ESSENTIAL DESTINATIONS

MONTH: December 2006

Who Gets The Money? -- 17th annual edition

Starting on page 15 is our 17th 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 representative 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, P for publication, 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 more than three identifying letters.
Most of the financial data we cite for U.S. charities comes from IRS Form 990 filings, usually covering fiscal year 2005. Form 990s from most U.S. charities are available-- free--at <www.guidestar.com>.

Canadian data comes from the online data base maintained by the Revenue Canada Charities Directorate.

The data for many British charities is an estimate based on comparisons of data posted by the British Charities Commission and the evaluation service Charities Direct. Neither offers as much data as Form 990, but between them they furnish the essentials.

The data for other foreign charities, and for some U.S. charities, comes from a balance sheet furnished by the organization, if a balance sheet appears to be the most current, detailed, and accessible data source.

Ethical standards

There are almost as many ways to evaluate charities as there are donors. We do not give simple thumbs-up or thumbs-down judgements because each donor will have different priorities.

However, we have issued detailed 10-point sets of standards expressing our own beliefs about how ethical animal charities and animal charity fundraisers should operate.

Our standards are accessible at <www.animalpeoplenews.org/IMPORTANT_MATS/whatisanethicalcharity.html>, or can be e-mailed on request, and appear as part of the preface to the 2006 ANIMAL PEOPLE Watchdog Report on 125 Animal Protection Charities, $25 from ANIMAL PEOPLE, POB 960, Clinton, WA 98236. The Watchdog Report annually reviews selected animal and habitat charities in greater depth than "Who gets the money?" allows.

A more extensive discussion of nonprofit ethics appears in our handbook Fund-raising & Accountability for Animal Charities, free for downloading at <www.animalpeoplenews.org/IMPORTANT_MATS/fundraisingforAsia.pdf>.

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 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.

This yardstick favors charities which 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, formed by a merger of the Philanthropic Advisory Service of the Council of Better Business Bureaus with the National Charities Information Bureau: 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" 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 (for "Adjusted") 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 appear in boldface.

Groups which collect interest on large endowments tend to have lower overhead because they can do less fundraising.

Shelters, sanctuaries, and activist groups which use mostly volunteer labor and donated supplies by contrast may have "high" overhead, as much of their program work does 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.

Unfortunately, calling appeal mailings "program service" in the name of humane education has devalued the concept of humane education so much that fundraising for real 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 cash because of declared liabilities.

Compare the Budget and Funds/ Investmt columns. 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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ANIMAL PEOPLE is the leading independent newspaper providing original investigative coverage of animal protection worldwide. Founded in 1992, ANIMAL PEOPLE has no alignment or affiliation with any other entity.