NPO finance expert, Curtis Klotz, argues that it is not enough to tell donors of the need to fund overhead and admin costs, we need to show them. The problem, says Klotz, is that “We are stuck with old terms and old images.” He thus proposes a radical solution, that we retire our traditional organisational pie chart!
Doubtless this will cause great consternation to those of us who rely upon the easy “chart maker” function in our word processing programs. Yes, pie chats help beautify financial reporting. They are simple to make and easy to understand. But do you really want to "show" everyone how overheads take a big slice of funding away from the programmes pie? With that image in mind it's no wonder donors hate to fund them.
Perhaps more to the point, are they even an accurate depiction of your organisation? Are program staff really at odds with admin as they all fight for precious resources? If that is indeed the case then we really DO need a different model. Not until we ourselves think, define and visualise the issue differently, will we be able to convince funders to do otherwise. Instead, we all need to think of overheads as investment in organisational infrastructure, as Klotz puts it, our “Core Mission Support.”
Our new, reimagined pie chart would thus look like this:
Viewed this way, we see overheads not as something competing with programs for scarce funds, but rather part and parcel of the “real” work of the organisation. Each program is not only supported by, but shares responsibility for Core Mission Support.
Klotz’s version now shows what he terms, the True Program Costs, which include:
* Direct Expenses that are Program-Specific
* Direct Expenses that are Shared by all Programs
* Core Mission Support provided by Finance, HR, and the Board
* Core Mission Support from Fundraising & Partners
In addition, this modified pie chart clearly shows how underfunded programs, ones that don’t provide for overhead costs, create a gap in core mission support that endangers the entire organization.
Sure, maybe convincing funders to cover overheads may not be as easy as using a new pie chart. But we have to start somewhere. Says Klotz, “once we have a new way of understanding and communicating about the Core Mission Support needed by our organizations, it is our job to share our thinking with others.” We are all advocates for our causes in one way or another, perhaps its time to advocate for our own organizations. These visuals are at least a good place to start the conversation. After all, funders do want us to succeed. If it’s as easy as showing them how, a newly improved pie chart is a great place to start.
- Read the original article, A Graphic Re-visioning of Nonprofit Overhead, by Curtis Klotz, on the Nonprofit Assistance Fund website.
- Download our free pocket guide on Budgeting for Sustainability by Shelagh Gastrow.