2009/10/8 Gregory Kohs thekohser@gmail.com:
"Our data shows that 7 out of 10 charities we've evaluated spend at least 75% of their budget on the programs and services they exist to provide. And 9 out of 10 spend at least 65%. We believe that those spending less than a third of their budget on program expenses are simply not living up to their missions. Charities demonstrating such gross inefficiency receive zero points for their overall organizational efficiency score."
While the WMF seemed to be narrowly meeting these guidelines (according to the site's "Revenue/Expenses Trend" histogram) in perhaps 2007, it appears that in 2008, the trend got decidedly worse. Perhaps I am misinterpreting the criteria and/or the graphic. But, the 2-out-of-4 stars rating is decidedly clear.
As far as I can see, the "...at least 75% ... at least 65% ... less than a third" relates to the proportion of program expenses to overall expenditure, which as the table and pie-chart shows is ~66% for the WMF.
The histogram doesn't seem to directly relate to those numbers or that criteria; it shows absolute program expenses against absolute overall *income*, not expenditure. I think interpreting the proportions of the histogram using the rules applied to a different ratio is going to get confusing. (The reason it seems to have got "substantially worse" is a $4.3m increase in income against a $800k increase in expenses, compared to an increase of $1m in income versus $800k in expenses from 2006-2007. I do not know to what extent this will continue in 09.)
WMF could no doubt spend a lot more in program expenses, though defining exactly what those are is a pretty fun game. But it's certainly not spending as inefficiently as the histogram might seem to suggest.
For comparison, witness an organization cited by Charity Navigator as "similar" to the WMF -- the Reason Foundation -- and see how their Expenses are a much larger portion of revenue for them, and thus obtain a 3-star rating: http://www.charitynavigator.org/index.cfm?bay=search.summary&orgid=7481
Again, expenses/revenue isn't where the rating comes from; it's program expenses/total expenses. Reason are indeed doing better at this than WMF - 87% versus 65% - but it's important to distinguish between the two ratios.
It's interesting to note that Reason show the same expenses pattern as WMF; they have program expenses increasing at a fairly linear $1m/year, but unlike WMF their income is plateauing - they'll be exceeding their income this year at that rate!