How should a nonprofit talk to potential donors about overhead costs?
By Megan Lepore
By Megan Lepore
In a world where everything is scrutinized, administrative costs (also referred to as “overhead”) have almost become dirty words in nonprofit fundraising. Everyone’s heard some version of the following, usually from an uninformed friend or family member: “Can you believe [insert organization here] keeps a third of every dollar? They won’t get a dime from me!”
With the budgets of even large, nationally respected organizations being targeted for criticism in recent years, the dilemma for small and mid-sized nonprofits is great. How much financial information should you openly offer to donors and prospects, and how can you best convey it? Is it best not to mention overhead costs at all, or perhaps speak in generalities?
At Dunleavy & Associates, we believe strongly in the importance of honesty and transparency. Leaving donors or prospects in the dark about where their money is going will eventually have negative repercussions, and you can bet they’ll never donate again once their trust is broken.
What donors are really concerned about is not just confirmation of where their dollar is going, but whether or not it’s being wasted. Donors by nature are considerate people, capable of understanding that yes, your staff must earn a salary in order to carry out your nonprofit’s mission. And they (should) recognize that there are real costs involved to doing your work.
So, what is the solution? Use your organization’s communication channels to talk about those costs. It’s okay to talk with prospects about the expenses associated with using current technologies to provide integral services to your constituents, the need to sometimes outsource services (such as graphic design), and the everyday cost of running a successful nonprofit organization.
At the same time, it’s not unreasonable for them to want to know how well you steward their dollars. Be prepared to share what percentage of donations goes to overhead costs. You can share how your organization has worked with vendors to make more cost-efficient decisions (bulk printing, shared resources, in-kind services, etc.) and how the staff and board have resolved to more closely monitor expenses to increase revenue in the new year. This type of information will help to build trust that your organization is careful with every dollar.
And don’t be afraid to spice up your communications. Many organizations report their financials only at the end of the year, often in a large, dense report. Let your donors know how their contributions are making an impact in the community – in both big and small ways.
Send out brief recaps that utilize statistical infographics or photos of your clients and staff. Tell them how the campaign they donated to fed 300 families for a month, or helped 30 pups find forever homes. Highlight your top corporate or individual donors to reward them for their support.
And don’t just wait till the end of the year. Break with tradition and send a brief mid-year synopsis detailing the accomplishments of the first six months, as well as your capital and campaign goals for the next six. Not only will your donors feel more involved in the process, you’ll keep up with your financials and avoid the end-of-year pileup.
Always remember, in a time when donors, prospects and journalists have access to your 990s at the click of a mouse, any effort to cloud your financials is a disaster waiting to happen. Instead, get ahead of the conversation and build trust with transparency through smarter, more engaging communications.
About the author: Megan Lepore is a Senior Project Manager at Dunleavy & Associates and has more than 10 years of development experience in the fields of healthcare, education and human services. She holds a Master of Science in Communication Management from Temple University, where she has also taught undergraduate courses in speech communication, public relations and news writing. Annual appeals, corporate sponsorship, grant writing, foundation relations and event planning round out her professional expertise.This entry was posted in financials, Hear what our team of experts has to say…, marketing/PR, News. Bookmark the permalink.