“I don’t want my donation to cover overhead expense.”
It’s a sentiment heard by nonprofit organizations on a regular basis. However, like a business, it’s a simple fact nonprofits have overhead needs.
“There is a large population of donors who use overhead as a litmus test,” said Crystal Webster, Breast Cancer Foundation of the Ozarks executive director, during the recent Nonprofit CEO Roundtable. “It’s not that they are saying this the only question that’s important, but there is an expectation we will meet a certain threshold. Beyond that, we can continue the conversation as a valid organization.”
However, local organizers believe low overhead as the definitive mark of a quality nonprofit is a myth. Dan Prater, director of Drury University’s Center for Nonprofit Communication, pointed out the misnomer in the center’s Nonprofit Impact Study released last April.
“The nonprofit sector has focused a lot on keeping overhead down over the last decades, and I think that has actually starved a lot of nonprofits from investing in their own work,” Prater said at the time, noting organizations often are just responding to the will of donors.
For Bonnie Keller, CEO and president of Ronald McDonald House Charities of the Ozarks and The Tooth Truck Inc., the first priority is programming, but it’s only one part of the picture.
“I caution people (that) having a super low number for management, general and fundraising sometimes is a red flag,” Keller said, adding a nonprofits foundation and infastructure are key to making a mission last. “I know there’s always so much focus on that, and I think it’s a good thing, but I think there’s a balance that’s needed.”
So how much of each dollar donated goes toward the mission? It varies. According to
CharityNavigator.org, the industry standard is 20 percent.
For each dollar donated, roughly 20 percent goes toward overhead costs, based on the industry standard. A handful of local organizations have cut that figure in half or more.
The breakdownAt Ozarks Food Harvest, 96 cents of every dollar donated goes directly into programming, garnering the pantry a four-star rating from Charity Navigator, which rates based on financial health, accountability and transparency.
“Anything that has to do with food is where it goes,” said Denise Gibson, director of development and communication, adding the remaining funds cover expenses, such as gas for trucks, insurance, payroll and utilities in providing assistance to 28 counties in southwest Missouri. “We’ve been able to hold that steady for several years now.”
In fiscal 2014, Ozarks Food Harvest netted total support and revenue of more than $27.4 million, with in-kind contributions of over $21 million and cash or cash equivalency donations over $6 million – a 22 percent jump over 2013’s $22.4 million.
In 2014, the organization distributed 15 million pounds of food through programs that include the organization’s mobile food pantry and the backpack program which provides weekend backpacks of food for about 1,500 at-risk children at 47 elementary schools – 22 located in the Springfield area.
“We can’t just hope that somebody will donate food like that to us, we actually have to purchase that food,” Gibson said. “(It’s) one of our most expensive programs and a very important program.”
She said expenses in 2014 topped $25.8 million, with more than $24.8 million going toward programming and distribution services. Overall, Ozarks Food Harvest spent $484,916 on fundraising efforts and $451, 472 on general and administrative expenses, which includes payroll.
Jeff Nene, national spokesman for Convoy of Hope, said the Springfield-based international humanitarian relief organization sets a target of spending no more than 10–11 percent on administrative and fundraising efforts.
In 2014, Convoy’s budget was $107.8 million, with about 4 percent used for administrative expenses and 6 percent allocated to fundraising, also netting the nonprofit a four-star rating from Charity Navigator.
“You have to be willing to invest in order to attract donors, but you want to find that balance to where you’re not spending too much,” Nene said.
Beyond the bottom line“I think what is more important is to make sure you have a well-rounded organization,” Keller said.
At the Ronald McDonald House, another four-star organization, Keller attributes much of the charity’s expansion to its culture of volunteerism. Last year, they numbered 150.
The Ronald McDonald House provides housing for families with seriously ill or injured children undergoing hospital care. The first Springfield house was built in 1988 and a second house was incorporated into the sixth floor of Mercy Children’s Hospital in November 2012. The organization also operates the Tooth Truck, a mobile dental clinic for at-risk children.
“When we built the house, everything was done as far as planning and raising funds, with volunteers, and the house opened debt free,” Keller said. “We’ve literally had volunteers in every area you could imagine. It’s always been that way, and I think that when you have that culture you’re able to keep your administrative costs down.”
The organization’s two houses and mobile dental care facility cost roughly $1.7 million to operate, with about $220,000 allocated toward fundraising, management and general expenses. Keller said the nonprofit received a little over $1 million in local donations in 2014 and she estimates 80–85 percent are allotted to programming.
Manpower needsVolunteer efforts have become increasingly important for the Humane Society of Southwest Missouri. Executive Director Darin Landrum said recent changes have opened doors for volunteers to do everything short of veterinary work, racking up more than 7,000 hours of volunteer time.
“The biggest thing they do for us is they allow us to socialize the animals that come in here,” Landrum said. “Taking those animals out and showing them love and affection actually works really great toward getting these dogs and cats socialized and adopted.”
Adoption fees account for about $160,000 in shelter income, the No. 3 earner behind mail-in donations of $170,000 and the Humane Society’s signature Lucky Paws fundraiser, which brought in $200,000 on March 14.
But it’s never quite enough to break even, Landrum said. Though the nonprofit operates on a nearly $1 million budget, it costs roughly $80,000 a month to keep things going, and Landrum said the shelter usually falls south of that by about $30,000.
“We lose money,” Landrum said. “Basically every dollar that’s donated goes toward keeping the doors open.”
Despite the monthly struggle, Landrum said income has increased in recent years through increased community presence and awareness. The animal shelter has a current Charity Navigator rating of two stars, attributed to a low accountability and transparency score.
“I think we let people know what we do here. We’re as open and honest as we can be,” he said.
Features Editor Emily Letterman contributed to this report.[[In-content Ad]]
