Dear Charity Navigator: Don’t Backtrack on Overhead Now!

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Arrows crawl along the ceiling / Cameron Russell

October 3, 2016; Charity Navigator Blog

We understand that in any recovery process there may be relapses, but it is important to acknowledge and learn from them. Therefore, we are going easy on Charity Navigator with regards to its latest blog, wherein it declared the achievement of an administrative overhead of 15 percent as “excellent.”

In fact, CN completely deserted the rest of us by going back to (even emphasizing) a simplistic framework we are all trying to eschew as we transfer to a “full costs” model. Most of us have recognized that the manipulations required to land in an “excellent” place with regards to administrative overhead take some backward kinds of figuring that are good neither for nonprofits nor donors.

Administrative (or simply “Admin”) Expense Percentage looks at the amount of money spent on management and general expenses reported on an organization’s Form 990 in relation to its total expenses. Any cost that is not allocated to actual program work or to fundraising activities is allocated here. It is important to note that this total does not consist of ALL employee salaries, as a significant portion of a staff member’s salary may be allocated to program, if the employee’s work is mission-related. For example, an administrative assistant’s salary at an animal shelter may be an admin cost, while the salary of a veterinarian at the same shelter may largely be allocated as program.

When looking at admin expense percentage, we check to make sure an organization’s admin allocation is in line with other organizations performing similar types of work. For most organizations, anything less than 15 percent spent on admin is considered excellent and is worth full credit for this metric.

In the interest of keeping this short, I can only say, “Wha?” I return to Clara Miller’s analogy of a hotel: Would the check-in staff be considered non-mission-related? Absurd! These obfuscating and arbitrary metrics are a distraction to our work. We realize that it is still how things are reflected on the 990, but let’s try not to make it worse.—Ruth McCambridge