The Overhead Myth - Part Two
In our last blog, we wrote about this thing called the Overhead Myth and why you shouldn’t believe it. We talked about how you should nuance your approach to understanding the impact of a nonprofit. It’s got to be more than just a simple ratio of dollars spent on programs vs. overhead. We mentioned how many things that an accountant might drop into the overhead bucket are actually ‘mission in disguise.’ Finally, we touched on how some critical thinking can help you cypher through these things.
Now that we’ve throughly identified the problem, it’s only fair that we offer a solution for the three people reading this post. That was sarcasm for you non-Americans, as we know that there are at least four people reading this.
So how do you measure a nonprofit’s impact?
1. Go see their mission in action.
Talk to the people whom it serves and see what’s happening. This is pretty easy if the nonprofit is local, but what if they’re doing work across the globe? Do they offer a short-term trip of any kind? If they do, sign up to go spend a week serving alongside them in their environment.
2. If item #1 isn't feasible, you can look at their board of directors.
Most nonprofits will have a page that explains who serves on their board. A board is important because the board members provide oversight and counsel to the CEO of the organization and make sure that the organization is moving in the right direction. You can get a feel for an organization’s legitimacy based on the people that govern it.
3. Check out Guidestar.
Guidestar.org is a sort of online watchdog for nonprofits and is the industry standard for such things. Most legitimate nonprofits post their financial reports here.
There is this semi-famous TED talk by Dan Pallota, founder of the Charity Defense Council in which he explains why funding a nonprofit’s fundraising budget could be the most effective way to increase its impact.
You can also look at a nonprofit’s leadership as well as their success stories to get a good idea of it’s true impact.
Thanks for reading and keep working to become an informed and educated investor! For more on what SuNica's doing in the way of fundraising and overhead cost, check out The List campaign.