Are you getting tired of all this talk about fundraising ratios, of how much it should cost to run a nonprofit compared to what a realistic cost to run a nonprofit is? I hope not because it’s important! Stop resting on your laurels, fellow fundraisers and give this some serious thought.

Here’s a must read article: “The Nonprofit Starvation Cycle” by Ann Goggins Gregory & Don Howard. It was published in the Stanford Social Innovation Review in Fall 2009 but is still relevant today (even more so, perhaps).

The authors write that charities are in a vicious starvation cycle. The standard for administration and infrastructure costs has been set unrealistically low – so low that organizations are potentially depriving themselves of staff and resources needed to effectively carry out their mandate.

Gregory and Howard tell us that the cycle develops because charities continue to promote these low admin costs as the norm – and donors have come to expect that administration costs will be between 15-20%, or even lower! This line of thinking drives charities to feel continued pressure to meet these unrealistic standards, which leads back to the deprivation of organizational infrastructure and potentially limited effectiveness as a result.

The authors put the onus on us, as fundraisers, to break this nonprofit starvation cycle. And I agree with them!

My view is that charities are damned if they keep admin costs low, because it impacts their ability to successfully carry out their mission. But they’re also damned if they don’t – because they fear losing donor support or attracting attention from the tax auditors.

Add to this the pressures of the new (and unrealistic) 2009 CRA Guidelines on, Fundraising and charities have been backed into a corner like never before.

I’m no expert, but I doubt that more than a handful of for-profit industries spend a minimum 15% on overhead and admin related costs.

I encourage you to take a stand. It’s time to rethink how you are portraying your fundraising costs, and how you can manage your infrastructure expenses without sacrificing your mission. Don’t be afraid to join with similar organizations and push back.

Some interesting resources:

If you’re in Canada and you aren’t aware of the new CRA guidelines, you should be. Click here to find out more.

“Uncharitable: How Restraints on Non Profits Undermine their Potential” by Dan Pallotta.

Exclusive STTV interview with Dan Pallotta, filmed at 2010 AFP Toronto Congress