More good stuff on overhead ratios and “worst charities” – 11-7-13

Two great opinion pieces in the Chronicle of Philanthropy that are worth your time, both dealing with the ‘overhead’ issue. At first glance they seem to have opposing views. I think they are both correct with many good points, which illustrates the complexity of the issues.

Chronicle of Philanthropy – The Overhead Debate: Charities Risk Widening Rift With Donors Over Administrative Costs – Prof. Brian Mittendorf says charities need to expand financial communication. Merely saying ignore overhead risks a disconnect with donors who have legitimate concerns over making an impact with their donations.

I agree, professor. Additional information needs to be provided if we want donors to reduce their reliance on “overhead” as a main screening criteria for giving.

Counting on Charity – Some Reactions to the Reactions to my Op-ed in the Chronicle of Philanthropy – Prof. Mittendorf discusses some of the comments to his Chronicle Op-Ed.  He believes

The costs of setting up basic internal controls are minuscule. 

Chronicle of Philanthropy – The Overhead Debate:  Low Administrative Costs Make It Harder to Fight Thefts and Scams – Prof. Kirsten Grønbjerg says that implementing good internal controls takes a bit of money and a lot of time. That time component means staff salaries, which is accounting, which means overhead. The huge pressure on charities to squeeze “overhead” as low as possible directly translates into pressure for less internal control.

I agree, professor. The question raised by several commenters is how much would that increase the G&A allocations. While that is a good question, the point remains there would be an increase. And that is what creates opposition to implementing appropriate internal controls.

All three articles are superb. If you are following this issue, it would be worth every moment of the time it would take to read them all.

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