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Tuesday, June 18, 2013

'Impact' vs. 'Overhead': How Should Charities be Judged? 06-18

'Impact' vs. 'Overhead': How Should Charities be Judged?

Grading nonprofits by “overhead” is officially out. The heads of Guide Star, Charity Navigator and BB Wise Giving Alliance, the three major organizations that evaluate non-profits for donors, have written anopen letter "to the donors of America"saying that using overhead is a poor indicator when deciding where to give. With it, they created a well-branded website: www.overheadmyth.com.
They say: "The percent of charity expenses that go to administrative and fundraising costs—commonly referred to as "overhead" — is a poor measure of a charity’s performance."
The triumvirate ask donors to “pay attention to other factors of nonprofit performance: transparency, governance, leadership, and results” — and saying many charities should spend more on overhead to build capacity and escape the cycle of starvation that keeps organizations from being as effective as they can be.
My favorite sentence is: “The key here is that it’s all about impact.” This is long overdue — but better late than never. Thank you to these leaders for focusing donors on our goals, mission, impact — and how to most efficiently achieve them.
Also, does anyone know why it's only addressed to donors of America?