The Overhead Myth

The Overhead Myth

There is a new petition making the rounds this week that may change the way people assess charities. “The Overhead Myth” challenges that overhead expenses are a poor indicator of a charity’s performance. And we couldn’t agree more.

Overhead expenses – those line items that account for infrastructure, staff salaries, fundraising expenses, and more – have long been given a bad rap. For years, charities have been encouraged, and often required, to limit these types of expenditures by donors and grantors. The logic? Because these organizations are operating off of donations, as much money as possible should be given to the causes they support, not to the people running the organization.

There is obviously a flaw in this logic. While accountability and transparency are important, shouldn’t nonprofits be held accountable to the impact they are having in their community? To their ability to accomplish their mission? To their commitment to their constituents?

Transparency of accounting for nonprofits comes with the agreement of tax exempt status, and is important to avoid abuse of the system. But transparency does not mean spend as little as possible. It shouldn’t mean limit your organization’s ability to grow in the future. And it can’t mean that charities are being less effective because they feel limited by this idea of overhead being a negative.

Overhead means new technology. Overhead means outsourcing projects that are beyond the knowledge and abilities of your current staff. Overhead means training volunteers and staff. Overhead means a better ability to fundraise and communicate your message. Overhead means paying your employees a competitive wage and rewarding them for their hard work and achievements. Overhead means your organization has the ability to live up to the promise that was made upon your inception, to fulfill your mission statement, and to have an impact in your community.

For those keeping score, with the start of this petition, it’s Dan Pallota 1 – Charity Rankings 0. Here’s hoping we keep moving in the right direction.

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