Nov. 7, 2021

13. Why we shouldn't worry about a charity's admin expenses


Here's today's letter:
How do I find charities that have low administrative overhead expenses?

Let's begin by discussing a less common question: why do we hold nonprofits to a higher standard of scrutiny than other organizations? There’s less scrutiny on silicon valley startups and 90% of them fail. And they are trying to sell apps and websites. They aren’t trying to undo hundreds of years of structural inequality and oppression. Why do we hold nonprofits to a higher level of rigor?

So, here’s the thing, you can look up a charity’s overhead ratio on a lot of the popular charity evaluation sites, like charity navigator, but I want to first push back to ask if that is as important of a metric as you might have been told.

Let’s say we are looking at an organization that is working on access to clean water, in a place like Michigan, or  Papua New Guinea in the Asian Pacific region. We need those organizations to have office space, we need them to have the technology systems to make sure they are tracking their work accurately. We need them to be keeping up with advancements in the field of clean water. If they need to do a fundraiser, they will need to pay to keep a list of donors, they will need to buy mailers, pay for some graphic design so it doesn’t look bad. If they’re doing an event, they need to pay for that. We need them to pay their staff, otherwise you get a bunch of trust fund kids that are the only people that can afford to work there. Salaries need to be sufficiently high so that the organizations can be staffed by people who reflect the communities they are serving and have expertise that is helpful to the organization.
So this notion that an organization should starve itself, not invest in its infrastructure, staff, research, fundraising, it just doesn’t make sense. And in fact, it has been proven, that organizations that starve themselves in this way, don’t perform as well.

That being said, there have been some outliers, and I do mean outliers, these are the ones that get all the press and cause a panic that then harms the vast majority of nonprofits that are not running themselves that irresponsibly.

So, my advice is, if you are still worried about overhead, start your donations small with an organization, while you get to know them. Or check to see, some organizations will let you restrict your donation so that it can only be used for programmatic expenses. And as you donate and engage and start to read their reports and maybe interact with the nonprofit (remember, that’s someone’s job, every time you want to ask a question or for them to provide more documentation, these are all things that cost overhead), but as you get more comfortable, I think you’ll find yourself not restricting your donations anymore and letting the organizations figure out where they need the money the most.

To recap, your question was how to find charities with the lowest overhead expenses and my answer is, please don’t.

To submit your letter to the show, email spenddonateinvest@gmail.com
To support the show visit buymeacoffee.com/spenddonate

Support the show (https://www.buymeacoffee.com/spenddonate)
Transcript

Here's today's letter:
How do I find charities that have low administrative overhead expenses?

Let's begin by discussing a less common question: why do we hold nonprofits to a higher standard of scrutiny than other organizations? There’s less scrutiny on silicon valley startups and 90% of them fail. And they are trying to sell apps and websites. They aren’t trying to undo hundreds of years of structural inequality and oppression. Why do we hold nonprofits to a higher level of rigor?

So, here’s the thing, you can look up a charity’s overhead ratio on a lot of the popular charity evaluation sites, like charity navigator, but I want to first push back to ask if that is as important of a metric as you might have been told.

Let’s say we are looking at an organization that is working on access to clean water, in a place like Michigan, or  Papua New Guinea in the Asian Pacific region. We need those organizations to have office space, we need them to have the technology systems to make sure they are tracking their work accurately. We need them to be keeping up with advancements in the field of clean water. If they need to do a fundraiser, they will need to pay to keep a list of donors, they will need to buy mailers, pay for some graphic design so it doesn’t look bad. If they’re doing an event, they need to pay for that. We need them to pay their staff, otherwise you get a bunch of trust fund kids that are the only people that can afford to work there. Salaries need to be sufficiently high so that the organizations can be staffed by people who reflect the communities they are serving and have expertise that is helpful to the organization.
So this notion that an organization should starve itself, not invest in its infrastructure, staff, research, fundraising, it just doesn’t make sense. And in fact, it has been proven, that organizations that starve themselves in this way, don’t perform as well.

That being said, there have been some outliers, and I do mean outliers, these are the ones that get all the press and cause a panic that then harms the vast majority of nonprofits that are not running themselves that irresponsibly.

So, my advice is, if you are still worried about overhead, start your donations small with an organization, while you get to know them. Or check to see, some organizations will let you restrict your donation so that it can only be used for programmatic expenses. And as you donate and engage and start to read their reports and maybe interact with the nonprofit (remember, that’s someone’s job, every time you want to ask a question or for them to provide more documentation, these are all things that cost overhead), but as you get more comfortable, I think you’ll find yourself not restricting your donations anymore and letting the organizations figure out where they need the money the most.

To recap, your question was how to find charities with the lowest overhead expenses and my answer is, please don’t.

To submit your letter to the show, email spenddonateinvest@gmail.com
To support the show visit buymeacoffee.com/spenddonate