Tuesday, November 21, 2006

Room to Read

Charity Navigator (CN) is a great source to analyze a non-profit's efficiency and financial capacity. However, CN currently does not rate Room to Read, my favorite new charity after reading Leaving Microsoft to Change the World: An Entrepreneur's Odyssey to Educate the World's Children. I suggested the charity for review after reading CN's criteria, but I'm impatient to wait for the review since I'm extremely enthusiastic about Room to Read's results. I can't get over the fact that they've opened over 3,000 libraries in developing countries in the last six years. That's over 500 per year! More than one library per day! Outstanding!

Since CN's calculations come from IRS Form 990, which I've been studying the last few days, I decided to run my own calculations to try to provide an apples-to-apples comparison of Room to Read with other organizations reviewed by CN. I wish to provide the disclaimer that I do not analyze non-profits for a living. My analysis is not guaranteed to match CN's analysis once they add Room to Read to their database. I also attest that I am not getting paid by anyone for my review; it's just my good-faith effort to do some due diligence on the organization before donating. I'm also strongly considering doing a virtual fundraiser on behalf of Room to Read, and I want to make sure I can approach friends and family with confidence about the organization's legitimacy, efficiency, and sustainability. Here are my calculations:

Organizational Efficiency
Program Expenses: 90.8%
Administrative Expenses: 3.2%
Fundraising Expenses: 5.9%
Fundraising Efficiency: $0.04

Organizational Capacity
Primary Revenue Growth: 182.9% CAGR (for years 2003-2005)
Program Expenses Growth: 190.9% CAGR (for years 2003-2005)
Working Capital Ratio (Years): 0.85

Primary Revenue: $11,457,237
Other Revenue: $89,137
Total Revenue: $11,546,374

Program Expenses: $6,834,596
Administrative Expenses: $242,345
Fundraising Expenses: $446,468
Total Functional Expenses: $7,523,409
Payments to Affiliates: $0
Excess (or Deficit) for the Year: $4,022,965
Net Assets: $6,439,090

Name: John Wood
Title: CEO and President
Compensation: $113,000
% of Expenses: 1.50%

Predicted Stars and Scores
Efficiency Rating: 4 Stars (39.1)
Capacity Rating: 4 Stars (27.5)
Overall Rating: 4 Stars (66.6)

Based on my calculations, I predict that Room to Read will easily be classified as a 4-Star charity once CN reviews them. To me it's clearly a legitimate, efficient, sustainable organization.

I also strongly believe that Room to Read has a worthwhile mission and is effective at fulfilling its mission. To help you understand whether Room to Read is an organization you're interested in supporting, below is some additional information about the group, taken from its web site:

  • Tagline: World Change Starts With Educated Children

  • Mission: Room to Read partners with local communities throughout the developing world to establish schools, libraries, and other educational infrastructure. We seek to intervene early in the lives of children in the belief that education is a lifelong gift that empowers people to ultimately improve socioeconomic conditions for their families, communities, countries, and future generations. Through the opportunities that only an education can provide, we strive to break the cycle of poverty, one child at a time.

  • Approach to non-profit management: (1) Scalable, measured, sustainable results; (2) Low-overhead, allowing maximum investment in educational infrastructure; (3) Challenge grants fostering community ownership and sustainability; (4) Strong local staff and partnerships creating culturally relevant programs

  • Results: In less than six years, Room to Read has helped over 1,134,000 children by: (1) Constructing 221 schools; (2) Establishing over 3,370 libraries; (3) Publishing 99 new local language children's titles representing over 930,000 books; (4) Donating over 1.2 million English language children's books; (5) Funding 2,344 long-terms girls' scholarships; (6) Establishing 108 computer and language labs

I can't say enough good things about Room to Read. After analyzing the organization in greater detail for this post, I now need to figure out the details of my virtual fundraiser. What it comes down to is this: adding a library to an existing school in a developing country costs only $2,000. Or, funding a 10-year scholarship to provide primary and secondary education for a girl in the developing world costs only $2,500. I believe raising $10,000 is a reachable goal. That's five libraries or four girls' scholarships, or some combination thereof.

Stay tuned for the details, and please let me know of any suggestions. If you plan to donate as a result of this post and would like to track the progress of this virtual fundraiser, please put my name (Ryan Gunderson) in the special instructions section of the credit card donation page on Room to Read's website; or if you are writing a check, write my name in the memo section and/or attach a note with my name on it so that the donation is trackable. I will not know (and do not want to know) who has donated or how much, but Room to Read has told me that they could provide me monthly summary updates on the progress of my fundraiser, which I will pass along via this blog.

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