• Putnam Barber

    Ira Kaminow, of Tzedakah ([LINK=http://www.just-tzedakah.org][/LINK]) poses this thought experiment: “Would you feel comfortable giving to an organization that told you, completely truthfully, that it spends [U]nothing[/U] on administration? No money, no volunteer time, nothing at all.” For me the answer is easy. Of course not. Sound administration requires care that can’t be bought on the cheap. Of course, as well, administrative expenses can be “too high”. But judging whether that is true or not requires detailed knowledge of the inner workings of the organization in question — more data and more attention than outsiders are likely to give, even if they could. A focus on administrative costs harks back to a model based on :”the rich” giving money to intermediaries to help “the poor.” Naturally, both “the rich” and “the poor” want the intermediary’s share to be small. That model simply doesn’t fit the work of tens of thousands of perfectly respectable nonprofits. If they slight administration to look good by some outsider’s measure, they are slighting their mission. If they misrepresent their costs in pursuit of that goal, something much worse and much more dangerous to the quality of community life is going on. Good for Jack Shakely for making his point so forcefully and well!

  • Mazarine Treyz

    Everyone knows where to find a nonprofit’s 990. It’s on Guidestar, right?
    And everyone knows that you can cook the numbers to get them to look like whatever you want them to look like.
    Overhead is a red herring.
    I’ve written about this before, when I talked about some of the key concepts from Dan Pallotta’s book, uncharitable.
    for example, there’s the No Life, no Liberty, Just Pursuit of Wealthy donors concept, which says that we shouldn’t want to be compensated fairly for working in charity, that we are lucky to get $10 an hour

    When you just look at overhead, you encourage a culture of destitution.

    People getting paid less and then jumping to another job as soon as they can. How will this help fulfill the mission?
    Instead of asking, “what is your overhead percentage” we should be asking, “how well are you accomplishing your mission?” Because that’s the more difficult and the more interesting question.



  • Richard Taylor

    Great point made by Mr. Shakley. As a beancounter, I have to add that the computation of administrative rates are as subject to manipulation as Fannie’s profits were….

  • Saras Chung

    This practice reminds me of how Charity Navigator grades nonprofits. Their completely formulaic approach to determining the worth of a nonprofit is a dangerous practice as donors trust and use these ratings as a guide for their charitable givings without much thought. The focus should be on outcomes. Are they achieving their mission? Some organizations may look good on paper in regards to their administrative percentages but may not have much impact on the mission they are working to achieve.

  • Elizabeth Rosen

    I agree with Shakely — he provides a great illustration of why we need to look beyond financial metrics when deciding which nonprofits deserve our time, money, and public support!

    In fact, I intern at GreatNonprofits.org (www.greatnonprofits.org), which is a site that shares his perspective. It’s the largest online database of user-generated reviews of nonprofits. On the site, donors can see a new dimension of the impact of the nonprofit – through the eyes of a parent whose child received tutoring, or the ex-felon who got job training, or the volunteer who helped write advocacy newsletters. These first-hand experiences help donors see the on-the-ground work of the nonprofit.

    Don’t hesitate to contact me – [email protected] – if you have any questions about the site, or just want to talk more!