Nonprofits work hard to raise the funds that support their good work. How they spend that money is of major interest to their donors, their boards of trustees, the government, and of course, those who benefit from their services.
The question isn’t so much whether or not they turn the lights off at the end of the day. Rather, it’s how much they spend on programming compared to expenses. The best-run nonprofits reach a high bar of fiscal responsibility and transparency. Others are less successful.
Any large nonprofit depends on many volunteers and employees, and on the whole, these people manage expenses responsibly and work hard for their organizations. Unfortunately, it’s the operators and executives of the nonprofits who have a history of overspending on salaries, expenses, lavish fundraisers, travel, and hotels.
Wounded Warrior Project Wastes Donations?
It’s always upsetting to hear that a highly regarded nonprofit has failed the financial accountability test, and the recent scandal surrounding the Wounded Warrior Project is no exception.
In January, CBS News reported that the Wounded Warrior Project spends only 60% of its budget on services to veterans. By comparison, Charity Watch’s top-rated nonprofits spend at least 75% of their budgets on programming. The best-of-the-best surpass even that: the Disabled Veterans Charitable Service Trust spends 96% of its budget on vets.
So where did Wounded Warrior Project’s money go? According to CBS, it was the usual suspects: 5-star resorts, extravagant parties, and donor entertainment.
More Common than You Think
We’d all like to think that our charitable donations are hard at work helping those who need it most. But that’s not always the case. A report from the New York Attorney General’s office states that although charitable giving has nearly doubled in real terms since 1990, “51.6% of the funds raised by telemarketers in 2013 were paid to fundraisers for fees and/or used to cover the costs of conducting the campaigns.”
Of course, fundraising costs are only one measure of nonprofit expenditures. But statistics like this highlight an overall lack of visibility into nonprofit finances. So how can nonprofits assure donors that their money is well spent? In addition to utilizing cost-effective fundraising methods, nonprofits will gain credibility by closely managing business travel and other expenses.
Pre-Paying it Forward
One way to enforce an organization expense policy is to give employees and volunteer prepaid corporate cards to manage spend. Using prepaid expense cards is one of the easiest and most effective ways nonprofits can control their expenses. Executives who travel to give presentations, courting potential donors, and hosting benefits often have the authority to spend large sums of money. A prepaid card provides greater accountability without limiting their ability to do their job.
Because prepaid cards can be managed through a web-based reporting platform, the organization gains a central place to monitor and approve expenses on a large scale and in real-time. When used consistently, prepaid cards provide insight into individual spending patterns and an accurate picture of the organization’s overall health.
To learn more about PEX as an expense management solution for nonprofit organizations, please download our Nonprofit Fact Sheet.
The PEX Visa Prepaid Card is issued by The Bancorp Bank pursuant to a license from Visa U.S.A. Inc. and may be used everywhere Visa debit cards are accepted. The Bancorp Bank; Member FDIC.