The worst question to ask a charity

Rosita Cortez, one of the people I follow on Twitter, linked me to this article by Dan Pollata on the Harvard Business Publishing blog. He writes about one of the most frequently asked questions that affects a nonprofit's rating with Charity Navigator, the Better Business Bureau, and the American Institute of Philanthropy. The question is "What percentage of my contribution goes to the cause rather than to overhead?"

His point is that because these watch dog groups make this the only question in determining an organization's effectiveness, they don't lead donors to consider the more important question, "Is the organization making a difference?"

How can that be, you ask? Well, the media, the watchdogs, and the sector itself have done an amazing job of training the public to think that the two things are the same, i.e., that if a charity has low overhead, it must be making a difference. Major studies on the relationship between organizational strength and impact find otherwise.

A strong organization needs a strong infrastructure. By continually forcing charities to scrimp on such things as operational management, fund raising, human resource development, marketing and information technology, misinformed funders are weakening the potential of nonprofits to diversify their funding base and ensure for the welfare of their staff.

Here's a link to another article from Bridgespan entitled, Nonprofit Overhead Costs: Breaking the Vicious Cycle of Misleading Reporting, Unrealistic Expectations, and Pressure to Conform, that makes a similar case. the authors write, "When nonprofit organizations are able to invest adequately in staffing and infrastructure-- “overhead”--they are better able to carry out their missions."

At Breakthrough we try to stretch every dollar. Funding for overhead is the most difficult to find and yet it I believe adequate funding for overhead is essential for us to carry out our mission effectively. Here's what I would suggest you do before you give to any organization.

• Visit the organization to witness their effectiveness
• Meet the leaders of the organization
• Ask to see an audited financial statement
• Spend time observing operations
• Volunteer so you get to know the staff and observe how they relate to the program participants
• Ask about the accountability structure of the organization and the involvement of the Board of Directors
• Ask how the organization measures outcomes

If you like what you see and you determine that you can trust the organization to use your donation wisely, give an undesignated gift so it can be used where it is most needed.