What is your opinion about overhead? Can you think of examples of overhead supporting organizational missions? Do you see any risks of over-spending on overhead? Give your opinion and support it with some facts.
Reading the assigned artcles:
What is your opinion about overhead? Can you think of examples of overhead supporting organizational missions? Do you see any risks of over-spending on overhead? Give your opinion and support it with some facts.
Requirements: 150-250 words
9/19/22, 3:57 PMNonprofits may need to spend about one-third of their budget on overhead to thrive Ð contradicting a rule of thumb for donorsPage 1 of 4https://theconversation.com/nonprofits-may-need-to-spend-about-one-tÉ-overhead-to-thrive-contradicting-a-rule-of-thumb-for-donors-188792Nonprofits may need to spend aboutone-third of their budget on overheadto thrive Ð contradicting a rule ofthumb for donorsHala Altamimi Published: September 19, 2022 8.23am EDTNonprofits that spend more on information technology, facilities, equipment,staff training, program development and fundraising tend to be moresuccessful than those that scrimp on these”overhead expenses.Ò But manydonors are reluctant to support groups that spend heavily on those prioritiesbecause they associate high overhead costs with wasted money and badmanagement.Because this problem is of concern to donors and charities alike, we Ð twoscholars of public administration Ð set out to identify the point beyond whichspending more on overhead stops enhancing an organizationÕs operations.That is, how much overhead spending is enough, and how much is toomuch? And since we reasoned that the point that strikes the right balancemight be different for, say, a homeless shelter than an art gallery, we focusedon one broad category.We analyzed data derived from 22,328 U.S. arts and cultural nonprofits Ðlargely museums and theaters Ð from 2008 through 2018. We looked at whatshare of their budget covered overhead and how many people attended theirevents and exhibitions. More people going to a museum or seeing a playover those 11 years served as our proxy for success.As we explained in the academic journal Nonprofit and Voluntary Sector
9/19/22, 3:57 PMNonprofits may need to spend about one-third of their budget on overhead to thrive Ð contradicting a rule of thumb for donorsPage 2 of 4https://theconversation.com/nonprofits-may-need-to-spend-about-one-tÉ-overhead-to-thrive-contradicting-a-rule-of-thumb-for-donors-188792Quarterly, we found that when arts nonprofits devoted 35% of their budgetto overhead, they fared best in terms of attendance.Attendance declined, by contrast, for organizations that spent extremely lowand high amounts of their budget on overhead. Groups that spent far toolittle saw their attendance decline by 9%. Attendance for arts groups thatspent way too much on overhead fell by 30%.ÔStarvation cycleÕOur findings cast doubt on a common rule of thumb, embraced by someprominent groups that monitor and evaluate charities, that nonprofits withlower overhead ratios are better than those with higher ratios.This research also adds to a growing body of evidence that spending toolittle on overhead deprives nonprofits of the competitive salaries, stafftraining, equipment and other resources they need for long-term success.Nonprofit scholars have been warning for nearly two decades about thedangers of pressure from donors to keep overhead spending low.Conforming to expectations about keeping overhead expenses down cancause whatÕs known as the Óstarvation cycle.ÒInitially, funders hold unrealistic expectations about running a nonprofit withlow overhead.In response, nonprofits feel pressured to meet those expectations to attractfunding. They may then spend too little on overhead by paying low andnoncompetitive salaries, replacing paid staff with volunteers and usingoutdated facilities and equipment. Alternatively, they may distort the waythey report on their expenditures to satisfy their donorsÕ demands.
9/19/22, 3:57 PMNonprofits may need to spend about one-third of their budget on overhead to thrive Ð contradicting a rule of thumb for donorsPage 3 of 4https://theconversation.com/nonprofits-may-need-to-spend-about-one-tÉ-overhead-to-thrive-contradicting-a-rule-of-thumb-for-donors-188792Either response can feed donorsÕ unrealistic assumptions, creating a cyclethat slowly but steadily starves nonprofits and weakens their infrastructure.The Starvation Cycle. Source: Ann Goggins Gregory and Don Howard/Stanford Social Innovation Review.Problems with any rule of thumbWe also found evidence supporting donorsÕ fears that spending too much onoverhead is unwise.But while the data analysis suggests that arts nonprofits hit the sweet spot
9/19/22, 3:57 PMNonprofits may need to spend about one-third of their budget on overhead to thrive Ð contradicting a rule of thumb for donorsPage 4 of 4https://theconversation.com/nonprofits-may-need-to-spend-about-one-tÉ-overhead-to-thrive-contradicting-a-rule-of-thumb-for-donors-188792by spending a bit more than one-third of their budget on these costs, we arenot trying to recommend a new benchmark for overhead spending in thesector.ThatÕs because optimal overhead levels vary depending on several factors.For example, programs that charge admission may have to spend more onoverhead than free programs to attract an audience.In short, we are not recommending a new rule of thumb for all nonprofits.Both performing arts and visual arts organizations need to spend more thanmany other kinds of organizations on marketing to increase attendance. Inaddition, many performing arts nonprofits face high travel costs, whilemuseums need to spend more than most other nonprofits on security toprotect their collections.Adjusting donorsÕ expectationsIn our view, these findings further challenge the often unrealisticexpectations surrounding overhead spending.They also contribute to the ongoing efforts of nonprofit leaders, scholars,certain foundations and some charity monitors to adjust donor demands andexpectations.To aid those efforts, we encourage nonprofit leaders and funders to findmore meaningful ways to assess whether a nonprofit is worthy of a donorÕsdollars than calculating the share of their budget spent on overhead.
Overhead Cost DefinitionsWhat is overhead?Classifying expenses accurately is not arbitrary guesswork. Both the IRS and FASB (Financial Accounting Standards Board) have definitions for these functional expense classifications. It’s important to note that every nonprofit needs to use their own judgment and make some estimates, and that the two sets of definitions are not always consistent with each other.From IRS: Instructions to the 990Management & GeneralExpenses for overall function and management, rather than for the direct conduct of fundraising activities or program services. Overall management usually includes the salaries and expenses of the chief officer of the organization and that officer’s staff, except the time they spend supervising (or performing) fundraising activities or program services. Other expenses include those for:• Meetings of the board of directors• Committee and staff meetings (unless held in connection with specific program or fundraising activities)• General legal services• Accounting (including patient accounting and billing)• General liability insurance, office management, audit, personnel, other centralized services• Publication and distribution of an annual report• Investment expensesFundraisingFundraising expenses are incurred in soliciting contributions, gifts, grants, etc. Include all expenses including allocable overhead costs. Fundraising activities include:• Publicizing and conducting fundraising campaigns• Preparing and distributing fundraising materials• Soliciting bequests and grants• Soliciting government grants that are reportable as contributions (rather than government funds that are a payment for services)• Participating in federated fundraising campaigns
From Financial Accounting Standards Board: FASB 117To help donors, creditors, and others in assessing an organization’s service efforts, including the costs of its services and how it uses resources, financial statements shall provide information about expenses reported by their functional classification such as major classes of program services and supporting activities.Management & GeneralActivities that are not identifiable with a single program, fundraising, or membership development activity, but are indispensable to the conduct of these activities and to the organization’s existence. These expenses include: • Oversight and business management, which usually includes expenses and salaries of the board, CEO and supporting staff (except the portion that is spent directly supervising programs, fundraising, or membership), costs of disseminating information to the public about stewardship of funds, announcements about appointments, and annual report• General record keeping, budgeting, and finance• Cost of soliciting revenue from exchange transactions such as government contracts and the sale of the organization’s goods and services• All management and administration, except for direct conduct of program activities or fundraisingFundraisingExpenses incurred by fundraising activities, which include:• Publicizing and conducting fundraising campaigns• Maintaining donor mailing lists• Conducting special fundraising events• Preparing and distributing fundraising materials• All other activities involved with soliciting contributions from individuals, foundations, government, and others, including the costs of soliciting contributions of services from individuals (i.e. volunteers) even though the value of those volunteer services is not recognized as income under FASB2
Collepals.com Plagiarism Free Papers
Are you looking for custom essay writing service or even dissertation writing services? Just request for our write my paper service, and we'll match you with the best essay writer in your subject! With an exceptional team of professional academic experts in a wide range of subjects, we can guarantee you an unrivaled quality of custom-written papers.
Get ZERO PLAGIARISM, HUMAN WRITTEN ESSAYS
Why Hire Collepals.com writers to do your paper?
Quality- We are experienced and have access to ample research materials.
We write plagiarism Free Content
Confidential- We never share or sell your personal information to third parties.
Support-Chat with us today! We are always waiting to answer all your questions.
