Florida Donation Report Highlights Donor Concerns
Florida donors are concerned about the amount nonprofits spend on general and administrative costs.
This is one of the big takeaways from the Giving in Florida report published by the Florida Nonprofit Alliance (FNA) with research conducted by Indiana University’s Lilly Family School of Philanthropy and funding from the Jessie Ball Dupont Fund. .
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I’m frustrated that we’re still talking about this issue nearly 10 years after author and activist Dan Pallotta’s TED Talk titled “The Way We Think About Charity Is Completely Wrong” went viral and was viewed over 4 million times. Shortly after Dan’s talk, Charity Navigator, Better Business Bureau Wise Giving Alliance, and Guidestar coined the name The Overhead Myth to dispel the misconception that administrative expenses are unrelated to mission.
Mismanagement is rare
In its report, the FNA acknowledges that there are examples of financial mismanagement, but says they are “rare among Florida’s 98,000 nonprofits. Most nonprofits operate in an ethical and transparent manner that maximizes their resources to provide quality services and work towards achieving their mission.
Definition of overhead
Overhead costs are generally defined as a combination of management, general and fundraising costs. The overhead ratio is the amount of a nonprofit’s revenue spent on costs that do not appear to be directly associated with delivering the program. These typically include salaries, rent, technology, utilities, staff training, and insurance.
Describe overhead as funding the core work of the mission
The Giving in Florida report reveals that overhead is a problem for some donors and, in some cases, a barrier to increased giving. FNA believes the disconnect between what donors see and what happens stems from how nonprofit spending is defined as overhead or indirect.
At first glance, these costs appear to be detrimental to the work of the program. However, administrative costs are essential to the success of the programs and services offered.
Moreover, without overhead, program results are not possible. Since overhead is not optional, FNA proposes that it be described as “funding the core work of the mission”.
Focus on results, not overhead
It is up to the nonprofit sector to be clear and transparent about the true cost of service delivery and to advocate for more effective ways to measure results.
Low overhead does not guarantee better results and, in fact, likely means that the organization misses out on outdated equipment, lack of technology, low salaries and dilapidated facilities. The result is what Stanford Social Innovation Review describes as the “nonprofit starvation cycle.”
A message to council members
It is critical that Board members understand the true cost of service delivery and advocate with funders and donors about those costs. This includes discontinuing the practice of describing direct costs as mission and indirect costs as overhead. They are both missions and cannot exist without each other.
To learn more about this issue and other findings from the Giving in Florida report, plan to attend an in-person presentation by the Florida Nonprofit Alliance at 10:00 a.m. on September 29 at Theater Tallahassee, 1861 Thomasville Road. The event is co-hosted by the Community Foundation of North Florida, the Institute for Nonprofit Innovation and Excellence, and United Partners for Human Services. Register at flnonprofits.org.
I’ll end with a quote from Dan Pallotta: “The next time you go to a charity, don’t ask about their overhead rate. Ask about the magnitude of their dreams.
Notes on Nonprofits is produced by Alyce Lee Stansbury, CFRE, president of Stansbury Consulting. Please send your questions and comments to [email protected]
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