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Money for What Matters: Getting Over Overhead

By Put Barber, Editor of the Nonprofit FAQ.


From Flickr CarbonNYC If you’re like me, at the end of the year you have a little burst of philanthropic activity. Your school may send you a special appeal for annual giving. The bell-ringers on the street remind you of the need for food, clothing, something to put under the tree in way too many families. You may have a philanthropic plan that prompts you to make some year-end gifts. In the midst of all this, you may be wondering to yourself “How do I know my money is really going to do any good?”

If you talk to other people or research the question online, you may find a lot of concern about “overhead.” “I want my money to go to help people, not pay for offices and salaries,” is a common worry, and there are websites that offer to steer donors to the most “efficient” nonprofits – meaning those that spend the largest proportion of their budgets on program services.

At first hearing, it actually sounds like a good idea. For people who have been working in the field for a while, though, some contrary thoughts have been bubbling up. Late last year, several of the independent organizations that offer advice to donors published a manifesto with the title “The Worst (and Best) Way to Pick A Charity This Year” to emphasize that effectiveness, not some arithmetical calculations on budget entries, should be the focus of donors’ attention. (You can read the whole text of the manifesto from Guidestar, CharityNavigator, Great Nonprofits and Philanthropedia here [PDF].)

The earthquake in Haiti, and the remarkable outpouring of donations to try to address the damage, offers another dimension for thinking about these questions. Few of us would be able to help at all if it weren’t for the organizational resources and deep experience of organizations like Doctors Without Borders, MercyCorps, Oxfam and scores of others. Without the development of those capacities, the aid organizations would not have been able to get to Haiti and set to work at all; as it is, they have had to struggle with enormous sad barriers created by widespread destruction. Idealist has a page with suggestions for ways to help here.

One more thing to think about: if you have a philanthropic plan, what should you do about this sort of heart-stopping disaster? One idea: designate an amount to be used to help when terrible things happen during the year. Then, at the end of the year, if the money blessedly hasn’t been passed along as a small part of the help for disasters, use it to supplement what you can do in the way of year-end giving to the organizations close to home that you know are doing effective work to build healthier, stronger communities.