In Defense of Overhead

Today is Giving Tuesday, a day in which many non-profits and charitable organizations will make appeals for donations to worthwhile causes. I hope you give, and continue to give generously.

Unfortunately, the manner in which many such organizations solicit funding from donors is deeply problematic. One of the most popular ways to compete for donation dollars is to claim that the organization spends little money on overhead and that a high percentage or your money goes directly to programming. From my own tradition, UMCOR, the United Methodist Committee on Relief, says that 100% of what you give goes to programming.  That sounds wonderful. Who could object to more money going to people in need rather than administrative costs?

Well, me.

The accounting practices used to claim that money is going to “programming” rather than “overhead” borders somewhere between unethical and outright fraud. You would be shocked to find out what counts as “programming” in the non-profit world. They feel justified in doing so because it has become standard practice in the industry to invent and follow a new budgetary language foreign to any business school. There are almost no non-profits that advertise based on “programming vs overhead” that are being honest with you.

They do this, not just to trick you, but primarily because you, the donor, demand it. We want to be tricked. We want our money to go to the cause, not fill bank accounts of non-profit CEO’s. This notion is foolish. Organizations are successful because the people running the programs are successful, not because X% of dollars goes to programming. The people running the programs can be successful when their headquarters are competent, and well managed. They remain so if they are properly supported, properly equipped for the job, and properly paid. The jobs they do are complicated and require extensive education and training. The places where they work are often difficult, dangerous, and far from home. They have to monitor where money goes in areas where they may not speak the language or may not be able to perfectly navigate cultural differences. They also have to do this in places where the rule of law and beliefs about corruption don’t work the same as in the West, and even at home the job is difficult and expensive.

How do non-profits reconcile the problem of the need for high-end staff and the need to send X% of money to programming as required by donors? First, they short their staff, and rely on staff’s feelings of commitment to the cause so that they can pay them salaries and benefits below the market rate and far below what they deserve. The result is high turnover, high stress, high levels of dissatisfaction, high level of cynicism, and overworking them until they burn out. Second, they lie to you, or rather they knowingly define “programming” different than everyone else in the world, hide such definitions in the unwritten assumptions of the budget, and know that you will never look at it.

The result is predictable.  When staff aren’t properly paid or properly equipped to do their jobs, the work suffers.  Beneficiaries who need the assistance given to them by non-profit organizations receive worse services.  Non-profit workers can often move into other industries, but people who rely on their assistance usually have few other options.

The core problem here is unrealistic expectations of donors. You want your cause of choice solved for cheap. You want to outsource solving near impossible problems to “do-gooders” but don’t want to give “too much” money. You want staff to be experts but want to pay them like amateurs. Most of all, you don’t want to do the hard work of going through a budget, understanding complex issues, questioning your assumptions, or evaluating projects and staff, so you take a shortcut of “programming vs overhead”.  Non-profit workers are professionals, not volunteers.  If you want professional work, you have to compensate them like professionals and pay for a professional work environment.

If an organization promotes their giving based on “programming vs overhead”, run away. Or, ask to see their budget and ask questions about what counts as programming. Better yet, have a meal with one of their workers doing the actual work of interacting with beneficiaries and figure out for yourself if they and their projects are worth supporting. Then write a check earmarked to “overhead”, “employee salaries”, “office equipment”, or “parental leave” and walk away knowing that you might actually have done some good.

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