Why NOT to use overhead ratios as a way to compare NGOs

We in Dóchas are very keen to promote Good NGOs, and to discourage funders to keep supporting Bad NGOs.

And in doing so, we obviously need to have clear standards of what a “Good NGO” is. And that is not easy. But we are working on that!

For starters, have a look at these resources:

• Good NGOs have signed up to Codes of Conducts;
• Good NGOs network with others, to learn from them;
• Good NGOs are accountable to all those interested in, or affected by, their work;
• Good NGOs have professional organisational procedures and systems;
• Good NGOs know how to leverage the energy, skills and expertise of others;
• Good NGOs are good listeners;
• Good NGOs are keen to learn;
• Good NGOs know how to answer critical questions.

But the list is longer than this. Please bear with us while we develop it further.

In the mean time, however, we thought that it would be helpful if we tell you how NOT to judge an NGO.

One of the most widely used criteria to assess NGOs is their overheads ratio: the percentage of the organisation’s income that is used on administration, salaries and other “overhead” costs.

We hope that, when you have read the articles below, you will agree: OVERHEAD COSTS ARE NOT A GOOD WAY TO JUDGE THE QUALITY OF A NOT-FOR-PROFIT ORGANISATION.

Have a look for yourself:

• Why Overheads Don’t Matter
• How To Get Bang for your Donation Buck
• In Defence of NGO Overhead Costs
• About NGO Overhead Costs
• Charity Ratings based on Admin Costs Do More Harm Than Good
• The Worst Way to Pick A Charity
• Lies, White Lies and Accounting Practices
• Donors Need A Better Way to Rate Charities
• Are Overheads the Perfect Measure of NPO Efficiency?
• Admin costs: the worst way to judge a charity
• So What, if 90% of money donated goes to the programme?
• Survey – Overhead costs should be 23%
• How to recognise an Effective NGO

Also have a look at this article, called “The Non-Profit Starvation Cycle“

And finally, this article: Might it be time to stop talking about NGO administration costs?

What do YOU think?

How can ordinary people know which NGO is best?

Please let us have your views by leaving a comment below.

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