up to less than the sum of fixed assets plus cash because of
declared liabilities.
Compare the Expenditures and Cash & Securities lines.
Says the Wise Giving Alliance, “Usually, the organization’s
net assets available for the following fiscal year should not be more
than twice the higher of the current year’s expenses or the next
year’s budget.”
Substantial fiscal assets are often “locked up” in
restricted endowments. Yet an endowment balance may be used as
collateral on investment in expanded program service– if a charity
opts to do so.

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