Julian Omidi looks at why the Better Business Bureau and Charity Navigator are changing their stance on charity overhead.
One of the highlights of the 2013 TED conference was a talk given by Dan Pallotta. Mr. Pallotta has been a leader in social activism for over decades and is closely associated with his work on AIDS Rides bicycle journeys, Out of the Darkness suicide prevention walks, and Breast Cancer 3-Day walks which have helped to raise $582 million over 9 years. Pallotta recently founded the Charity Defense Council, which is a 501 (c)(3) organization aimed at changing how people view charitable giving.
The TED talk that Pallotta provided was focused on how what we have come to believe about non-profit organizations is wrong. Specifically he focused on how the amount of overhead that a charity has has been misrepresented by certain organizations as the measurement of how effective they are. He stated that the biggest factor that we should be considering are the results of the charity and not how much overhead they may have.
With this TED talk now having been viewed almost 2 million times, it seems that several organizations that provide information on nonprofits are now denouncing the “overhead ratio” model for performance.
The Better Business Bureau’s Wise Giving Alliance, GuideStar, and Charity Navigator have written an open letter to help correct the misconception that they have in part previously helped to promote; that the quality of a nonprofit can be measured solely on the metric of overhead or the percentage of expenses that are used for fundraising and administration.
For years the public have associated these costs with poor management and often decide not to donate as a result. The fact of the matter is that these costs and expenses may be resulting in significant changes in the areas that these charities are working and that should be recognized.
Hopefully this will help the public to consider all facets of a nonprofit organization before they make a donation. Check out the TED talk from Dan Pallotta below and decide if you think he is right.
By Julian Omidi
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