by Kimberly Goodrich, CFRE, Senior Director of Development
Several of my articles and posts have focused on the Overhead Myth – the commonly held belief that financial ratios are the sole indicator of a nonprofit’s performance. Over the last year, it has become widely agreed that stars and ratios do not clearly communicate a nonprofit’s impact or show that we are meeting our mission.
The Multiple Sclerosis Association of America has joined BBB Wise Giving Alliance, Charity Navigator and GuideStar in the pledge to end the Overhead Myth and move toward an Overhead Solution. Instead of focusing on the percentage of charity’s expenses that go to administrative and fundraising costs-commonly referred to as “overhead”-we need to focus on what really matters: trustworthiness and performance.
Last year, BBB Wise Giving Alliance, GuideStar, and Charity Navigator, published an open letter to the donors of America denouncing the use of the “overhead ratio” as the sole indicator of nonprofit performance. The letter, signed by all three organizations’ CEOs, marked the beginning of a campaign to correct the common misconception about the importance of a low overhead ratio.
A new open letter, published in October on www.overheadmyth.com, educates and encourages nonprofits to work towards an Overhead Solution. Specifically, the letter asks nonprofits to do three things, “(1) demonstrate ethical practice and share data about performance (2) manage towards results and understand your true costs and (3) help educate funders on the real costs of results.” The letter goes on to provide resources to help nonprofits in this critical endeavor to measure and report on what matters most.
Join us in spreading the word about this important topic. Nonprofits and their supporters are encouraged to learn from and share the latest Overhead Myth letter. We’d love to hear your thoughts and ideas. As always, please contact us if you have any questions at all.
Thank you for your support in this effort.
I am the Senior Director of Development at MSAA and have worked in the nonprofit arena for over 15 years. I love reading, running, theatre and the Green Bay Packers. I volunteer with the Disabled American Veterans teaching outdoor sports like skiing and kayaking to injured veterans and find that I receive much more from them than I am able to give.