Find the right agencies to support by utilizing a few simple indicators.
It seems nonprofits constantly solicit donations from the public, yet it is difficult to determine if a particular nonprofit is well-managed or provides quality programs. People often ask me, “Where should I donate? How do I know if this is a good organization?” Unfortunately, many people curtail their donations to nonprofits or choose not to contribute altogether because of misconceptions or missing information. Ignorance is not bliss! A donor can find the right agency to support with a basic understanding of the sector’s circumstances and a few simple indicators of healthy nonprofit organizations.
The Overhead Myth
For decades, the nonprofit sector relied on a simple statistical computation to measure the quality of an organization: the percentage of fundraising and administration expenses (overhead) compared to programmatic expenses. In the 1980s, a 15-percent standard was set by sector watchdogs GuideStar, Charity Navigator and BBB Wise Giving Alliance. Nonprofits exceeding this 15-percent overhead threshold were considered inefficient because too much funding was diverted away from direct programming. These watchdogs rated nonprofits and discouraged the public from donating to “top-heavy” organizations.
Today, the same watchdogs admit the 15-percent standard is not only unrealistic, but detrimental to the sector. The “overhead myth” generates a myopic view of the nonprofit and fails to consider the quality of programming, the fundraising environment, service demands or long-range planning efforts. Quality services in any industry require administrative expenses, and the nonprofit sector is no different. The overhead myth, however, chokes a nonprofit’s ability to make vital investments in its staff, facilities and technology. The ramifications of the overhead myth are so profound that the CEOs of the three sector watchdogs who developed the 15-percent threshold issued a joint proclamation opposing the practice. Donors need to accept overhead expenses and realize they are essential to the health of the organization.
The Never-Ending Battle
American society is complex and suffers from complicated issues like homelessness, addiction and abuse. No community is immune from the social ills addressed by local nonprofits. However, we simply cannot expect a single nonprofit organization—or even a network of nonprofits—to completely solve our community’s most wrenching problems. Why do nonprofits ask for a donation every year? Because the social problems they address remain at their doorstep every year, and sometimes the problem is worse. Do not be discouraged because the same organization continually asks for a contribution. Nonprofits are often fighting a never-ending battle, and they need your help.
Today and Tomorrow
While it is impossible to completely solve complex social issues, quality nonprofits address current needs creatively and effectively while planning for the future. Many strong nonprofits collaborate with other public entities and leaders, carefully gather information about the environment, and actively consider responses to future community issues through strategic plans. Savvy nonprofits connect budgets to identified strategic initiatives and constantly invest in staff through internal training opportunities, conferences and continuing education sessions. In order to provide quality services today and tomorrow, a staff and its programs cannot be stuck in the past.
Prospective donors can learn a great deal about the health and vision of an organization by reviewing strategic plans, budgets and newsletters. Meet with the CEO or board members—they are likely happy to discuss their agency. Support organizations that are grounded in today and actively preparing for tomorrow. Better yet, support the planning and training expenses nonprofits can use to improve their organization.
Quality nonprofits are supported by quality donors. Consider who else invests in a particular nonprofit organization. A transparent annual report includes individual donors, as well as grants from foundations or public entities. Nonprofits receiving awards from the United Way or other community chests are required to maintain certain levels of accountability and performance. Some nonprofits seek accreditation from national governing bodies and complete periodic reviews to maintain designation. However, do not discount smaller nonprofits, or those recently organized, as some organizations are modest endeavors and do not require large gifts from leading foundations and philanthropists. Likewise, some nonprofits operate in areas where accreditation is not required. Finally, do not ignore startups, which take time to develop as organizations. Most nonprofits in the Peoria area are small in size, but size does not determine quality. Take cues from other donors when evaluating a nonprofit, but remember: bigger is not always better.
Follow the Leaders
Quality nonprofits are managed by excellent boards of directors. Nonprofit boards are ultimately responsible for the health of the organization. High-functioning boards meet regularly to conduct business, participate in fundraising events and personally donate to the organization. Attentive boards convene eight to 10 times a year and support several active committees. The board maintains transparency and communicates their business through formal reports and informal exchanges. Finally, healthy boards constantly recruit new members in order to rejuvenate the governing body. A stagnant board likely manages a stagnant organization. Research the nonprofit’s board of directors because it sets the tone for the entire organization.
Listen to Your Heart, But Be Flexible
More than anything, donors should follow their heart. When a nonprofit’s mission speaks to you, answer the call. If supporting animals makes you happy, then donate to shelters and service animal agencies. If you were a horrible tuba player in fifth grade but learned to appreciate music in the school band, find a nonprofit that exposes kids to music.
Listen to your heart, but consider this: all too often, donors designate their gifts to a specific program of a nonprofit. Donors want their gifts to directly support the golden retriever or the 10-year-old tuba player. However, nonprofits need non-designated income more than anything. The golden retriever needs a training facility with heat, water and electricity. The young tuba player needs an executive director to coordinate teachers, rehearsals and fundraisers. It may not seem appealing to support general operating expenses, but consider this—the service dog and the tuba player do not exist without facilities, utilities and administrative staff. It is like expecting a college diploma without purchasing textbooks or paying for room and board. Give undesignated contributions because every dollar finances the mission you love.
Peoria’s nonprofit sector is truly amazing. Every day, local agencies heal, educate, protect and empower our friends, family and neighbors. Invest in our nonprofits, but invest wisely. We must hold them to high standards of integrity and quality, but we must also be realistic and support organizations in ways that allow them to serve our community. Our nonprofits make the extraordinary a reality every day. Partnering with them is bliss. iBi
Eileen Ruby Setti is a partner with Ruby & Associates and PhD candidate at Northern Illinois University. For more information, visit rubyassoc.com.