“The earth is the Lord’s and all that is in it” (Psalm 24:1).
Lutheran World Relief’s core value of Stewardship calls us to employ the highest standards of responsible planning and management of resources.
To that end, LWR wisely and prudently invests our financial resources for growth, so that we may develop sustainable programs that make a lasting impact in the lives of more and more people experiencing poverty and marginalization around the world.
Knowing when to invest resources to grow
Growing LWR’s capacity to help more people
Ratings from External Charity Watchdogs
LWR’s Efficiency: 85.7%**Program Efficiency Ratio = (Total Program Expenses) / (Total Expenses)
What makes a healthy efficiency ratio?
Charity watchdog organizations, such as those listed above, use financial efficiency as one measure among many of a nonprofit’s health and accountability. What’s a healthy range?
- Charity Navigator recommendation: 75% or higher
- Better Business Bureau recommendation: 65% or higher
An efficiency ratio that is too high may indicate that an organization is under-investing in necessary management infrastructure.
What are non-program expenses?
Non-program expenses, often referred to as “overhead,” include many of the basic costs of doing business, including:
- Stewardship and accountability, including oversight, budgeting, general record keeping and financing
- Leadership and governance
- Staff hiring, retention and development
Interested in learning more about LWR’s financial stewardship? We publish all official tax documents and financial audits on our website.
What are others saying about efficiency?
In a historic move, the leaders of the country’s three leading sources of information on nonprofits — GuideStar, Charity Navigator, and BBB Wise Giving Alliance — penned an open letter to the donors of America denouncing the “overhead ratio” as a valid indicator of nonprofit performance.
At TED2013, activist and fundraiser Dan Pallotta calls out the double standard that drives our broken relationship to charities. Too many nonprofits, he says, are rewarded for how little they spend — not for what they get done. Instead of equating frugality with morality, he asks us to start rewarding charities for their big goals and big accomplishments (even if that comes with big expenses). In this bold talk, he says: Let’s change the way we think about changing the world.
Based on Saundra Schimmelpfennig’s own experience tracking aid in Thailand after the 2004 Indian Ocean tsunami, she reflects on examples where an emphasis on low administration costs did more harm than good.
Lauren Schmidt, at effectivism.net discusses three of the oldest and best known charity evaluators, all of which grade organizations in large part according to financial metrics. She also discusses the controversy over using such metrics, and the pros and cons of these sites.