March 6, 2018; Lehigh Valley Express Times
NPQ sees a lot of silly articles about nonprofits, but this one stands out as particularly absurd. It starts by asking the nonsensical but leading and provocative question, “When you contribute to a charity or a nonprofit organization, do you ever wonder how much of your contribution goes to help the beneficiaries of the charity and how much goes to the employees who manage the charity or the professional fund raisers who solicit donations?”
Then, after pointing people to the database at the secretary of state’s office in Pennsylvania, the Lehigh Valley Express Times goes on to list some presumably stellar nonprofits that “spent the equivalent of less than 10 percent of their total assets on management expenses in the most recent fiscal year of data available.” Why that particular ratio should matter is not made clear. Likely, the author has confused total assets with total budget, which is how the now-outmoded overhead ratio would have been figured (proportion of total expenses spent on management and fundraising combined). Of course, it also makes the mistake of thinking that such a straight comparison between various types of organizations means anything. And to top it off, the 10 percent standard ties to nothing in even the most retrograde standards of charity management.
And to make matters worse, it then contrasts various financial models against one another indiscriminately—service provision groups, for instance, which survive largely on contracts and look like this example from The Third Street Alliance for Women and Children:
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- Gross contributions: $658,000
- Net assets: $3.5 million
- Program services expenses: $1.3 million
- Management and general expenses: $302,000
- Fundraising expenses: $65,000
with the United Way of the Greater Lehigh Valley, which fundraises all of its revenues and looks like this:
- Gross contributions: $11.6 million
- Net assets: $8.8 million
- Program services expenses: $10.3 million
- Management and general expenses: $850,000
- Fundraising expenses: $1.3 million
But is that sufficient in terms of what nonsense can be advanced as information? Not at all. The article then goes on to call out the organizations that show management expenses that are (horrors!) more than 10 percent of their assets, thus reinforcing a raft of ancient notions that have little to do with ethical or competent or even efficient nonprofit management.
This kind of clickbait should be below any serious journalist at this point. More than a year ago, three of the sector’s most well-respected watchdogs issued a letter urging people to abandon the ratio as virtually meaningless without a good deal of other information. They wrote, “The percent of charity expenses that go to administrative and fundraising costs—commonly referred to as ‘overhead’—is a poor measure of a charity’s performance,” adding that undue focus on the measure “does more damage than good.”
But beyond that, the false focus on these kinds of misdirected “issues” detract from a serious public understanding of the nonprofit sector. We deserve and should demand better.—Ruth McCambridge