With CFC charities, AFR percentage is an indicator of complex picture
Story by Craig Cavitt, lead management and program analyst, Plans, Analysis, Integration and Operations
FORT BENNING, Ga. (Nov. 22, 2017) – Just as businesses have operating costs, so too do charities.
Whereas for-profit businesses use money from profits, charities rely on money from donations to operate.
A charity’s operational costs vary by organization, and the percentage of donations spent on operating the charity is readily available. The operating costs – administrative and fundraising expense rate, or AFR – is listed in the CFC charity list as a percentage rate. These AFR percentages vary widely. Skimming the CFC Charity List you will see AFR percentages ranging from less than 2 percent to more than 80 percent, and everything in between.
The AFR percentage is not a fixed amount; it varies year to year. There is a common misconception that charities with higher percentages tend to waste donations. The truth is that it’s unfair to judge a charity simply by the AFR percentage as it does not show the entire picture. There is much more that goes into the AFR percentage, and sometimes a higher percentage is a good thing. Here’s a glimpse into what makes up the AFR percentage.
The AFR is meant to provide some insight to the operational costs of charities and by no means is a complete comprehensive listing to all costs incurred by charities. Some of these expenses are easy to identify, such as employee salary and operating costs (rent, utilities, office supplies, transportation and more).
One expense that can easily raise the AFR percentage but isn’t always easily identifiable is capital expenses. Capital expenses are costs for facilities and equipment. For example, a charitable hospital builds a new wing, outfits it with the latest technology, and upgrades other departments. That’s an expensive undertaking that will allow the charity to be better suited to provide services. Those capital expenses will increase the AFR percentage until everything is paid for.
Other expenditures that are not easily identifiable are advertising (television, radio, print and social media) and fundraisers. The cost of name recognition is expensive, but with greater name recognition comes greater donations. Charites live and die by name recognition. The same is true for fundraisers. Charites will conduct fundraisers hoping for a strong return on investment.
Other items to consider that factor into the AFR percentage is the size and scope of the charity, name recognition and donation amounts. Smaller charities that receive smaller donation amounts may have to spend a higher percentage of contributions on operating costs. Conversely, charities that receive larger donations will have to spend a smaller percentage for the same level of operating costs. Name recognition has a correlation to donation amounts. Easily recognizable charities tend to receive more in donations. Each charity publishes the percentile breakdown and is available upon request.
With this information you have a better understanding of what makes up a charities AFR percentage.
Please consider using CFC to donate to the charities of your choice. The preferred method of donating is to use the official Office of Personnel Management CFC donation website at https://cfcgiving.opm.gov.
This year’s CFC open period is now through Dec. 15. CFC online pledging will be accepting donations through Jan. 12, 2018.
The generosity of our installation has a positive impact on those in local communities, across the nation and around the world. If you would like to make a contribution, see your unit CFC representative.
Consider giving through the CFC to support charities, helping those who need it most. Your gift makes a difference.
For more information, see your unit’s CFC coordinator or contact the installation CFC program by calling 706-545-1670.
To learn more, to explore charities or to make a pledge, visit https://cfcgiving.opm.gov.
For more on CFC at Fort Benning, visit https://benningnews.org/2017/10/26/cfc-open-2017, at http://benningnews.org/2017/11/09/cfc-2017-pledging/ or at http://benningnews.org/2017/11/16/cfc-2017-finding-charities.