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Majority of Americans Believe Nonprofit Overhead Unreasonable

(Feb. 19, 2008) Sixty-two percent of Americans believe the typical nonprofit organization spends more than what is reasonable on overhead expenses such as administration and fundraising, according to a new survey.

When respondents were asked what is a reasonable level of overhead costs for nonprofits, the average figure was 22.4 cents for every dollar collected. However, when asked what they thought the typical nonprofit actually spends on overhead costs, the figure was 36.3 cents per dollar.

The findings, gleaned from a survey developed and conducted by Ellison Research involving more than 1,000 American adults, found that while respondents were fairly consistent in their thinking about how much charities should spend, their thoughts on how much charities actually spend were more diverse.

On one hand, almost a quarter (23 percent) of respondents believe that the typical nonprofit spends less than 20 cents per dollar on overhead expenses. On the other hand, nearly as many (22 percent) believe that the average charity is spending more than 60 cents per dollar on such costs.

In contrast, 43 percent of respondents believe charities should spend less than 20 cents per dollar on overhead costs, and 74 percent say charities should spend less than 30 cents per dollar.

“The results are not terribly surprising, and are a good example of how the profession as a whole needs to do a better job of talking about fundraising costs,” said Paulette V. Maehara, CFRE, CAE, president and CEO of AFP. “Educating the people about fundraising costs is one of our key goals this year, but it’s also the job of all fundraisers when they’re interacting with their donors. We need to stop apologizing for our costs and start explaining them. The high-profile cases that the media cover are often linked to percentage-based fundraising and are the exception, not the rule.”

Demographic Differences

The findings reveal some differences in attitude based on age and race. Respondents under age 35 were 2½ times more likely than respondents age 55 and older to believe that a typical charity’s overhead costs were lower than a reasonable standard (however each respondent defined "reasonable"). In addition, African-Americans were twice as likely as Caucasians and Latinos to believe that a charity’s overhead costs were lower than a reasonable standard.

Differences based on household income, religion, region and locality (urban vs. rural) were very small. Political affiliation was not a significant factor either, although Republicans were 7 percent more likely than Democrats to believe that charities spent more than was reasonable on overhead costs.

About the Survey

The survey involved 1,007 adults in 50 states, with respondents’ age, household income, geography, racial or ethnic background, and gender tracked to ensure representation and accuracy. The survey is accurate to within +/- 3.1 percentage points at the 95 percent confidence level with a 50 percent response distribution.

Ellison Research is a marketing research company in Phoenix, Ariz.

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