[Foundation-l] Charity Navigator rates WMF

[Andrew Gray]

2009/10/8 Gregory Kohs <thekohser at 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!

-- 
- Andrew Gray
  andrew.gray at dunelm.org.uk