More good stuff on overhead ratios and “worst charities” – 7-9-13

Some more articles that are worth attention. I don’t have time to discuss them in a full post.

“Overhead ratio”

StatesmanJournal – Oregon charity law is a first – New law removes sales tax and property tax exemptions for charities that spend more than 70% of expenses on G&A and fundraising. Donors won’t be able to claim a state deduction for contributions to the ‘bad’ charities. A three-year average is used for the calculation. Initial estimate from the state is that under 100 charities will be affected. Estimate from the reporter is that 153 would met the test on a one-year basis.

InfoCision – Donors need to move beyond The Overhead Myth – One of the major telemarketing firms agrees we ought to pay less attention to the overhead ratio. 

On one hand, they have a vested interest in the ongoing use of telemarketing. On the other hand, they are not included on the list of 123 telemarketers involved with the “America’s Worst Charities.” I have received a number of calls from InfoCision over the years.

Nonprofits Assistance Fund – Kate Barr – Overhead – good, bad, or both? – Kate Barr brings the Overhead Myth and Worst Charities discussions together. Key point – not all ‘overhead’ is the same.

She suggests stewardship is a better focus.

She also wishes we could bust the overhead word along with the overhead myth. See following article.

Counting on Charity – It’s Time to Retire the term “Overhead” when Talking about Non-Program Expenses – Professor Brian Mittendorf suggests we need a new term since ‘overhead’ is so loaded. Professional literature uses the term “supporting activities”. I suggested “supporting services,” which the professor mentioned in his post.

Nonprofit Quarterly – Using Outcomes to Measure Nonprofit Success – Richard Larkin points out the differences between inputs, outputs, and outcomes. Developing a worthwhile outcome is difficult.

I like the question of what is a good outcome for a local church – “Souls saved per pew-hour preached”. Check out the discussion of a one-panel cartoon at the WSJ to illustrate the struggle with outcome measurement.

By the way, anything from Mr. Larkin is worth your time.

Chronicle of Philanthropy – About High Fundraising Costs: It’s Complicated – Jeff Schreifels provides an example of when high fundraising is helpful – when it grows a $7M charity to $60M in 13 years. Doing so took a $10M fundraising campaign over four years that only raised $5M. Was that a good use of donor dollars? I think so.

At the same, and in contrast to what I’ve noticed in the detail of the “Worst Charities” listings, that campaign only lasted four years and it showed very dramatic results.

“Worst Charities”

Chronicle of Philanthropy – Suzanne Perry – “Worst Charities” Report Prompts Calls for Charities to Respond– Forgot to mention this in my first good stuff list. Article provides reactions from various people and organizations.

Raises question of how does the rest of the NPO community deal with outliers that give a bad name to the majority of the community.

As I assembled the list of articles on ‘overhead ratio’ above, I noticed several of them included vague or indirect criticisms of the types of activities that got charities on the “Worst Charity” list.