I have been having a few conversations lately with Charity Intelligence about the true value of a charity.  Some of this is in light of the CEO Compensation debate that seems to have reared its head in the news lately.  In fact, in Canada there is a private member's bill - C-470 in the House of Commons that is being voted on about capping CEO Compensation.  This issue got me thinking about the true value of a charity.

One way to look at the value of a charity is by how much revenue and funds it raises.

Another way is to see how many lives are impacted regardless of the cost to raise those funds.

A third way could be the organization's efficiency factor.  In other words, the best way they cut their budget by using resources like volunteers and in-kind donations to off-set their bottom line. 

It's this third option that Charity Intelligence uses as their evaluative metric.  So for example, an organization that has an "official" operating budget of $1Million and receives administrative support and in-kind donations that directly affect its bottom line in the amount o $250,000 actually has a $1.25Million operation.  However, because the supports and in-kind donations are not actually counted in the budgeting process (mostly because from year-to-year they can't be relied upon) a donor will never know the true operating costs of the agency.  What this then means is that when it costs them $140,000/year to raise $1Million, or 14cents on the dollar, it really is 11cents because the donated time and in-kind contributions are not monetized.

It is for this reason, when donors ask, "How much do you spend on fundraising?" the question is never a straight 14cents on the dollar.  Donors should be asking, how much of your operating budget is donated that isn't being accounted for?  In other words, "What is the true operating budget for your organization?"