Nonprofit GPS

Your Personal Navigation System Through Not-for-Profit Accounting Issues

Overhead Myth – Regulating Administrative Expenses

I was surprised this morning when I opened my email and saw the news:

Today, the CEOs of all three of the major charity watchdog groups (GuideStar, BBB Wise Giving Alliance, and Charity Navigator) published a letter “condemning the use of administrative expenses as a measure of nonprofit performance.”

This is HUGE news for the nonprofit world! How many times have you heard “we had to get our administrative expenses under x%”? Or looked at another organization’s 990 and thought “there’s no way they are allocating their expenses correctly, but donors don’t know this so how can I compete”? It has long been a frustration that donors (who would be investors if this were a for-profit entity) don’t want you to have any administrative expenses. How did they think an organization was able to function if there was nobody paying the bills or seeking out funding?

We joined GuideStar, Charity Navigator and BBB Wise Giving Alliance in the pledge to end the focus on the Overhead Myth. It’s about nonprofit RESULTS – not administrative expenses! Read the open letter to donors from Jacob Harold, Ken Berger, and Art Taylor, and spread the word: www.overheadmyth.com.

Katie L. Thomas, CPA