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.
Nonprofit organizations have specialized audit, tax and operational needs that require specialized service. Armanino has been committed to the nonprofit sector since 1953, and we now work with more than 500 nonprofit clients. This hands-on experience gives our staff of CPAs and former CFOs a deeper understanding of the issues nonprofits face, so we’re able to meet their needs and help them fulfill their missions in the most efficient, cost-effective way possible.