How to understand GiveDirectly’s finances
Non-profit finances are often opaque and complex; we want GiveDirectly’s to be straightforward and transparent. Below we explain what we spend, how we do it, and how you can keep us honest.
We’ll update this page each time we release our annual financial statements and 990 tax filing — which you’ll find right here. For more on the impact of our spending, please see our summary of the evidence on cash transfers.
Our spending falls in two categories: cash transfers & fundraising
Our spending has increased dramatically over the last few years. What has stayed constant: cash transfers (i.e. the money that winds up in the hands of recipients) make up the vast majority of what we spend, with a small portion of our budget going towards the cost of delivering cash transfers, and an even smaller portion towards fundraising. Our COVID-19 response projects in the U.S. and Africa drove the sharp increase in cash transfers in 2020.
We manage the organization as two distinct business systems, (1) cash transfers and (2) fundraising to deliver as cash, with a core performance metric for each.
|Cash transfers||Cash transfers committed to people in poverty and all costs associated with delivering them (foreign exchange fees, staff time, rent, etc.).||Efficiency = Cash transfers ÷ [Cash transfers + cost of delivery]|
|Fundraising||Any work spent talking to donors or press, running the website, spreading the word, etc.||Cost per dollar raised = Spending on fundraising ÷ Revenue raised|
These systems are worth separating because:
- They’re usually funded by different donors (more),
- They’re logically separable (e.g., we could spend $0 on fundraising, leave a static website up, and continue to deliver cash), and
- Strong performance looks different for each.
We review each of these metrics in more detail below.
Cash transfers are measured by efficiency
We define efficiency as [the total money transferred to recipients] ÷ [the total money transferred to recipients + the costs of delivering those cash transfers]. Efficiency is the proportion of each donated dollar that ends up in the hands of people in poverty. For the non-cash portion (“delivery costs”), we include everything that’s not fundraising: ranging from parts of our New York office rent to time spent by our senior management to the salaries of field officers going door-to-door to sign people up to receive cash.
Fundraising is measured by cost per dollar raised
We measure how well we invest in fundraising through cost per dollar raised, defined as [spending on fundraising] ÷ [revenue raised]. Over time, while our revenue is more volatile than our spending, it has typically grown with increases in funds invested. In 2020, cost per dollar raised was roughly $0.01, compared to $0.05 in 2019.
GiveDirectly’s performance on this measure ranks in the top half of elite non-profits.
We don’t think “overhead” is a useful measure
Traditionally, nonprofits present program efficiency as “overhead,” defined as [only management and fundraising costs] ÷ [total spending]. Unlike efficiency, “overhead” doesn’t actually tell you how much value reaches the people we’re trying to help because many costs are still included in the “Programs” bucket.
Rather than grouping these together, GiveDirectly partitions our fundraising costs for separate comparison and fully allocates management costs to cash delivery or fundraising, which we feel better reflects the value delivered.
Why we don’t think overhead is a useful measure:
- It’s open to manipulation. Partly, the distinction between what’s spent on “program” and what’s spent on “management” is open to manipulation. For example, Charity X could count a fleet of new Land Rovers and the salaries of the contractors riding in them as “programs” and not as “overhead.” Also — as many have noted –– it’s not clear why “overhead” spending on high quality management should be penalized relative to spending on program services.
- It can hide costs of bureaucracy. Because sub-grants to other organizations count toward program services, organizations that primarily re-grant what they receive after taking a cut for “overhead” will look efficient, even though they may help comprise a heavily intermediated system which leaves little of value left over for the people it’s meant to help.
That said, while we don’t think it’s is a particularly useful concept, GiveDirectly’s lean model scores very highly on traditional “overhead” measures.
On our financials by year page, we provide additional detail to help compare “overhead” and efficiency, as well as the numbers presented in our 990 filing with our audited financials.
What we spend on
We spend funds as quickly as possible
We plan our operational pacing using projections of future fundraising to minimize the lag between when we raise funds and deliver them.
There are exceptions when we receive one-time significant grants, as seen in 2015 and 2016, we received grants of $25m and $30m (each for long-term projects including basic income). In 2020, we also received significant grants towards the end of the year, most of which were spent down in the first quarter of 2021. Otherwise, our spending tracks our revenue reasonably well.
With more funding, we can reach more people
In 2020, GiveDirectly committed $26M in cash transfers to 163K people in Kenya alone. This represents less than 1% of the 16.4M people living in extreme poverty in Kenya. That year, we also worked in Rwanda, Liberia, Uganda, Togo, the DRC, and Malawi, where another 103M people are living below the extreme poverty line. Over the years, we’ve made significant advancements in targeting, delivery, and fundraising.
Based on our track record of growth, we believe we could reach 2 million people a year working just in the countries we already operate in (including the U.S.) with the technology that we have today. With an average transfer size of $1,000, this means we are building the capacity to deliver $2 billion a year.