I really enjoyed reading "Nonprofit Overhead Costs" by Bedsworth et.al. (2008) for this week's class, because it caused me to think about overhead costs in a way that I hadn't before. As Kristen mentioned in her post, overhead costs have been discussed in other classes within this program, along the lines that the less overhead costs an organization has, the better. I think that's why I enjoyed this article so much - because it contradicted what we have been taught in class and contradicted what Kristen, myself, and other donors have considered important when determining which organizations to donate to.
Like Rebecca, I was also struck by the fact that a survey conducted by the Better Busienes Bureau's Wise Giving Alliance found that American adults: "ranked overhead ratio and financial transparency to be more important attributes in determining their willingness to give to an organization than the demonstrated success of the organization's programs" (p. 12). As I read this passage, I thought to myself - why is this? I believe it is because there is a suspicion among organizations' funders (including private donors) that if a nonprofit's overhead rate is too high (over 20 or 30 percent), its money is not being managed well. If people had trust in a nonprofit's staff and board, however, I wonder if they would still think that an overhead rate over 30 percent means that the nonprofit is not managing its money well. I can't speak for everyone, but I think if I knew and trusted a nonprofit's board and staff, I would not think anything of a 40 percent overhead rate; I would simply assume that the board and staff were managing the money well and were doing the best they could to have the biggest possible impact.
A major inhibitor of ending the cycle that Bedsworth et.al. (2008) discuss in their article with trust is that some people may not trust nonprofits simply because they have high overhead rates. However, I think that nonprofits still have much to gain from building people's trust in them. If they are able to do this, perhaps people will be able to look beyond their overhead rates and look instead at their impact.
A very thought provoking post, Kate. My only suggestion is that if a nonprofit organization I generally trusted had an overhead rate of 30% or 40%, I would seek an explanation. Trust is one thing, blind trust another. You should use your judgment to acknowledge that a 40% overhead rate is unusual. If you were a board member, or even a donor, I think you'd be obligated, at least, to inquire about the rate and understand it.
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