Nonprofit Overhead: Learning Resources
Today, I am pleased to lead a discussion on nonprofit overhead, donor expectations, watchdogs, and fundraising ethics. The event will take place at Charlottesville's Center for Nonprofit Excellence (CNE) and is hosted by the CNE and the American Marketing Association's Central Virginia chapter. To further support that event's attendees - and for my wider community - I have collected the following resources on overhead, impact, and an illuminative case study.
I hope you will use these materials as fodder for your organization's internal considerations. If your team or peer group would benefit from a facilitated discussion of this important issue, please contact me by email or at 434.422.2209. I would love to help.
Presentation of Concept: "The Overhead Myth"
- The charity watchdogs provide a helpful primer with their answer to this FAQ: "What is an "overhead ratio" anyway? How is it calculated?"
- Dan Pallotta's 2013 Ted Talk, "The Way We Think About Charity Is Dead Wrong," launched the sector's strategic discussion around overhead, strategy, and scaling for impact.
- BBB Wise Giving Alliance, GuideStar, and Charity Navigator have compiled resources on the overhead myth, including a "Letter to Donors" and a "Letter to Nonprofits" - both with creative commons license to encourage wide sharing.
- If you are working specifically on joint cost allocation, here is a helpful allocation overview. For a deeper dive into practical allocation, check out this webinar from accounting firm Aronson LLC: "Allocating Direct and Indirect Costs for Nonprofits." And this memo from the Association of Fundraising Professionals on "The Top Five Mistakes to Avoid" will remind you what NOT to do.
Why We Invest: Infrastructure and Impact
- Nonprofit Quarterly reimagines the traditional expense pie chart and makes a visual case for overhead as core mission support in "A Graphic Re-visioning of Nonprofit Overhead."
- Two articles from Stanford Social Innovation Review examine the issue from complementary strategic angles:
- BBB Wise Giving Alliance, GuideStar, and Charity Navigator recommend this Charting Impact Guide, which outlines best practices for understanding your organization's goals, strategies, and capabilities - and offers a model for communicating that essential information to funders.
- Guidestar also recommends Impact Calls to support consistent stakeholder communications. You can join a GuideStar impact call for inspiration and/or put their template to work for your organization.
Case Study: Wounded Warrior Project
It was nearly impossible to miss the Wounded Warrior Project's public relations nightmare in 2016. It began with CBS News and New York Times features, in which previous employees accused the organization of fiscal mismanagement, outrageous overhead, irresponsible spending, and weak programs. Over the next year, the Charity Defense Council sprang to WWP's defense, the Senate Judiciary Committee produced a critical 496-page report, and industry watchdogs delivered their own verdicts. Internally, WWP replaced its CEO and COO - and of this writing still suffers a serious decline in revenue. Though the news cycle has quieted, Wounded Warrior Project will be long at work recovering from damage to its reputation.
This case is extremely rich for learning across functions, and in particular executives, fundraisers, and marketers will gain much from studying it. Here's a starter-pack of materials for the endeavor.
- CBS News Investigates Wounded Warrior Project Spending (CBS)
- Wounded Warrior Project Spends Lavishly on Itself, Ex-Employees Say (New York Times)
- Wounded Warrior Project: The Other Side of the Story (Charity Defense Council)
- Who Will Be the Next Wounded Warrior Project (Charity Defense Council)
- Myths, Misconceptions, and Mistakes: The Wounded Warrior Project (GuideStar)
- BBB Wise Giving Alliance concludes, "no lavish spending" and "no evidence of inaccurate or misleading or characterizations."
- Senate Committee Finds Misrepresentation of Finances at Wounded Warrior Project (Nonprofit Quarterly)
- Wounded Warrior Project CEO Responds to Government Investigation (CBS-Jacksonville)
- Wounded Warrior and Komen Show Similar Deep Donation Drops After Their Respective Scandals (Nonprofit Quarterly)