Donors have high expectations regarding how much of their donation will go toward the cause. This is generally a good thing, as it sets clear requirements for the organization. At the same time, expectations can become too high. A clear example is when one demands that absolutely nothing be spent on administration.

What is administration?
The Fundraising Oversight Committee’s definition of “administration” is taken from the accounting standard “Generally Accepted Accounting Principles for Nonprofit Organizations.” Administration refers to “all costs that cannot be allocated elsewhere.” This will, among other things, This includes, among other things, accounting, auditing, planning, management, and evaluation of the organization’s projects.

Effective Use of Funds
It can be tempting to simply measure the “amount of money spent” on a particular purpose. But spending as much money as possible to achieve what you want is not a goal in itself. Nor is it the case that this money has the desired effect—or any effect at all. Projects must be assessed in advance and evaluated afterward. These assessments cost money. The administration ensures the proper management and allocation of funds. Therefore, keeping administrative costs as low as possible is not a goal in and of itself. The administration ensures that the funds are used for their intended purposes.

Old Myths
One claim we often hear is that “large organizations spend 80–85 percent on administration.” We have not been able to trace this statement directly to any actual fact. The fundraising industry has, from time to time, been criticized in the media—both justifiably and unjustifiably. In the latter cases, this is often based on misconceptions regarding facts and events, as well as differing definitions of terms. Justified criticism of fundraising is warranted. However, in most cases, the criticism directed at the administration seems both unfounded and unjustified. There is no doubt that excessively high administrative costs can occur, but this is not the case for any of the organizations approved by Innsamlingskontrollen.

Donors “actually” want some administration
Donors consistently express two wishes in surveys: less money for administration and more control over how the money is spent. The fact is that administration is what ensures effective oversight. A misperception of administrative costs can, in the worst-case scenario, lead organizations to fail to implement sufficiently strict control measures for fear that donors will not accept a higher administrative percentage.

Administration is not a necessary evil; it is simply essential for smooth operations. Determining what constitutes an “appropriate” administrative percentage requires both qualitative and quantitative analysis of the organization. Charity Monitoring Norway does this every year as part of its review of the financial statements and reports of our approved organizations. For the 2018 fiscal year, the average administrative expense ratio was 2.9%.

Critics of the administration (and donors in general) should ask themselves: Would I donate to an organization that does not engage in any form of planning or evaluation of its projects?