Tuesday, March 15, 2011
Overhead Costs and Fear
As mentioned by several other students, this week's reading was very eye-opening in terms of the functioning of a nonprofit organization. People often have no idea exactly where and how much of their money is allocated to overhead costs, actual programs, etc. When you see a commercial for an organization asking you to donate, a lot of the time the people speaking will say "all of your donation will go directly to the children, animals, etc.". I found it very strange that these organizations would be allowed to claim such things if they are not true, but then after thinking about it again, a lot of these overhead costs will impact the programatic functioning so I think it is extremely necessary to be allowed to put a significant amount of money towards these costs. I think it is unfortunate that CEO's have to bend the truth about where their funds are going, but it just brings up those issues of accountability and trust that we talked about earlier in the semester.
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Sheri, I agree with you. After thinking about our class discussion, there is no right answer to how high your overhead costs should be. Yes, we discussed that the rule of thumb is roughly 15%, but putting limits on an organization can make them much less effective. If it is necessary for an organization to have overhead costs of 25%, then they should operate in that way.
ReplyDeleteNot to get completely off topic, but look at the area school districts. To a certain extent, they are being limited due to the cut in State aid. So, you can argue that they are being limited in succeeding in their mission. Granted, they can make cuts in other areas of their choice but when an organization is forced to have caps, it causes a real threat to their services. Opinions on this subject are welcome, but I am trying to co-relate caps on overhead with caps on school districts, because I am by no means for increased school property taxes.
The bottom line is I do not believe that donors should base overhead costs on whether or not they will provide funding to an organization.