Nonprofit Blog

Welcome to the Nonprofit Blog hosted by the professionals at Armanino, CPAs & Consultants. This blog is set up to inform nonprofit organizations of trends, rule changes, best practices and free educational offerings that we have built to support nonprofit organizations. Our professionals bring you their insights from an accounting and organization perspective to help nonprofits reach their goals. We support our clients with advice, direction and best practices.

Friday, January 31, 2014

Focus on transparency and messaging

Posted by Armanino Nonprofit Team

Prospective donors are constantly reminded to check what percentage of their donations goes to programs as opposed to administrative costs. And it’s good advice, up to a point.

Like so many things though, one size doesn’t fit all.

Across the wide span of the nonprofit community, the litmus test of a well-run organization seems to frequently default to an allocation of 75-80% to programs and 20-25% to administrative costs. That’s a shame, as it can be misleading.

As statistical averages, these may work well. But when they are taken out of context as rules, they do a disservice to both nonprofits and their donors.

Many well-run nonprofits couldn’t possibly pay their fixed costs with 25% of their donations, while there are others that could very well be viewed as wasteful operations and yet remain well under 25% administrative costs. In fact, certain nonprofits run at less than 10% administrative costs. That’s the nature of their business.

The moral of the story: Nonprofits need to focus on transparency and messaging more than one set measure when it comes to benchmarking.

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