NCPA - National Center for Policy Analysis

Report Says Charities are Wasteful

May 16, 2003

Charities could free up $100 billion each year, enough to give every high school graduate in the country a $40,000 scholarship, according to a study by Bill Bradley.

Nonprofit organizations say the study threatens their financial support by implying that they are wasting large sums of money through inept and sloppy management, has the philanthropic world buzzing.

The study uses assessment techniques borrowed from the business world to suggest ways that nonprofit organizations might wring money out of their operations and plow it instead into programs and services.

  • The authors estimate $15 billion to $26 billion a year could be pared from fund-raising costs if organizations solicited more gifts through the Internet and focused on attracting fewer but larger grants and contributions.
  • Some $55 billion a year would materialize, they said, if nonprofits working to provide similar services reduced the gaps between more cost-efficient organizations and less-efficient ones.
  • The study found that even if the best and worst quarter of more than 300 local affiliates of three national youth-service organizations were excluded, some affiliates spent as much as 67 percent more per person served than others.
  • The authors said if nonprofit institutions could find a way to cut just a fraction of a cent more out of each dollar they spend a year, it would free up $20 billion.

Bradley and his colleagues freely concede the decision to put dollar estimates in the new study was partly intended to be provocative, but they insist they were conservative.

"Numbers have a way of capturing people's attention in a way that concepts that have been talked about for a long time don't," says Les Silverman, who also worked on the study. "Some will quibble with them, but we think they will call attention to the real opportunities there are for improvement."

Source: Stephanie Strom, "Billions in Charity Money Could Be Saved, Study Says," New York Times, May 10, 2003.


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