New publication I like: Lies, White Lies, and Accounting Practices-Why nonprofit overheads don’t mean what you think they mean

Chris Blattman’s recent post on Who is to blame forexcessive administration costs in humanitarian aid? or Bottom Up Thinking’s latest post on Accountability and Overheads or just two examples of how alive the debate on organisational overheads is.
However, as valuable as the anecdotes, examples and comments are they are often written by insiders for the insider’s (blogging) community. The main reason why I enjoyed Saundra Schimmelpfennig’s new e-publication on the subject so much is that it is an accessible, practical and relevant publication that can be read by the whole family. Given the growing size of the philanthropic sector, the fact that many donors to charities are not development- or non-profit-experts and the complexity of the subject Saundra’s publication really speaks to the ‘99%’ of non-experts:

If you are like 80% of Americans, the number one thing you look at before giving to a nonprofit is the percent they spend on “overhead” which are administration costs such as salaries, rent, and computers. You do this because it makes intuitive sense - the less a nonprofit spends on administration the more it spends helping people. You do this because it’s what many experts tell you to do. And you scrutinize overheads because you want your donation to do the most good possible. Unfortunately, the intense focus on overheads is making nonprofits less effective, not more so.

The publication’s core part on Lies, white lies, and accounting practices explores a range of strategies of how non-profits keep overheads low from Manipulating staff time, Changing where administrative work is done, Manipulating who pays for what to, Valuing donated goods and Valuing medicine – two apparently very common practices I have not been aware of so far.
The publication also contains a brief historical background of the debate and also tackles the topic of ‘waste’ and alternative indicators and initiatives that address transparency issues and learning from mistakes. But her core message is very clear throughout the publication:

While there is waste and fraud in the nonprofit world, these problems are not uncovered by looking at an organization’s administration ratio. In fact little can be learned by the administration ratio as it’s often more a reflection of the organization’s accounting practices than anything else.

The only theme that may have deserved more attention is the changing nature of professionalism in the sector. Saundra does write about director’s salaries, but I would have liked to read more on the fact that many young, well-educated and highly qualified women and men enter the sector (often with a significant student loan burdern) and that paying decent salaries is important – for the communities at home as much as for those who benefit from the non-profit’s projects.

One interesting aspect for me as a ‘development writer’ is that Saundra’s publication defies neat categorisations – it’s much longer and more detailed than a blog post, but yet it’s not a ‘book’. It’s also more insightful than a newspaper article, yet the publication is easy to read and understand. 

To sum it up: A great primer on the topic and an excellent gift for parents, siblings and friends who have ‘good intentions’, but want to learn more about the realities of the non-profit ‘industry’.

Full disclousre: I received a free review copy from Saundra at the beginning of February 2012.