Here are a few background articles on the overhead issue and why it is a good idea to have a gift acceptance policy.
12/13/15 at Nonprofit Chronicles – If not overhead, then what? Maybe this. – Perhaps it is understandable that donors focus on the percentages on the functional allocation of expenses in assessing charities. What else is available? Nothing.
Article points to a new charity called ImpactMatters which is developing a methodology to audit the impact of charities with an intentional parallel to a financial audit of financial statements.
The report from the audit will be on a pass/fail basis with fail reports kept confidential. I will not look at the audit methodology because I will obviously filter my perceptions through the lens of being a CPA who provides financial audits.
You can see one of the summary reports here. That provides good information to donors. Actually testing impact, reporting on the results, and explaining what the results are based on would be a huge step forward from just calculating a few ratios on the statement of activity.
1/10 – Nonprofit Chronicles – Can Charity Navigator find its way? – Article focuses on the difficulty of moving from the Overhead Myth to major in impact. Charity Navigator is one of the leaders and having created the mindset that a charities effectiveness is measured by dividing supporting services on the functional allocation by total expenses. The organization is also the lead of struggling to develop a new methodology that can be applied broadly. Developing a quantitative tool is a major challenge.
One perceptive idea is to develop a sector by sector methodology. Perhaps the animal shelter, the museum, and rescue mission communities could develop a methodology that applies just to their sector.
12/23 – Nonprofit GPS answers the question Why Shouldn’t We Accept All Donations? – Very short answer is it may cost the charity more to assess the fair value and dispose of odd tangible property than will be received from the sale.
As a, oh, not so theoretical picture, imagine receiving a donated speedboat. Cool, huh? After you find out the teak deck needs to be replaced and the engine is about to disintegrate, you may find that the cost needed to get it into a salable condition and the time spent on doing so was more than the sales price.
Land is particularly risky. For starters, keep in mind that the liability for any environmental exposure extends to everyone who ever owned the land after the land was harmed. Let’s say in a decade there is a problem discovered from decades ago on land you owned for a few months while you disposed of it. You are on the hook for all the clean up costs.
The solution? A gift donation policy. See the article for more explanation.