More good stuff on overhead ratios and “worst charities.” 7/16

Here are a few more articles in the ongoing conversation of overhead and the “worst charities.”

“Overhead ratio”

7/11 – Chronicle of Philanthropy – Wounded Warrior CEO Rips Rating Systems as ‘Ineffective and Misinformed’ – CEO says Wounded Warrior could have modified their operations to manage the overhead ratio, but they choose instead to focus on long-term service to their community, which involved upfront costs and other efforts that affected ratios. They disagree with the attitude that overhead is bad and fundraising is either a sign of inefficiency or fraud. In the tell me how you really feel category, the CEO says this of the rating agencies:

“Essentially what these groups are doing is passing judgment on decisions that were made by charity boards and staff on how to best fulfill their missions, meet the needs of their constituencies, and sustain their organizations over the long term,” he said.

He also mentions what few others will discuss: not all charities are completely honest in their functional allocations.

7/15 – Huffington Post – Measuring Charity Effectiveness: Manage Your Mission, Not Your Rating Steve Nardizzi, CEO of Wounded Warrior Project goes in-depth on why the overhead ratios and rating agency methodology is out of line. This is a must read if you have been following the overhead debate. Several quotes:

The two main issues with ratings agencies (sentence diagrammed by me for emphasis):


  • equate fundraising and overhead to fraud and
  • judge the business decisions charities make in order to best fulfill their missions…

The foundational step to more healthy future?

Charities need to take back the dialogue about our industry from these self-appointed watchdogs who create their own standards…

Five specific steps he suggests:

First, we need to do a better job of measuring and reporting our impact — transparently.

Second, we need to hold ourselves and our industry to the highest standards of ethics and professionalism.

My translation: There are a few, not many, but a few bad players in the industry.

Third, we need to inform government officials about the appropriate way to measure charity effectiveness, educate them …, and advocate against onerous regulations ….

Fourth, we need to start having a public dialogue about these issues — with our donors and supporters, with the media, and, yes, with each other.

Finally, we need to encourage everyone in our industry to make the right choices to further their mission.

A final, unnumbered point:

Choose to make a great impact.

3/19 – Nonprofit Assistance Fund – Busting the Nonprofit Overhead Myth starts with you – Kate Barr wonders why everyone she talks to in the nonprofit community agrees the emphasis on overhead ratio needs to be changed. Then she looks in the back of every financial statement she reads and finds the same pie chart with the same three slices. Perhaps we need a new recipe to tell the story, she suggests.

I agree. Mr. Nardizzi agrees.

6/16 – Chronicle of Philanthropy – 4 Tips for Measuring Outcomes Instead of Activities – If you need something to reorient yourself to measure whether you are changing the world instead of just doing stuff, consider:

Aim at the right outcomes

You, by yourself, can’t reduce unemployment in Los Angeles county. But you could count the number of your program graduates employed one year after completing your program.

Use existing research

Leverage off research you completed on previous, related projects.

Consider indirect measurements

It may take a decade to reduce diabetes in your town. In the meantime, quantify how many people have made measurable improvements in diet or exercise.

Focus on measuring what matters to funders

Instead of counting how many hours of tutoring were provided, make an estimate of how much your students improved their math scores in the last year. You may not have a perfect methodology or ideal measurement tools, but if you show & support your calculations, you will have an easier job persuading funders that your agency is very likely to accomplish your shared goal.

“Worst Charities”

3/14 – Center for Investigative Reporting – Telemarketer profiled in worst charities series files for bankruptcy – One firm that shows up frequently amongst the Tampa Bay Times top charity list filed for bankruptcy protection. They will continue operating while reorganizing under court supervision. Interesting tidbit in the article: the company owes the IRS $15 million.

4/10 – New to Seattle – Charity telemarketer plaguing Seattle files for bankruptcy – William Barrett comments on the bankruptcy filing. He has observed a drop off in calls from the company

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