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How do You Measure a Nonprofit's Effectiveness?

Earlier this week, we blogged about a letter from three prominent organizations strongly refuting the use of overhead costs to measure a nonprofit’s effectiveness. But, in seemingly direct contradiction to this letter, a new Oregon law requires that nonprofits spend no less than 30% of their total annual expenses on charitable programs.

Worst of all, the new law punishes donors along with charities. If an organization fails to spend 30% of its expenses on charitable programs, a donor will lose his or her ability to take a state income tax charitable deduction on the donation. The organization must contact all of its donors to disclose the loss of the deduction or face a penalty of up to $25,000.

Read the entire new law here.

Do you think there is an objective way to measure the effectiveness of a charity? Post your ideas and comments below.