Just like any company you do business with, it is prudent to know that they are going to do the job you hired them for.
When you donate to a charity, you are in essence, hiring them to make sure your money goes to help the stated cause.
Unfortunately, many charities have trouble controlling their expenses, meaning that when you donate to them, most of your money goes to salaries and expenses and not so much to the cause you want to help.
"Where your Money Goes"
1. The standard used to compare how a charity uses your money is called an "Expense Ratio".
2. The Expense Ratio of a charity shows you how much of your donation goes to salaries, perks and expenses and how much actually goes to the charity cause.
3. Look at their tax returns. Take their expenses subtract what they provided to their cause and divide by revenues and you have the charity Expense Ratio.
An Expense Ratio of less than 50% is good.
An Expense Ratio of more than 50% means more than 50% of your donation goes to Expenses and not to the end recipients.
An Expense Ratio of 70% or higher is bad.
IF the charity has less than $1,000,000 in the bank, than a higher expense ratio is acceptable.
For your consideration, we have provided a list of charities and how much of their money goes to expenses vs. their stated cause.
Remember, the higher the Expense Ratio the bigger the scam the charity is. A high expense ratio means they are taking the moeny and not giving it to the cause.