We understand that many donors view the “overhead ratio” as a good shorthand measure of effectiveness and efficiency. And we also understand that many good-hearted donors prefer that their donations support the “program” side of the mission, and not be used for overhead (which many think of as fundraising, marketing, and “bureaucracy”). While professional accounting bodies and generally accepted accounting principles suggest best practices in accounting, every organization accounts for their expenses slightly differently. What’s important to us is that we follow best practices and invest your donations to generate the maximum benefit to people in need in the communities we serve.
While our financial reports present the program-to-overhead ratio each year, we hope that you’ll dig a little deeper to see what costs are reflected in each of the line items that make up those two broad categories. For example, did you know that mission-critical functions like financial reporting, independent auditors, information technology, telephone and e-mail, board oversight, and human resources are part of the “overhead” part of IVC? Without those functions, it would be impossible to measure and report on the beneficial impact that IVC delivers, let alone communicate with and support our Ignatian volunteers.
It is also important to acknowledge that our local programs benefit greatly and are more efficient and effective because of the support and resources provided by our national office. We are working on finding other ways of communicating the vital capabilities that are provided by “overhead” functions that are too often seen as unnecessary or even wasteful, but for now, we can share that IVC is as lean and thrifty as it can be and that we are dedicated to good stewardship at every level of our organization.
For additional perspective from industry experts, check out the page Guidestar has created to foster a discussion on the overhead issue , and why they call the overhead ratio “a poor measure of a charity’s performance.”