We’ve all heard stories of charities misusing donations, whether by paying exorbitant executive salaries or by spending too much on administrative overhead. We all want to make sure that our donations only go to the organizations that will put our time and money to the best possible use. At Bright Funds, we are passionate about making it easy to support the most effective organizations focused on the issues that matter most to you.
We think everyone deserves to be confident that their giving is making a real difference and improving lives. Bright Funds is about empowering people by putting informed, high-impact giving at their fingertips. That’s why we have thought long and hard about how to decide which nonprofits to include in our funds. We want to share some of the lessons we’ve learned.
Administrative Costs Are Not Always a Bad Thing
There are many different ways of thinking about how to measure the effectiveness of charitable organizations. One of these ways of thinking that you have probably heard before is that the best charitable organizations are those whose administrative costs make up a small percentage of their total budget. According to this way of thinking, an organization that spends 15 cents of every dollar on administrative overhead is a better destination for your money than one whose administrative costs amount to 35 cents on the dollar.
This advice is easy to use and provides a very concrete way to measure the effectiveness of charitable organizations. In some cases—especially organizations that address urgent needs like soup kitchens and disaster relief efforts—administrative costs can be a relatively reliable sign of an effective charity. In these cases, low administrative costs are a pretty good indication that your money is likely to go directly toward helping people.
In other cases, however, administrative costs might not be a good measure of effectiveness. Some influential people in the philanthropic world have claimed that judging all charitable organizations on the basis of their administrative costs can be “misleading and even destructive.” Not only do some kinds of charitable organizations unavoidably involve higher administrative costs than others, but also accounting practices are not consistent across nonprofits. Even within the same field, different charities sometimes add up the numbers in different ways.
Identifying Effective Charities to Match Your Values
At Bright Funds, we take a holistic approach to measuring effectiveness that does not rely on any single metric or methodology. In order to identify which charities to include in our funds, we combine the research of five highly-respected organizations devoted to assessing the effectiveness of charities working in a wide variety of areas. We want to make use of all the information and expertise that is out there to ensure that the organizations in your portfolio are the best and the brightest in the country.
We think of charitable giving as making an investment in a better world. We want to empower you to give with confidence that your investment will see a return in the form of cleaner water, more protected forests, healthier people, better schools, and all the other changes you want to see in the world. Bright Funds is about giving everyone the tools to become effective philanthropists.