Stop Fixating on the Administrative Overhead of Nonprofits

Megan McArdle Feb 2 2012, 2:29 PM ET

So naturally, posting on abortion has caused a swarm of very angry people from both sides to show up in my comments. A couple of them are demanding that I "educate myself" about "the facts" on Planned Parenthood and Susan G. Komen, such as the fact that only a minority of the procedures performed at Planned Parenthood are abortions, and that Susan G. Komen spends about 20% of their money on admin and fundraising.

I'm aware of the former, but thought it was obvious that people who don't want to fund abortions probably don't want to fund any abortions at all, much less the 330,000 abortions performed at Planned Parenthood annually--nay, not even if this represents only 3% of Planned Parenthood visits.

The latter is a silly and all-too-common complaint that desperately needs refuting.

To start with, Planned Parenthood spends about 16% of its annual budget on . . . overhead and fundraising. Now that they know, how many of the people who were angry about Komen's overhead are going to also withdraw their support from Planned Parenthood? I suspect the number is zero, but I could be wrong.

But more broadly, the worry about charity overhead has gotten completely out of hand. I've heard from more than one frantic foundation fundraiser who can't raise a dime for overhead--everyone wants their money earmarked for programs. None of the donors seem to realize that even at a very well run charity, the electric bill, accountants, IT staff, grantwriters, compliance experts, investment managers, and yes, fundraisers do not actually get paid by good fairies who drop off wee buckets o' gold at the beginning of every month. Or that unless you have all those boring-yet necessary things, you cannot actually run any programs.

Now, of course, donors should make sure that the causes they support do not simply become sinecures for the people running them. But they should not wring their handkerchiefs when they discover that--whoda thunkit?--charities have to have offices and coffee makers just like all the places that donors work.

Nor is there one right level of overhead for an organization. A group that provides a lot of very expensive services might have a very low central overhead rate, while a group that has a heavy legal compliance burden, or has a large number of low-cost operations to coordinate, or has a small endowment which requires constant fundraising, might have high overhead. Maybe Susan G. Komen's numbers are out-of-whack, but you can't prove it by saying that 20 cents on every dollar go to overhead. You have to assess what they do, and how much that costs.

You certainly shouldn't use those sorts of numbers as a political club. Unless you're very, very sure that none of the groups you support put a lot of their money towards overhead.