Assessing Charities Using Data Envelopment Analysis

Data envelopment analysis (DEA) is a technique that takes account of multiple inputs and outputs to assess the relative efficiency of organisational units. Unlike regression its assessments are not based on any average but on best observed practice (and weighted combinations thereof). Whilst DEA has seen an explosive growth in its application to various fields, it has rarely been applied to the voluntary sector. This paper gives an elementary non-mathematical introduction to the technique and demonstrates one way in which it can be applied to assessing charities. In particular we assess the efficiency with which fundraising expenditure and administrative expenses are used to generate voluntary income.