How Can I Help?
Ratios
When reviewing an organization's financial information, especially if examining how much of your donation will go to affected people, you are likely to encounter financial ratios. One that is often used is the program ratio - the ratio of expenditures on programs (actual assistance to affected people) to total expenditures (which includes administrative and fundraising costs). Ideally the organization you support will have a program ratio in-line with other organizations providing similar services in the same region.
You should be cautious about organizations with program ratios that are very low (meaning less of your donation goes toward direct assistance). However, the opposite is also a red flag - program ratios that are unusually high. While you want as much money as possible to reach the affected people, keep in mind that it costs money to spend money well. A certain amount of administrative expenses should be welcome, as an indication that the organization is well-equipped to manage relief programs effectively.
It is also important to remember the limitations of financial ratios. A program ratio will tell you how much of your dollar goes toward assistance to affected people. But it will tell you nothing about the quality, timeliness, or usefulness of that assistance. Financial ratios are an important component of selecting a charity to support. But they are not the only component. You should also consider the organization's history, experience, and demonstrated results. While obviously more difficult to quantify, this information is key to evaluating an organization.
For more on ratios, see Why Ratios Aren't the Last Word, written by GuideStar. And ReliefWeb can be used to compare the activities of the organization you are reviewing with others operating in the affected region.
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