A New Model for Financing Nonprofits
One of the primary ways in which charity performance is measured today is on the percentage of money, from operating budget, spent on benefit programs, and not on administrative expenses. This allows donors to know that their money is reaching the intended beneficiaries and not administrators who are lining their own pockets in the name of the needy.<p>Charities which adopt this model will be itemizing quick access to capital as an administrative expense being passed onto their donors, in lieu of increased benefit shown to donors who donate their money to charities not using this scheme. It seems to me like this is a solution to a problem which does not exist: if I, as a donor, want to donate my money to make a difference in the world, why do I have to choose between a proven charity with lower administrative costs and an unproven charity which is pushing its operative risk onto me, by forcing me to compensate professional investors for the risk? Why is that a difficult choice - why wouldn&#x27;t I just go with the proven charity?<p>I suppose this makes sense for you, as a donor, if you have a single issue which drives your donation decision - say, somebody close to you died of some disease or condition and you want to donate to an organization doing specific work to cure that specific disease&#x2F;condition, because you are motivated by results in that specific area. So having institutional investors guarantee results will help you make the decision to donate, because you see it as a necessary cost for the specific results you&#x27;re looking for. But I think most people just want to know that their money is being spent well, and for those people, percentage spent on benefit combined with reputation is a much better metric.