Don’t Judge a Non-Profit by its Administration Costs

Posted on September 13, 2014 Updated on September 22, 2014

Dearest Reader,

There are a lot of things on my various newsfeeds that I have to actively ignore.  I mean, A LOT.  The overwhelming majority of the folks I went to college with and worked with over the years have a completely different world view than I do, and that’s okay.  It takes all kinds, right?  But as the summer of awful things (I mean, so many horrible summer events…) draws to a close, I am finally to a point where I have to speak up about the one thing that both got my dander up, and that I feel like I can argue about with some authority.  And it has to do with the ALS Ice Bucket Challenge…

No, it’s not the challenge itself.  Honestly, I don’t think it’s a great awareness campaign (I’ve yet to see any challenge video even address what ALS even stands for-it’s amyotrophic lateral sclerosis, FYI) but I do think it’s an AMAZING fundraiser.  That is a mere issue of semantics, however, and beside my point.  My issue comes with the associated posts I’ve seen about where the money being donated is going…

Two people in my newsfeed have posted[1] links to articles about the ‘fraudulent’ practices of the ALS Foundation- that “only 27%” of the donations are going to “actual research” while the rest is going to administration costs and salaries.   I will admit that the sites that the posts linked to might be bad satire or poor propaganda (who can tell anymore?!), or at best, not that great news sites that host a misconstruction or misunderstanding of the facts, but my question is: what’s wrong with spending on administration and salaries?

This is an issue that came up when the Red Cross was assisting with Hurricane Katrina recovery efforts, and back then, because I didn’t really know what I was talking about, I was also horrified that all the donations weren’t all going to survivors or rebuilding efforts.  But now as bona fide adult that spent a couple of years working in a, albeit on a much smaller scale, non-profit (and 2 of those years running it), I can honestly say that there is nothing wrong with spending donations on the less attractive categories of “administration costs” and “salaries.”

Allow me to address the two categories separately, and I beg you to hear (or read, rather) me out before you roll your eyes and move along to Buzzfeed or Facebook…  Also, please note that I’m speaking about these things in a broad, general sense.  Every organization is run differently, but many face the same challenges…

Administration Costs[2]…

We can all agree that non-profits, by definition, do not make money.  As a result, they have to function on grants from the government and charitable foundations, fundraising campaigns, donations, and in some cases, dumb luck.  But for many non-profits, these sources of income do not want to pay for administration costs, and often restrict their ability to use received monies on them, if they allow it at all.

What’s wrong with that, you ask?  Shouldn’t all the money I donate go towards directly helping the people that need it?  The answer is yes, but I’ll argue that when your money goes to administration costs, it is going directly to those that need it.  Administration costs, also referred to as operation costs or expenses, are what keep organizations running.

Even if we’d like to think non-profits get a break because of the good works they do, they don’t always get a do-gooder discount, but they do have to operate in a world where they accrue expenses simply for existing, and usually at the same rate as a similarly sized for-profit organization.  So what are these mysterious “administration” costs?

They’re bills.  No really, it’s that simple.  We’re talking about things like supplies for the staff, paying utilities, computers, or rent-things that you need to, you know, operate.  Why not cut costs?  Buy cheap supplies?  Most do.  Use cheap computers!  The smaller the non-profit organization, the cheaper and older the equipment they’re using.  Find a cheaper place to rent!  Trust me when I say, non-profits are in the most cost-effective building they can find.  Everything a non-profit buys or pays for has a purpose for their mission and the community they serve, and while paying a phone bill doesn’t seem that cool, I guarantee you that it means something huge to someone that calls a hotline at 2 am.

To contrast, I should talk about some of the things non-profits aren’t spending money on.  Non-profits often can’t spend money on buying their own space.  Most grants won’t allow you to use funds to buy property and it takes years of a successful capital campaign[3] to raise enough in donations to put a down payment on a facility-so they become renters, because grants will pay for work space rental.  Non-profits can’t pay for advertising.  When you see a Public Service Announcement or a press piece on a non-profit, it’s almost always because there’s a popular news story associated with the agency’s mission, or a radio or television station donated that time (usually at the pleas of non-profit agency volunteer or staff member).  It’s much easier now that Facebook and Twitter make publicizing programs and events easier, but if you see non-profit staff or volunteers in the media, it’s probably going to be the local morning news show (Community Calendars are THE JAM!).  Non-profits can’t spend more than a couple of paid hours per week on a fair amount of actual work that they have to do.  I mentioned this earlier, but some grants will cover a few administration costs-but not all of it, even if it’s for that grant.  For example, if a program administrator at a local after school program has to spend 4 hours a week doing paperwork that a state grant requires, her boss probably has to pay for most of that time with “unrestricted” funds because even though that state grant requires that paperwork for continued funding as part of the agency’s contract, they only allow the agency to use $X/month to pay for “administrative work.”  Seriously.

I could go on for ages about what agencies are spending and not spending on, but I think you get the point when I say that administrative costs are unavoidable and completely necessary to make the work possible.  And while the bigger the non-profit the more you have to spend; that also means, the farther the reach of that agency.

But if you’re still not convinced that administration costs are necessary, pick a nonprofit at random, call them, and ask about their administration costs.  Not only will they probably tell you whatever you want, they can give you a very detailed breakdown of where every dollar goes, because they have to report every single dollar they spend to every funding agency that provides them with money, and even some benefactors.

Salaries…

For some reason, paying people also seems to be a point of controversy.  If you are outraged to hear about the salaries that executives at large scale non-profits make, I would like to ask you: what should they be paid?

Again, individual non-profits operate their own way and probably have systems for determining acceptable staff compensation.  However, it is generally acknowledged that nonprofit staffs don’t get paid a lot.  I got warnings about it in college, and when I started looking for jobs, “You know you’ll never make much, right?”  Why aren’t people talking about how much staff at non-profit or charity agencies should make?  So often, those that work in the for profit sector speak as if knowing how little you’re going to make at a charity and still doing it, means you deserve what you get.  There are a number of reasons why this happens-but it’s not because they deserve to be paid less than someone in any other industry.

For a full time position in a non-profit, you’re more than likely going to need a college degree or substantial experience, so it’s not like they’re any less educated or experienced than someone entering into a full time position in a small business.  The intellectual demands of working in a non-profit are no less taxing than in an office, in fact, they often have to use more creativity to work around their limitations and yet still have to produce high quality work.  So it can’t be that they’re not as smart as people going into for-profit work.  And it isn’t just their bosses fault they get paid a lower salary; a good leader knows how to hire the right people, and knows a happy work force produces better work, and that’s better for the agency’s mission in the long run.

Honestly there are a lot of reasons that individuals that do charitable work get paid less than most, and a large part of it is how much we value their work, how much we give to these agencies, and how what they get is monitored.  Few non-profits are able to operate on donations alone.  That statement is not meant to guilt anyone into looking for their checkbook or to say that people are not generous (they are and I have seen it, and I appreciate it), it is simply a reality, and as a result, non-profits have to rely on grants from charitable foundations or government agencies.  But receiving grant monies mean you have spend money a certain way, lest you lose it.

When grants are written, the writer has to list everything that will be paid for with the funds being applied for.  So that means staff positions, job descriptions, and their rate of pay are listed and have to be justified to the funder.  What happens if the funding agency doesn’t think the position is necessary or the rate of pay is too high?  The person in charge at the agency either has to make adjustments and find another way to pay for the position like adding more responsibilities to the job description, or pay them with unrestricted funds (that there’s no guarantee will be received in the next year).  The point is: it’s really not just a matter of HR.  It’s a matter of what the person on the receiving end of your funding application thinks, or what that person’s boss thinks, and in some cases what the state legislature says the head of the funding agency has to think.

Aside from qualifications and the fact non-profit staffs are doing good work there is a need for, consider that they’re doing it a limiting environment.  In a larger, state or national charity organization there are opportunities to move up the ladder and expand your skill set; in a local non-profit there are fewer opportunities because there’s probably only a few positions in the organizations to begin with, and trying to add more means having to increase revenue.

Not to mention that at small, local non profits they’re doing a lot of work.  When you’re pinching pennies, you’re not hiring someone to help with phones and make copies, even on a part time basis; instead your office has only necessary employees and you’re acting as your own administrative assistant, janitor, and at times, maintenance.  You and your best work friend want to call in sick so you can play hooky together?  You probably won’t because you know that will only leave 4 people in the office and even with one of you gone; it’s hard to get everything covered.

And pay raises?  A program manager can easily be in his or her position for 2-3 years before even seeing a cost of living increase to their pay check because in a smaller non-profit, it’s hard to guarantee that the funding for that position won’ t be cut in the next fiscal year.  What if they’re doing an amazing job?  If you pay for a position with a government grant and want to increase a salary, your grant manager is going to ask why it’s necessary to increase the salary when the position could do the same work the prior year for less.

If you’re upset about the head of the ALS Foundation making $300k a year, think about how large an organization that foundation is and how much work and time goes into her job.  The ALS Foundation has affiliates across the country providing services, and I’m betting the foundation head knows what’s going on at each affiliate’s office while still keeping up with local paperwork, media appearances, staff issues, and I hope, maintaining a happy personal life.

What if she made $1 million?  Would that be worse?  Dan Pallotta has an AMAZING TED Talk on how we think of non-profits (and if you’ve made it this far into whatever you call this, I’m going to ask you to look it up because it’s so worth it), and part of his discussion is about how we all think you should be paid if you’re doing charity work.  “We have a visceral reaction to the idea that anyone would make very much money helping other people.   Interesting that we don’t have a visceral reaction to the notion that people would make a lot of money not helping other people. You know, you want to make 50 million dollars selling violent video games to kids, go for it.  We’ll put you on the cover of Wired magazine. But you want to make half a million dollars trying to cure kids of malaria, and you’re considered a parasite yourself.”

Those that do good works like spreading awareness about violence against women, working for economic empowerment and equity, or fighting against ALS deserve our support as much as the people they’re fighting for.  They deserve to make a good living helping others, and not have to leave a job they love and believe in because they know that their salary will never let them send their own kids to college.  They deserve to have both financial and skill growth in their positions without being limited in their on the clock activities because a grant won’t pay for time spent at a Volunteer Management Seminar or a cost of living increase.  Agencies that are working to make lives better deserve to be able to attract and retain staff that will do the best work for their mission, not just who they can afford and who can afford to work for them.

Let’s stop acting like people who do charity work, have to be charity cases.

My point…

My point in all this scribbling isn’t to say how awful it is to work at a non-profit.  Quite the opposite.  Working for a mission you really care about is unbelievably rewarding.  You get to show up every day and fight the good fight, and you’re doing it with people who are as excited about it as you are.  You honestly get to feel great about the work you do, and that is a blessing.  We know it’s difficult and that’s stuff we deal with, there’s even a Tumblr about it (it’s pretty funny and horribly accurate, check it out: http://workingatanonprofit.tumblr.com/ )-but it’s usually worth it.

What isn’t worth it is when we hear other people criticizing how we get it done.  Like any other business, we know what works and what doesn’t for our own organization, and when you say XYZ Foundation is spending too much on administration costs and linking a social media post to a specious website, what you’re saying is that you’re willing to smear an organization (that for all you know is doing amazing things) because you didn’t want to take the time to get more information on what’s really going on in their offices.

So what you can do instead…

1. Research your local non-profits-feeling wary of a bigger foundation?  Call your local United Way’s 211 and as for some names of non-profit organizations in your area and do some online research.  Or start making calls.  Whoever answers the phone will be more than happy to talk to you about what they do and how they could use your donation, or if you have the ability and will, your volunteer time.
2. If you have questions about how your donation is being spent-call the place you donated to.  I mentioned this before, but chances are good someone there will be more than happy to tell you exactly how your money helped the organization (or will help) because they love talking about what they do and you can bet your socks they are tracking every single dollar.
3. While you’re asking questions-ask what the non-profit could really use.  If they say cash and you’ve got it to hand over and you want to, do it.  If they say they could really use a discount on a copier lease and you happen to know a guy that works at Xerox, make that connection for them.  Could their staff really use an appreciation lunch? Ask them if it’s okay to have some take-out delivered, on you or mail in a gift certificate.  It’s super fun and easy to host a teddy bear drive or collect canned goods, but a lot of non-profits are afraid to ask for the things they really need because they’re afraid people will say they can’t help and they’ll stop doing the easy, fun stuff too.  If you honestly want to give back, ask for what they honestly need.
4. Vote.  I know that sounds random and hokey, but I promise it’s not.  When you’re a non-profit, you’re not at liberty to openly support candidates in elections (local or otherwise) that support what you do, the legislation that supports your mission, or funding (think the Violence Against Women Act) that supports your efforts.  So pay attention to what candidates are saying about the causes you care about and vote accordingly.

I’m sure you’ve about had it with my “manifesto”… so I’m out.  But just promise me that you’ll give this some thought and that you’ll be a bit more mindful when you’re commenting on how things get done.

Thanks for your time!

Love and Nosebleeds,

Annamal

Helpful links:

http://www.charitynavigator.org/

http://www.guidestar.org/

http://www.ted.com/talks/dan_pallotta_the_way_we_think_about_charity_is_dead_wrong?language=en

[1] Within a few days both individuals removed the posts when they were met with a few comments from people that had more background information than they did, I’m more than a little pleased they got shut down. 😉

[2] Some agencies include salaries in administrative costs-but for the sake of making a point, I’m separating them.

[3] “A capital campaign is an intensive fund raising effort designed to raise a specified sum of money within a defined time period to meet the varied asset-building needs of an organization.”