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News & Press: Nonprofit Sector

Is Fifteen Percent Enough? LANO CEO Questions Admin Cost Cap

Wednesday, December 07, 2011   (2 Comments)
Posted by: Matt Mullenix
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Nonprofit Leader Shares Thoughts Through Blog: For Goodness Sake!

The first post of a new blog by LANO President and CEO Ann S. Williamson asks readers to consider the issue of nonprofit administrative costs and whether the commonly cited ideal of 15% provides enough revenue to sustain an organization's mission in the long term.

The question is debated both within and outside the nonprofit community, as donors increasingly seek to improve return on their charitable investments, and nonprofits attempt to maintain strong mission delivery in a difficult economic climate.

In her post, "Fifteen Percent Overhead: Nonprofit Transparency or Snare?", Williamson recounts a recent discussion with a prominent nonprofit executive in which the origin of the 15% administrative cost cap came into question.

Writes Williamson:

"The intent of the cap, we know, is to assure focus on the mission; but the reality for many mission-centered nonprofits is more complicated.
"Consider that this nonprofit leader—who runs an office leveraging countless donated goods and mind-boggling volunteer hours with astounding direct service to her community—must spread that 15% over costs for staff training, conference attendance, association membership and other investments that can improve operational sustainability and strengthen services."

Williamson's post covers some of the history and current advice about administrative cost ratios, information that supports the legitimacy of the debate but casts doubt whether the "standard" 15% figure was ever a firm measure.

As President and CEO, Williamson notes that LANO, a statewide association of nonprofit professionals, supports "a stand-up nonprofit sector of accountable organizations that can demonstrate . . . their missions' effectiveness and efficiency."

But according to Williamson, the sector's good work and intentions will not necessarily guarantee its success: "Remaining strong and effective requires that nonprofits achieve success both in mission and management at the same time. And this, as any business owner will tell you, costs something."



Comments...

Matthew Mullenix, Louisiana Association of Nonprofit Organizations says...
Posted Thursday, December 08, 2011
Sarah thank you! The paper co-authored by Tom Pollak does note that arts and culture organizations tend to report higher admin costs; and the Charity Navigator site has a specific (higher) expectation category for Museums in particular.
Sarah C. Cortell says...
Posted Wednesday, December 07, 2011
This is an important discussion for museums as their structure often requires substantial overhead costs.

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