What Portion of Donated Funds Go Directly to Seminole State?
This is a common question posed to nonprofit organizations that rely on private fundraising to support their mission. A typical measure of nonprofit efficiency is the Administrative Expense Ratio (AER). The AER is calculated by dividing administrative expenses (AE) by total expenses (TE) and multiplying by 100 (AE/TE x 100). This ratio provides an indication of how much an organization spends to provide services in relation to overall administrative operations. For example, an AER of 20 percent would imply that 80 percent of an organization's expenses are focused on providing services.
The Foundation for Seminole State College of Florida is a 501(c)(3) nonprofit organization. Our role as a Direct Support Organization (DSO), however, makes this ratio analysis a poor indicator of our organizational efficiency. As a DSO:
- The Foundation receives salary assistance from the College, which is included in our annual expenses. While these dollars give a clear picture of the true costs of operating the Foundation, they may be misleading to a donor, since private contributions are not used to underwrite salaries.
- A large portion of the Foundation's fundraising activity is focused on growing and maintaining our permanent endowment. Therefore, private dollars raised in a given year are not expressed as an output of our total expenses.
Cost Per Dollar Raised (CPD), calculated by dividing the sum of administrative expenses and fundraising expenses by total revenue ((AE+FE) / TR), provides a more accurate measure of our organizational efficiency. This analysis tool allows our donors to more fully understand how much support is being directed to Seminole State College in proportion to our annual expenses.