Watchdog: HSUS Spends Nearly Half of Budget on Overhead

With a rash of recent charity fundraising scandals making national news, watchdogs are ramping up scrutiny of charities with the holiday giving season just around the corner. And today, there’s more bad news for HSUS’s spin machine: Another charity watchdog finds that HSUS spends about 50 percent of its budget on overhead costs.

Animal People is an inside-the-movement animal rights newspaper that publishes an annual Watchdog Report examining the finances of animal rights and animal welfare charities. In its newly released report, Animal People calculates that the Humane Society of the U.S. actually spends 46 percent of its budget on overhead, despite putting the figure at 20 percent in its annual report. (The Watchdog Report also included a nifty little blurb about the RICO suit naming HSUS and two of its employees.)

What’s with the big gap? How can HSUS’s “adjusted” overhead spending be more than double what it claims?

Nonprofits can classify some fundraising expenses as program expenses. For example, a four-page letter could have a three pages “educating” people about some problem before concluding with a beg for donations. A nonprofit might then write off ¾ of the cost of the letter as “program” spending. (You can get an idea of how much a charity does this by looking at the “joint cost” section of its tax return.)

Here’s how Animal People has explained it:

Most charity monitors agree that charities should spend at least 65% of their budgets on programs, excluding direct mail appeals. This standard is stricter than IRS rules, which allow charities to call some direct mail costs “program service” in the name of “public education.” [We calculated the] costs as they appear to be, if we ask of each mailing, “Would this have been sent if postal rules forbade the inclusion of a donor card and a return envelope?” If the answer is no, mailing should properly be considered “fundraising” and not “program.”

Animal People, as well as watchdogs such as the American Institute of Philanthropy, don’t blindly take these accounting schemes at face value and do their best to give donors the whole picture.

This isn’t anything new for HSUS. Using old Watchdog Reports that we have—and filling in gaps with our own calculations based on the Animal People model—we calculated that going back to 1998, HSUS has never really spent less than 43 percent of its budget on overhead and this figure has ranged as high as 55 percent.

It’s one more reason to make sure you send your money to a local humane society or rescue group if you want to best help animals.