I noted in my September 2013 blog post that three leading charity watchdogs in the USA, which collectively advise millions of donors annually, had not only rejected overhead ratios as the prime indicator of a charity’s reliability and effectiveness, but they had also launched an active effort to bust the “overhead myth.”
Recently, a financial publication called “Main St.” published an article called The Overhead Myth and Charitable Giving, which supports this effort to better evaluate charities on the basis of their overall business practices, their effectiveness and their transparency – rather than an over simplistic overhead or administrative ratio. Located on Wall St. in New York City’s financial district, the publication’s parent company called “The Street” offers financial insight and advice through its consumer websites and subscription investor services.
It is interesting to see that those who make critical financial evaluations regarding the personal and business investments of clients also agree that a solid business platform within a charitable foundation helps ensure an effective use of a donor’s philanthropic investment in their community.
It is also becoming increasingly evident that sound business practices represent important criteria for donors in making their giving decisions, and add to the donor’s trust and confidence levels as they develop their charitable relationships.
I hope these factors will be publically recognized by more financial experts and media - and that standards of efficiency, effectiveness, transparency, impact and return-on-investment continue to replace the simple calculation of overhead cost.