Go to Guidestar, a large database of American nonprofits, and search for charities with "multiple sclerosis" in their names. We just did and got 206 hits. "Diabetes" produced 542 references. "Mental health" returned 1,733 organizations. "Cancer" was found in a whopping 2,826 monikers, double the number found just eight years ago.
With upwards of 1.4 million nonprofits in the U.S., such duplications might be expected. And a contribution to just about any of them will give you a tax deduction. But how do you figure out which nonprofit will give you the most bang for your buck? To put it another way, which ones spend the most on fundraising and unneeded overhead?
One place to start is the 10th edition of our annual list of the country's 200 largest nonprofits by private donations. Over the last year, these charities received $40 billion in single-year contributions. Our data includes financial efficiency evaluations and trends that provide a basis for further research on your part.
The information is helpful even if the charity that interests you isn't on the list. You can look at similar nonprofits to get a sense of financial efficiency norms. (We strongly advise against comparing numbers between different kinds of charities; each category of nonprofit is unique.)
Of course, there are a lot of other factors to consider besides financial efficiency. So you still have to do your own due diligence. But our list can give you plenty of fodder for questions.
On average our 200 charities had $515 million in annual revenue, up 5% from last year. Donations accounted for $204 million, or 40% of revenue. This ratio has held for a decade. The rest came from government grants, sales of services or products (think Girl Scout cookies) and investments.
Our list is largely quantitative. Because it is oriented toward donors from the general public, we exclude certain categories of nonprofits. These include academic institutions (they mainly solicit from their alums), donor-advised funds (you're essentially giving to yourself) and religious groups that do not report numbers (Duh!). We also exclude nonprofits with a small number of direct donors, such as most private foundations, those that don't really solicit contributions and a few whose data we question.
At the heart of our list are three financial efficiency ratios, and the trend from a previously reported period. The higher, the better. Here's what they are and what they mean:
Charitable Commitment: This calculates how much of total expense went directly to the charitable purpose (also known as program support or program expense) as opposed to management, certain overhead and fundraising. The average this year is 85%, unchanged from 2007. At the bottom are Las Vegas's Smith Center for the Performing Arts (9%), Paralyzed Veterans of America (62%) and Philadelphia Museum of Art (63%). At the top, all at 100%: AmeriCares Foundation, Brother's Brother Foundation, Children's Network International and Gleaning for the World. All four are gift-in-kind charities, which receive most of their donations as large gifts of goods, which carry lower overhead.
Fundraising Efficiency: This closely watched statistic shows the cut of gifts left after subtracting the cost of getting them. The average this year: 90%, also unchanged. We have long recommended a cold, steely look at anyone with a fundraising efficiency below 70%. The four below that cutoff: U.S. Olympic Committee (57%), Veterans of Foreign Wars (60%), and Paralyzed Veterans of America and Northern California Public Broadcasting (both 69%). At the top, eighteen nonprofits share a 100% rating.
Donor Dependency: This measures how badly a nonprofit needs your contribution to break even. We subtract the annual surplus or deficit from gifts, then divide this figure by the gifts. The higher the percentage, the more the charity--well, needed the charity. A result above 100% means the nonprofit ran a deficit. The donor dependency ratio is greatest affected by investment performance and is the most volatile of our measures. This year's average is 60%, way down from last year's 68%.
Our database also includes each charity's top compensation to a single employee. This includes salary, benefits, one-time payments and deferred compensation, and may be for a previous fiscal year. The average is $512,669, up 3% from last year. The recipient is usually the top person, although not necessarily the current one. Eighteen nonprofits paid someone upwards of $1 million.
