Nonprofit Myths...Part 2 (Money Issues)

Nonprofit Myth #2: Donor and/or grant funding shouldn't support salaries, or overhead for organizational operations. See also: Low overhead and/or administrative costs are a sign of a healthy nonprofit organization. See also (also): Nonprofit organizations shouldn’t spend money/resources to engage in fundraising activities.

I would really like to exist in the mythical land where we don’t have to PAY PEOPLE to DO IMPORTANT WORK. Truly, this particular myth gets under my skin so much. See my post on how change sector work is valid, professional, and highly skilled work. I do not understand how funders, donors and supporters of nonprofit organizations expect that things will get accomplished if not by dedicated, talented, resourceful, professional staff with specialized skill sets—who need and deserve to be compensated fairly for their time and expertise.

Paying living wages and offering benefit programs to nonprofit employees to, you know, actually DO the work of the organization, ensuring that the mission is carried out is one issue. Supporting the costs of doing business (i.e. overhead, administrative costs, management & fundraising costs) is a closely related issue. It feels like we’re in broken record territory within the nonprofit sector—there’s nobody I’ve encountered who doesn’t see the logic of reducing restrictions on funding to better allow organizations to meet their missions. There’s also now a chorus of voices arguing for unrestricted and general operating funding in the sector, see some great information from: Grantmakers for Effective Organizations, Propel Nonprofits, The Overhead Myth and Nonproft AF. The pursuit of low overhead costs is harmful and destructive, because it undermines an organization’s ability to provide stable, quality services to beneficiaries and feeds into the Nonprofit Starvation Cycle. Overhead isn’t a measure of nonprofit effectiveness, it’s one financial measure—of inputs. There’s no correlation between how much an organization pays for rent, utilities, fundraiser’s salaries, executive pay, etc. and the impact it has on it’s community.

So, the solution? Provide unrestricted monetary support (donations and grants) for organizations. Encourage nonprofit organizations pay living wages to personnel to carry out their missions. Find ways of measuring impact and effectiveness that are unrelated to an overhead ratio. Support spending on necessary overhead, including costs to fundraise.

Next time…Part 3 of Nonprofit Myths!