A favorite saying in business is that you have to spend money to make money.
Charitable organizations, on the other hand, have to spend money to give money, and it turns out that some are woefully inefficient at channeling donations to the people they're supposed to help.
The non-profit Charity Navigator Web site tracks such expenses via charities disclosure statements to the IRS to provide donors with an assessment of how well charities run themselves.
Looking only at the supply side for the more than 5,500 charities that it tracks, the organization does not evaluate the impact on the recipients of funds, since that impact is often a subjective appraisal of "effectiveness."
The statistics used in this list are from the most recent fiscal year's data on the Charity Navigator Web site at the time of publication.
Well-known for its many programs focused on the protection of biodiversity and the environment, the Audubon society, based in Washington, D.C., has chapters across the country, run independently of the main office. Its affiliate in Tuscon, Arizona, which fosters interest in and conservation of the bird population of southern Arizona, has seen its administrative costs skyrocket as the recession has eaten into its incoming donations.
Partially due to Executive Director Paul Green’s inflated salary of $78,800, which accounts for more than 7% of the group’s expenses, the Tucson Audubon Society spends almost as much for its office as it does on the birds it aims to protect.
#9 New Hampshire Audubon
Administrative expenses: 42.8%
Like the Tuscon Audubon Society, the New Hampshire chapter of the bird-friendly conservation group has also struggled to maximize the amount of donations that go toward its environmental programs.
Much of the administrative costs can be traced to the group’s seven visitor centers that it runs throughout the state, where staff organize classes, summer camps, and activities for children and adults. These fixed costs mean that in lean years for donations, it is hard for the New Hampshire Audubon Society to trim down their considerable administrative expenses.
#8 Gospel to the Unreached Millions (GUM)
Administrative expenses: 43.1%
Based in Houston, this evangelical ministry is one of the least efficient in translating donations into international programs designed to spread its spiritual message.
With administrative expenses topping 43% and fundraising expenses more than 38% of its total budget, GUM was able to disburse a mere 18% of incoming money to the targeted recipients of aid in its last reported fiscal year, 2006.
Managing a budget of almost $1.5 million, GUM has a poor track record of directing that cash to its evangelical programs.
#7 American Psychiatric Foundation
Administrative expenses: 43.7%
Psychiatric evaluation and treatment are a big business in the United States, with new conditions being identified and monitored seemingly every day.
The American Psychiatric Foundation, based in Arlington, Va., tries to improve the public’s understanding of mental illness and to advocate for early intervention programs and treatment services through grants, research funding and awards.
The group, which is the philanthropic arm of the American Psychiatric Association, has received consistently low ratings for its high administrative costs, which consistently reach more than $500,000 annually.
#6 Marshall Heights Community Development Organization
Administrative expenses: 44.1%
Poverty has long been a problem in Washington, D.C., where the Marshall Heights Community Development Organization seeks to improve the lives of the Ward 7 area of the district.
Focusing mainly on affordable housing and adult education and job placement services, the MHCDO manages a budget close to $4 million. While its president, Michael Watts, pulls in an annual salary of more than $137,000, the group’s development of housing facilities and office space contributes to its high overhead costs and consequently low rating for operational efficiency.
#5 Please Touch Museum
Administrative expenses: 44.9%
Museums, which seek to educate and improve the lives of their visitors, play an important role in a modern society.
The Please Touch Museum, founded in Philadelphia in 1976, targets children ages seven and below using play as an educational tool. With revenue of over $24 million in its last reported fiscal year (2008), the museum funneled just $2 million of that to its community outreach programs.
While two million dollars is plenty to make an impact on children’s lives, the museum’s low ratings for efficiency reflect the unmet potential of an organization with considerable revenue to play an even greater role in the lives of local children.
#4 Peter G. Peterson Institute for International Economics
Administrative expenses: 45.4%
With almost $10 million in revenue in its last reported year of 2007, the Peter G. Peterson Institute for International Economics, a nonprofit, nonpartisan public policy research organization in Washington, D.C., plays a considerable role in shaping U.S. economic policy.
Widely praised as being one of the few truly neutral research organizations in the field, the Peterson Institute takes considerable resources to run, with administrative costs totaling over $4 million of its 2007 budget of just over $9 million.
With the global economy in crisis and issues such as climate change and renewable energy being debated on the world stage, the Institute’s highly-paid researchers are no doubt doing valuable work, though donors may be put off by how much of their dollars go to running the organization compared to the amount going to further its goals.
#3 Stan Hywet Hall & Gardens
Administrative expenses: 45.8%
Like many historical landmarks, the Stan Hywet Hall & Gardens in Akron, Ohio is a window into the past. The former home of one of the founders of the Goodyear Tire and Rubber Company, it was built in 1915 and was turned over to a nonprofit organization in 1957.
The site exists to educate the public about itself: the history of the land, the owners, and the local rubber industry. Maintenance of the property, as well as the $150,000 paid to its president and CEO, Harry Lynch, ate into the home’s budget of over four and a half million dollars in fiscal year 2007, which goes to educational programs for schoolchildren as well as the local population.
Being the only historical landmark in Akron, known at one time as the “Rubber Capital of the World”, the Stan Hywet house is an important local resource whose impact would surely be even more substantial if it could reduce its administrative overhead.
#2 Victorious Christian Living International
Administrative expenses: 46.0%
Based in Phoenix, Arizona, VCLI is one of the smallest organizations on the list, as well as being one of the least efficient.
With a budget of only around $100,000 in fiscal year 2007, the group spends almost half on administrative expenses stemming from the operational costs of running offices in Illinois, Alabama, Guatemala, and Cuba in addition to its headquarters in Arizona.
The organization, founded by its charismatic leader Ray L’Amoreaux (whose $24,000 salary represented 2.24 percent of expenses in 2007), seeks to help churches further their efforts to recruit more committed followers of Jesus.
#1 Changed Lives
Administrative expenses: 47.4%
Changed Lives is a Christian organization based in Tennessee whose message of Biblical values is broadcast streaming over the internet to followers around the world.
Carried by speaker Ben Haden, who began his broadcasting career at NBC in 1967, Changed Lives features video lectures on a number of spiritual topics and distributes Bibles and other religious literature for free to its supporters.
While the organization’s revenues have increased over the last three reported years, its overhead has more than kept pace, pushing administrative expenses to over 47 percent of the group’s 2008 budget of around $790,000.