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The Overhead Cost Myth

Overhead mythDuring the season of giving, many charities and non-profits are ramping up campaigns to raise money for their programs and initiatives. But there is often a misconception about how donations are used and questions about what percentage of charity expenses go to administrative and fundraising costs—commonly referred to as “overhead.”

Overhead costs include important investments charities make to improve their work: investments in training, planning, evaluation, and internal systems—as well as their efforts to raise money so they can operate their programs. These expenses allow a charity to sustain itself (the way a family has to pay the electric bill) or to improve itself (the way a family might invest in college tuition).

These costs are part of any organization and can have positive impacts on how it’s run, yet oftentimes, charities are viewed as irresponsible if they spend money on anything else other than what is directly related to who or what they support.

Three organizations dedicated to holding charitable organizations accountable, GuideStar, Charity Navigator, and BBB Wise Giving Alliance are asking people to change that view and consider other factors when it comes to giving to an organization; such as transparency, governance, leadership and results, something Monarch is committed to in all aspects of its programs.

When people focus solely or predominantly on overhead, it can create what the Stanford Social Innovation Review has called “The Nonprofit Starvation Cycle.” We starve charities of the freedom they need to best serve the people and communities they are trying to serve.

So when you are making your charitable giving decisions, please consider the whole picture. The people and communities served by Monarch don’t need low overhead, they need high performance.

Click here to watch a TEDTalk by Dan Pallotta, activist and fundraiser, on the ways we think about overhead cost.

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