For years, the gold standard in ministry effectiveness has been how much is spent on administrative costs. The arbitrary standard is that if a ministry spends 10% or less on administrative costs, then they are deemed “effective.”
Think about it: low administrative costs equals effectiveness. The theory is that if 10% or less is going to administration then 90% is going to programs or direct support. Jack Shakely wrote a compelling editorial for the LA Times (April 30, 2012) where he challenges this notion. Here’s why: in trying to reach the 10% standard, many organizations have gone to great lengths to pump up their contributions—particularly in-kind contributions—to make their administrative costs look smaller.
I know of one organization that received a great deal of in-kind contributions because they were a humanitarian organization. Clothes and food flowed into their coffers. These in-kind contributions made it look like they were spending very little on administrative costs. In reality, the leader of that organization was later removed for his indiscretions with ministry funds. Stated differently, the ministry’s low administrative costs were not at all a reflection of ministry effectiveness.
As Shakely states bluntly: “It’s hogwash; there is absolutely no way of telling that an organization with a 5% administrative costs is superior to one with 20% costs based on that criterion alone. In fact, the opposite may be true.”
Look at more intuitive kinds of results—are people better, living longer, better lives, free of bondage etc. as a result of that ministry. Look for those things and then give.
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Published July 25, 2012
Topics: Giving Strategies