Who Gets The Money? — 12th annual edition (Introduction)

From ANIMAL PEOPLE, November 2001:

Starting on page 14 is our 12th annual report on the budgets,
assets, and salaries paid by the major U.S. animal-related charities
and 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 2000
exchange rates.
Most charities are identified in the second column by
apparent focus: A for advocacy, C for conservation of habitat via
acquisition, E for education, H for support of hunting (either for
“wildlife management” or recreation), L for litigation, N for
neutering, P for publication, R for animal rights, S for
shelter/sanctuary maintenance, V for focus on vivisection, and W
for animal welfare. The R and W designations are used only if a
group makes a point of being one or the other. Charities of obvious
purpose may not have a designation letter.
While many groups are involved in multiple activities,
space limits us to providing only three identifying letters.
Except where otherwise stated, the financial data comes from
current Internal Revenue Service Form 990 filings, covering either
calendar year or fiscal year 2000.
The basic data on any U.S. charity and often full Form 990s
are available–free–at <www.guidestar.com>.
We offer the data here to further assess each charity 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
bequests.
If donations plus program service receipts fall short of
program cost, the program may be weak or badly promoted.
If donations plus program service receipts far exceed program
cost, the program budget for the next year should be larger–but
some administrators hoard rather than use most of a surplus, to have
more interest available with which to raise funds. (See “Budget vs.
assets,” next page.)
This yardstick favors charities which are old enough to
attract large bequests. If newer charities try to build reserves big
enough to pay interest equal to their fundraising cost, 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 this balance using a standard borrowed from the now
defunct National Charities Information Bureau: charities should
spend at least 60% 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” under the heading of “public
education.”
The % column in our tables states each charity’s overhead and
fundraising costs as declared to the IRS. The ADJ column 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 are in bold.
Groups which collect interest on large reserves tend to have
lower overhead because they can do less fundraising.
Shelters, sanctuaries, and some activist groups which use
mostly volunteer labor and donated supplies by contrast may have
“high” overhead, as much of their program work doesn’t appear in
cash accounting.
The practice of ascribing direct mailings to program service
instead of fundraising reflects the common but erroneous belief that
“good” organizations have the lowest fundraising costs relative to
program service.
But calling appeal mailings “program service” in the name of
humane education has devalued the very concept of humane education to
the point that fundraising for genuine humane education and outreach
has become a very hard sell.

Budget vs. assets

Italics, in the asset columns, 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 tangible assets plus funds and
investments because of declared liabilities.
Compare the Budget and Funds/Invest columns.
The NCIB suggested that, “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.