Charity Overhead – Flipping the Conversation

It’s time to talk straight about charity overhead. Over the years, this simple phrase has become synonymous with overspending—consequently, striking fear in the hearts of fundraising and finance teams alike.

The crux of the matter is that donors will choose to support a charity based on how much of their donation goes directly to the work the organization does—but not the effort it takes to get that work done. Administrative expenses like staff salaries, marketing budgets, office finances, and facility fees, while essential to the operation of a charity, are seen as negative marks on a charity’s scorecard.

The results have been disastrous for the charitable sector. Organizations are forced to cut core operating costs to compete for donations. And, as Arianna Hunter says in a 2020 Toronto Star article, “an industry faced with solving our greatest social problems is overworked, understaffed, underpaid, and outdated.”

The solution is to bridge the gap between finance and fundraising; to work together to understand the full cost of a project and set realistic benchmarks for core operational costs that include a range—a minimum investment as well as a maximum. It’s only when we flip the conversation on charity overhead internally that we can start to change the way donors think about charity spending.

How to set realistic benchmarks for charity overhead

1. The size of your organization: Some charities are big; others are small. Some work locally, others nationally or internationally. If your organization has complex operational requirements, you might need highly skilled staff, specialized equipment or infrastructure, or budget for frequent travel.

2. The tenure of your organization: Some charities have been around for a long time; others are just getting started. If you’re just getting off the ground, you might need more resources to recruit and train staff, establish your home base, and build your brand.

Once you’ve considered both the minimum and maximum requirements to cover your core operational costs, put them in your fundraising proposals. A good way to do this is by including a percentage of administrative expenses as a line item in each project’s budget. This will spread your day-to-day operating costs across all projects.

The final step is to share your charity overhead projections with your donors and supporters so they understand and appreciate the full cost of your work. If you’re worried about objections from your donors, try focusing more on impact than investment. Remember, it’s not the dollar value that matters most, it’s what you’ll be able to achieve with it.

Overcome the overhead objection by setting realistic benchmarks

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