Seeing How Non-Profits Work…Or Don’t?

I have had the privilege over the last few years to get behind the scenes of a number of ministry organizations. The advantage to this is I was able to see all the hard work that goes in to keeping a ministry going and the amount of sacrifice that happens as folks give of themselves for local causes. The disadvantage is I also got to see how inefficient some organizations really are, and how money and resources get wasted on what I will call a continual cycle of cause-driven fundraising.

These few organizations that I’ve worked with have been ones that generate anywhere from puny amounts of a couple hundred bucks a year to an organization that generated close to $250,000 in annual donations. One of the things I’ve discovered is that non-profit organizations can often become extremely inefficient. In the process of founding and incorporating my own (now defunct) non-profit ministry, I also learned that non-profits have a legal responsibility to respond to requests for financial records.

As a pastor, and a guy who has been around professional ministry for ten years, I’ve also learned that people have a tendency to give to “causes,” while not adequately vetting the organizations themselves. A polished speaker with the right cause or a particularly moving video can get people to give heartily, while at the same time doing very little for the cause itself. I’ve also seen how much time, money, and energy goes into “fundraising” for “the cause.” Sadly, one of the things I’ve noticed is that some ministries fall into the trap of using their cause as a platform to raise funds—funds that ultimately pay the salaries of the people who in turn raise more funds.

It’s a vicious cycle that allows ministries to appear to be doing massive things for God, when in reality they could do so much more, with so much less, if they were really focused on the cause. I have seen, on paper, literally millions of dollars going to waste in support of causes that aren’t really being affected positively at all. I don’t think this is intentional, nor do I think these ministries intend to do what they’re doing. What I’ve noticed is that boards, presidents, and ministry staff have usually inherited a mess on the front end and have simply done their best, for the sake of the cause, to manage what has already been mismanaged before them.

So with all this in mind, I want to offer three questions that both donors, and those who run non-profit Christian organizations, ought to sit down and honestly ask of the organizations they support and work for.

1. How much money does the organization bring in annually?

This is probably the most important question you can ask. The answer to this question will help you to evaluate the efficiency of the organization itself, and it also serves as the foundation question to the next two questions.

For some reason, very few people ask an organization how much money it receives annually before supporting it. It seems like a perfectly valid question.

Just to illustrate this point, suppose I randomly walked up to you and said my family is “in need” and I would like $100. Let’s say, for argument’s sake, I show you a really moving clip that convinces you that I’m a pretty honest Christian guy, and in your heart of hearts you think that I would spend the resources you gave me responsibly. Would you just give me $100? There are a lot of people who would “take the leap of faith” and “trust God for the results.” Those people are stupid.

Yes, I said it, stupid.

Why? Because you didn’t ask me any questions. You fell for my sales pitch hook, line, and sinker. What I didn’t tell you is that I gave the same speech to the last 700 people I met, and half of them were just like you: they didn’t ask any questions. They all gave me the $100. The video of my family in need was filmed four years ago when my family was actually in need. Since then, I discovered that I could keep my family fed pretty easily by running around to suckers like you and convincing you, with my video, that I was in need. I knew you’d “trust God” and “have faith,” and I could make a living off of people like you.

Okay, that may seem a little harsh, but that is exactly what a lot of organizations are doing. They aren’t as malicious as “I” am in that created scenario, but that’s what they’re doing. One simple question “you” could have asked “me” is, “Do you have any money?” Now, proverbial “I” can lie to you. What’s nice about non-profits is that they’re required by law to publicly report their annual giving and some of their employee’s salaries. It’s public information. What’s crazy is that a lot of people don’t ever ask for this information before supporting a non-profit organization!

There’s a really nice way to get an answer to this question without coming off as a rude IRS agent. Just call the organization and ask if they can tell you what their annual giving for the previous year was. If you already support the ministry, just say you like to evaluate all the ministries you support every once in a while just to see where God would have you put the resources he’s given you. Some organizations will ask to call you back because they’re not used to getting that question. If the organization flat out refuses to tell you, or they make it extremely difficult for you to get that information, you should stop supporting them immediately. It’s that simple.

Once you know how much they make annually, you can begin to assess how they use their annual resources.

2. How many different people does the organization serve annually?

This next question helps us match dollars to actual services rendered. However, it can get a little more complicated depending on the type of ministry you’re looking into. For example, if you support a local camp ministry, they might say that they have 700 campers a year. If, on the other hand, you’re looking into a pro-life pregnancy center they, too, might say they help 700 clients a year.

So what’s the difference?

Donations to a camp ministry are typically going to food, house, and provide 24-hour oversight to each camper for a week, or at least a full weekend. A pro-life pregnancy center may only spend an hour administering a pregnancy test to a single client. Both of those would represent “one person served,” but the nature and cost of the services would differ significantly. So when asking this question it’s a good idea to ask follow-up questions like, “What are the types of things you would do if I came to your organization for help? What’s an average person’s experience?” The organization will love this question. Everyone loves to talk about what they do.

As they are telling you what they do, you need to be mentally (or physically if need be) taking notes on how much you think providing that service would cost. For example, if a camp ministry provides room, board, activities, and 24-hour oversight to children, you can imagine the daily cost of providing those services. If you can’t imagine it, ask them. Also, keep in mind that a camp is typically not completely donor supported. Campers pay a fee to go to camp. As you’re assessing the costs to provide the service, also consider how much of those costs are already covered by the cost to the camper. On the flip, a pro-life pregnancy center may administer a free professional pregnancy test that costs them $10.

Truthfully, all this investigation isn’t completely unnecessary. I’ll show you why in my third question, but for now we need to do some basic math. Once you find out how much the organization makes annually, and how many people they serve annually, you’ll need to divide the annual giving by number of people served. Just as an example, let’s say our non-profit brought in $100,000 in 2014 and we served 500 people that year. Here’s the math…

$100,000 / 500 = $200 per person

Now, if you really wanted to drill down deep into an organization you could start going line by line through the books and determining how that $200 is spent. In order to keep this brief (it’s already getting too long!) I’ll show you a simple way, based on just those numbers, to determine if a ministry “needs” your money to support their “cause.”

3. If I gave you $100,000, what would you do with it?

This question is, literally, the $100,000 question: If you had $100,000 how would you personally go about tackling the cause you’re thinking about supporting?

Taking the data from the last two questions, suppose I handed you $100,000 and said, “Do whatever you can to stop abortion in this area,” or, “I want you to help teach 500 kids the word of God this year, or, “I want you to reach Africa with the Gospel.” What would you do with that money? More specifically, suppose I said I want you to reach little Timmy with the Gospel. Here’s $200. How would you spend that money? Would you take Timmy and his family out to lunch and share the Gospel? What would you do? Would you spend the money the same way that ministry spends it?

Ultimately what we’re really asking is, “Where is the money I’m giving you really going?” What is frustrating is that a lot of the money we give to support a cause actually goes back into the organization so they can turn around and raise more money for the cause. The problem is that the money we give never really makes it to the cause. Instead, it goes to paying salaries, accountants, utilities, marketing, and fundraising—year after year. Most organizations would say that these costs are just associated with what’s needed to run day-to-day operations. Here’s the problem—when most people give, they are not giving to support day-to-day operations. They’re giving to support a cause. The more day-to-day operations we give our money to, the less we’re actually giving to the cause.

One simple way to tell if an organization is spending too much money on infrastructure is to ask the question, “If I wanted to help one person the same way this organization helps one person, would it cost me as much as it costs the organization?” Sticking with our illustration, let’s say the pitch is you can send one child to camp for $200. That sounds pretty reasonable. However, you go to the camp website and find out they charge $300 per camper. Now the cost of camp is up to $500.

Could you take one child to camp for a week on $500? If you’re not sure, let me tell you the answer is, yes. Youth pastors all around the country do this all the time. In fact, they’ll take bus loads of kids on trips and I guarantee it doesn’t cost them $500 per kid to pull it off. If you don’t believe me, think about this. If your church wanted to take a 15 passenger van full of kids (we’ll say 13 kids and 2 adults) on a week long retreat would it cost you $6,500? Of course not! Even if you factor in the youth pastor’s salary for that week, all the gas, and $.10 a mile for vehicle wear and tear you’ll never be anywhere near $6,500 unless your driving from New York to Mexico for a missions trip.

Let’s say the ministry is a pro-life ministry. Could you (or your spouse) administer a pregnancy test for $200 and provide 60 minutes of mentoring care to someone in need? Of course you could. And you’d probably be able to give them $150 cash after you took them out to lunch and paid for a round of mini-golf. We could go through this with just about any ministry example. The fact is if it wouldn’t cost you that much to do it, why don’t you just keep your money, and do it yourself?

What’s the Point?

The reason I’m writing this post is because a lot of kingdom money is being wasted, and a lot of kingdom ministry is going undone. The only way this is going to change is if donors start taking a little more time to evaluate ministries before they give to them. It’s really not that difficult to tell, pretty quickly, if a ministry may be wasting a lot of resources. All we have to do is call them up and ask them these three simple questions, and do a little bit of math.

Question for Discussion

Have you ever been a part of an organization that wasted a lot of donor resources?

Photo by 401(K) 2012 via Flickr