Watchdog: HSUS Spends 55% of Budget on Overhead

BBB_CWIn its most recent report, CharityWatch gives HSUS a “C-minus” grade—nothing to write home about—and finds the organization spends up to 45% of its budget on overhead. That’s quite wasteful, and a number of watchdogs agree that a charity should spend no more than 35% of its budget on overhead. But a new analysis from another independent watchdog finds that HSUS’s overhead spending could be even worse.

Animal People, a newspaper that follows the animal rights movement, has issued its yearly Watchdog Report, which analyzes over 150 animal charities. After going through HSUS’s finances, Animal People has calculated that the group spends 55% of its budget on overhead. One of the few groups with a higher percentage spending on overhead, Doris Day Animal League (77%), is an HSUS affiliate.

HSUS, however, tells the public that 80% of its budget goes to programs, meaning 20% is spent on fundraising and management costs. So what’s the difference? It’s an accounting sleight of hand whereby charities classify fundraising costs as “program expenses.” This allows them to misleadingly claim in promotional materials that they are more financially efficient than they really are, when in fact a lot of money is going towards mailing campaigns—the ones that have produced a seemingly endless supply over the years of HSUS doodads, from mugs to calendars to, more recently, socks.

As Animal People notes, its calculation of higher overhead for HSUS and other groups “states those costs as they appear to be, if we ask of mailings, ‘Would this have been sent if postal rules forbade the inclusion of a donor card and a return envelope?’ If the answer is no, the mailing should properly be considered ‘fundraising’ and not ‘program.’” In other words, the real reason of these “program” expenses is really to raise money, not to educate people.

And if this was such a great use of donor money, why would HSUS try to shuffle it away with an accounting trick?

While we’re on the subject, if you ask HSUS about this it will reply that it is “approved” by the BBB Wise Giving Alliance and gets four stars (out of four) from Charity Navigator. But neither of these services, in their evaluations of HSUS, properly adjusts for the accounting trick. (And even worse, HSUS pays the BBB to “license” its “accreditation.”) They’re allowing HSUS’s spin-meisters and fundraisers to tell the public that the organization is more responsible with donor money than it really is.

Charity Navigator and the BBB Wise Giving Alliance are dropping the ball on HSUS’s massive overhead spending. It’s time for these two lapdogs to toughen up if they want to be considered watchdogs.