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Better Business Bureau ®
Start With Trust®
Telling the Truth About Overhead Myth
April 17, 2014

When donors give to their favorite charity, chances are they have already thought carefully about who they want to donate to, how they want to donate and why they donate to that particular charity.  

However, they may be surprised to learn that 100% of their contribution isn’t going to support the cause they intended. This phenomenon was recently addressed at BBB® offices by Art Taylor, President and CEO of BBB Wise Giving Alliance when he was in town.

“There is a misconception that when donors and funders invest in a charity, they assume all of the contribution goes toward programs,” said Taylor “That’s a great idea, but in reality that’s really not what does or should happen, because charities need to make an investment in their people, infrastructure, and technology to better provide services today.”

Taylor was recently in Cincinnati to bust the Overhead Myth, a misconception that the lower the charity's percent of expenses that go to administrative and fundraising costs (commonly called "overhead"), the better and more effective the charity is. However, overhead expenses include important investments charities make to improve their investments in training, planning, evaluation, and internal systems, as well as their efforts to raise money so they can operate their programs.

“Overhead is a part of operating a charity,” explained Taylor. “It does have a role in ensuring charity accountability, because, at the extreme,  the overhead ratio can offer insight as a valid data point for rooting out fraud and poor financial management. However, focusing on overhead without considering other critical dimensions of a charity’s financial and organizational performance does more damage than good.” Taylor encouraged donors and funders to pay attention to other factors of nonprofit performance such as: transparency, governance, leadership, and results.  

Locally, Cincinnati BBB has been at the forefront of efforts to increase the depth and breadth of the information provided to donors in these areas through its 501(c)(3), The Center for Ethics at BBB. The Center invites more than 860 charities to seek BBB Accreditation each year. As part of the accreditation process, BBB issues comprehensive reports on charities, allowing donors to access information about a charity’s  governance, programs, finances and BBB’s determinations whether a charity meets its Standards.

“You can’t properly assess a charity if you boil it down to just numbers,” said Jocile Ehrlich, President and CEO of BBB Cincinnati. “That’s why BBB’s  20 Standards for Charity Accountability assess an organization’s overall commitment to transparency.  Donors need to understand there’s more to operating a charity than just raising and spending money.” 

When considering giving to a charity, Taylor encourages donors to give with their heads as well as their hearts and consider the whole picture when determining which charities to support.  “Bottom line - when we focus solely or predominantly on overhead, we starve charities of the freedom they need to best help the people and communities they are trying to serve.”

Visit bbb.org to make sure a charity is one you can trust.

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