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In a recent study of over 10,000 New York nonprofit organizations, “Understanding Overhead: A Governance Challenge for Nonprofit Trustees,” the authors, John MacIntosh of SeaChange Capital Partners and George Morris and Dylan Roberts of Oliver Wyman, highlighted the following patterns existing among the organizations, with respect to overhead (administrative and fundraising expenses):
As management teams continue to fight the daily challenges of diversifying revenue streams, negotiating rate increases with government funders, convincing foundations of the strengths and merits of unrestricted dollars and overseeing programs that are already strapped for resources, trustees should be asking: How well do I understand the organization’s overall business model, including its full cost and overhead structure?
A place to start: Ask yourself the following questions: Do you know your organization’s key ratios (overhead, administrative, fundraising efficiency)? How have these ratios trended over time? Are they in line with the strategic objectives of the organization? How can economies of scale be maintained/achieved? How can we, as a Board, be more effective in our governance and leadership of the organization? What information do we need to fulfill our fiduciary responsibilities?
The study authors said it well: “Overhead is a dry subject. People don’t join nonprofit boards to read spreadsheets or study expense allocations. … So, the commitment to make analysis part of everyday leadership and governance must come from within.”
For a complete copy of the study, click here. Contact us if you have questions regarding Not-for-Profit Financial Reporting and visit our Not-for-Profit Industries page to learn more about the services that the Schneider Downs team can offer.
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