When explaining what GiveDirectly does, we sometimes get asked whether 100% of funds go to recipients. That’s no different than asking whether GiveDirectly has any costs.
In one sense, this is a strange question. Households, companies, and governments all have costs, so why wouldn’t nonprofits? And how could it be free for us to find hundreds of thousands of people in poverty, communicate with them, and deliver them funds?
But nonprofits have ourselves to blame for the question because we’ve muddled conversations about what our work costs with creative accounting and marketing tricks. We try to clear things up below.
What 0% costs really means
If you accept that the work of nonprofits can’t really be free, promising that “100% of your donation goes…” toward a specific destination means one of two things. Either the donation’s destination is vague enough that the promise is unhelpful but true, or someone else is paying for the things your donation isn’t covering.
1. The donation’s destination is vague enough that the promise is unhelpful but true.
For any donation we receive, GiveDirectly could truthfully say, “100% of your donation will support our work delivering cash transfers to people in need.” But that doesn’t mean 100% of the funds will be delivered to recipients, as that promise could be met by putting the donation toward mobile money fees, funding research on the effects of our programs, buying billboards to raise awareness, or paying for our annual financial audit. If hearing from nonprofits that they’ll only spend funds on activities at least loosely related to their mission is reassuring, that may be a sign we’re not holding each other to a high enough bar.
2. Someone else is paying for the things your donation isn’t covering.
If someone else is covering the costs, isn’t my donation more efficient? Not really. Depending on the nonprofit, the people covering the bill are some combination of committed donors excited to fund less glamorous activities or a group of donors to whom the nonprofit has made hazier promises. Neither group’s contribution actually changes how much it costs for the nonprofit to do its work, and if you didn’t donate or if you covered your own costs, more of the funds from those donors could be put toward wherever the nonprofit promised your funds are going.
We think it’s best to be straightforward about what things cost. Since our inception, 89% of funds put toward cash transfers and delivery costs have been delivered to our recipients, and, on the fundraising side, we’ve spent $0.03 on fundraising costs per dollar raised.
In general, our major cash delivery costs are banking and mobile money fees, time spent by our operations team, software and time spent by our technology team, other costs like insurance or auditing fees that scale loosely with the volume of cash transferred, and global and country level shared support costs (management, rent, HR, etc.).
More complicated projects requiring more interaction with the people getting the cash or with third party organizations are typically more expensive per household served. Similarly, smaller projects or projects that deliver less cash per person are less efficient due to fixed costs per project or person. We separate delivery costs from fundraising costs so we can evaluate the quality of investments put toward each.
For a more narrative view, here’s how costs come out of a $1000 donation directed to that same program in 2022.