Before giving to charity, do you check to see what percent they spend on overhead? If you are like most people, this is the number one thing you look for before donating. Unfortunately, you are giving based on a myth.

The percent a nonprofit spends on overhead is almost meaningless. A nonprofit’s overhead ratio has far more to do with their accounting practices than their actual cost effectiveness. The overhead myth puts constant pressure on non-profits to keep overheads low, unfortunately this is leading to worse programs not better aid.

In just 20 pages this book breaks through all the myths surrounding nonprofit overhead and will forever change how you evaluate nonprofits.

Reviews

Q: Are overhead ratios the perfect measure of NPO efficiency and effectiveness? - Nonprofit update

“Ever read a book and say “wish I’d written that”?  That was my reaction. Only I would not have kept it to 5,400 words.
Check out this book for a brief introduction to the issues surrounding overhead ratios.  It’ll be worth a few minutes and a few bucks.”

Praise

“awesome ebook from @Good_Intents on the fallacy of overheads as a measure of NGO effectiveness. go get it” Simon Moss from the Global Poverty Project

“Just had a sneak preview of @Good_Intents‘ new donor briefing “Lies, White Lies & Accounting Practices” on NGO overheads. Great stuff.” from Cynan_Sez

“Ever heard someone say ‘I support this charity cos 90% of funds go to the recipient’? Read this” from @wmyeoh

“Overhead/admin is often a meaningless metric, and trying to chase charities with low overheads is not a good idea. The best source of explanations for this is Good Intentions Are Not Enough, which has a whole ebook on the topic as well: Lies, White Lies and Accounting Practices — Why nonprofit overheads don’t mean what you think they mean.” from a Nadder!

Comments on Facebook

“Excellent resource, thanks!”
“Thanks for sharing this!”
“Very informative, thank you.”

How to Order

Order the book through paypal and choose your own price, you get to decide what the guide is worth to you. (The guide will be emailed to you within 24 hours.)

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Go to Smashwords to read an excerpt and download an e-version of the guide.

Their reasons for doing this do not stand up to scrutiny and can therefore be chucked up to an addiction to Gifts-in-Kind (GIK). The benefits of these programs to WV are so great that they are willfully choosing not to critically evaluate their work.

So let’s look at WV’s arguments.

Argument #1 – World Vision field staff request GIK.

This argument is undercut by behind the scenes rumblings from staff. They often complain that they face tremendous pressure from their headquarters to request and accept GIK. They are pressured to use GIK to keep their individual project or country overhead ratios low. They are pressured to accept GIK because World Vision benefits from their partnerships with businesses and the businesses want the positive publicity of their products being used after disasters or for development. Neither of these pressures are related to the actual impact of GIK programs and the impact of their GIK cannot be proven.

Argument #2 – World Vision is committed to continuous improvement.

During last year’s controversy, Aid Watch requested documentation proving the need for and impact of their GIK program. World Vision admitted that they had not conducted a single evaluation of the GIK program because they state that these are donations, not a program. Yet GIK makes up one quarter of their annual revenue. It would seem both prudent and professional to evaluate such a large part of their work – however you want to classify it. At $251 million per year, the amount World Vision claims in GIK is greater than the total annual revenue of most non-profits in the United States.

The documentation World Vision did provide to Aid Watch did more to refute the use of GIK than to substantiate it. Laura Freschi goes into detail on what they actually found in the documentation World Vision provided.

While World Vision did not evaluate their GIK program before last year, you would think that they would have made an effort to evaluate their massive GIK program since then, after all many professionals in the field spoke out against their GIK program. Instead World Vision’s recent blog post states:

“Some individuals knowledgeable about the effectiveness of community programs in the developing world have contended that product donations, especially shirts and other clothing, is ‘bad aid,’ and should play no role in the work of non-governmental organizations. Based on our more than 60 years of experience, World Vision respectfully disagrees.”

So in 60 years they’ve never evaluated the need, impact, or effectiveness of their GIK and they’re certainly not going to start doing that now. Where is the “continuous improvement?”

Argument #3 – They assign fair value to their donations

While the amount of value they assign to their donated goods may be legal, many would argue that it is ethically questionable and deceptive to donors.

World Vision valued last year’s Super Bowl items at the US rate of $11.65 per item even though they are not allowed to distribute them in the US. And World Vision themselves estimated that purchasing the shirt locally may cost as little as $2. In valuing them at $11.65 they are marking the items up by 482%. This makes their overhead ratio appear far lower than it actually is. And it’s not just t-shirts that World Vision is using to manipulate their overhead ratio, it’s also drug donations.

In a recent article in Forbes Magazine titled Donated Pills Make Some Charities Look Too Good On Paper, the author examined the over-valuation of deworming pills by nonprofits.

The pills can be bought on world markets in Europe, China and India for 2 cents each. But they have been valued on some nonprofits’ financial statements as noncash gift-in-kind (GIK) donations worth as much as $16.25 per pill—81,000% above that world market price.

The Article mentions World Vision as one of the organizations using these exorbitant markups.

For many years World Vision, a large faith-based charity in Federal Way, Wash., was one of the most aggressive in valuing deworming pills. In 2009 it used $10.64—the same 53,000% markup used by Crista Ministries. After studying the issue and paying for outside data, it dropped the valuation for 2010 to $2 a pill—a mere 9,900% markup.

Forbes goes on to say that:

… loose accounting rules for donated GIK goods, a questionable drug-pricing list and the drug price disparity between U.S. and foreign markets have provided charities some cover for their use of even the most egregious GIK valuations. Indeed, the biggest scandal here might just be what’s legal.

So while World Vision is following the letter of the law, they are not being honest about the value of their goods. It is the prolific use of SWEDOW and GIK to artificially inflate a non-profit’s worth and deflate nonprofit overhead ratio that led me to write a 20 page paper demonstrating how overhead ratios are meaningless and should never be used as a measure of a non-profit’s performance.

World Vision’s arguments are easily refuted and have been refuted many times in the past. Instead of taking this as an opportunity to grow and improve as a professional organization, World Vision is instead clinging on to their 60 year addiction to SWEDOW.

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Lies, White Lies, and Accounting Practices; Why nonprofit overheads don’t mean what you think they mean.

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Related Posts:

World Vision and sports-related product donations - World Vision

NFL / World Vision Part II? - Good Intentions are Not Enough

World Vision Super Bowl Shirts: the Final Chapter - Aid Watch – Critically evaluates documentation sent to them by World Vision

World Vision’s Annual Financial Review

The 200 Largest U.S. Charities – Forbes

Tracking the World Vision / NFL Shirt Donation Controversy – Good Intentions are Not Enough

The financial costs and benefits of sending a shirt overseas - World Vision

Donated Pills Make Some Charities Look Too Good On Paper – Forbes

How much are the NFL shirts worth? World Vision isn’t saying – Good Intentions are Not Enough – with information in the comment section by World Vision

Last year’s donation ignited a huge debate that got World Vision into a public image nightmare. To see the list of 70 blog posts written on the topic as well as links to World Vision’s responses see this blog’s post Tracking the World Vision/NFL Shirt Donation Controversy.

I personally wrote several posts on the topic including:

World Vision, the next 100,000 shirts

An example of why the percent spent on administration is meaningless

Explaining the radio silence over World Vision

The World Vision controversy continues –

How much are the NFL shirts worth? World Vision isn’t saying

So I’m extremely curious to see if any of this had an impact on World Vision’s actions. Thus far I’ve only been able to find two articles related to the topic. The first is from Mental-floss stating:

“A representative for World Vision said they’re not sure where the donated Giants/Patriots gear will be going this year. Once they get the product and take inventory, they’ll get in touch with their foreign staff and see who needs what where.”

From this it looks like all the bad publicity from last year has not changed World Vision’s practices. It appears that the only change it may have had is on their PR approach. When asked about the clothing from the Bowl Championship Series World Vision had this to say:

World Vision could not confirm whether it will be receiving this year’s BCS apparel. A spokesperson for World Vision said the organization has gotten college bowl apparel in the past but could not comment further.

UPDATE:

So which countries will receive life saving donations of “World Champion New England Patriot” t-shirts this year?

Here’s World Vision’s blog post in response to this one World Vision and sports-related product donations

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Lies, White Lies, and Accounting Practices; Why nonprofit overheads don’t mean what you think they mean.

This 20 page book breaks down the myths surrounding nonprofit overhead. You will never think of nonprofits the same again.

Click here to learn more

There is now a collaboration between whydev and Development Crossroads, where they are launching a peer coaching matching service.

“We believe that young professionals, graduate students, and others starting out in international development could benefit from peer coaching. We want to develop a service that best matches up with your needs, and supports your peer coaching relationship. We also want to know if you would actually use such a service!

We are still in the design phase, and would like to use this opportunity to get your thoughts through the online survey below. Would you want a peer coach? What would you like to get out of such a relationship? How often would you keep in touch? How much input and oversight would you want from us? These are the type of questions we would love to get your thoughts on.”

They’re asking anyone that’s interested to complete a survey through GoogleDocs. Here’s the link.

Here’s a comment from Brendan Rigby from whyDev

“Thank you for your support Saundra. We will be sure share the results with you, and what our next steps are. Just to reiterate. We really are at the design phase, and will seriously take into account feedback offered by those interested. We want this service to reflect the needs of aid and development workers. In addition, it should be stressed that it is not just limited to young professionals, graduates, etc., but will be for all!”

Chances are you would chose the job. If you’re desperate enough you might settle for any work, even short-term or dangerous jobs just to make whatever money you can. But most people would rather have a job that pays a living wage, offers a few benefits, and has some job security so they don’t worry about losing everything tomorrow.

People living in poor areas have those same needs and concerns. Voices of the Poor: is anyone listening conducted interviews with people living in poverty from around the world and a common theme was the lack of access to safe, reliable work that pays a living wage.

But are we creating jobs? The ODI paper Does Development Give Poor People What They Want? points out:

Donors and NGOs have, until recently, almost always ignored employment and jobs when looking at ways to bring ‘development’.

I agree that nonprofits seem fairly hesitant to directly create jobs, even though that’s one of the main things people living in poverty want.  I have to laugh whenever I hear a nonprofit use the term “money for work programs.” because what is it when you give someone money for the work they do? It’s a job. Can’t we just say that and be happy that we’re creating jobs?

Recently there has been a surge of articles that highlight companies creating jobs that pay living wages. This is a welcome change from the plethora of feel-good stories hailing programs that give out clothing or shoes. Here are some of the articles:

• Africa’s Most Successful Women (a series): Bethlehem Tilahun Alemu – Forbes – an Ethiopian entrepreneur and the founder of SoleRebels which produces shoes in Ethiopia.

• How Oliberté, the Anti-TOMS, Makes Shoes and Jobs in Africa – GOOD magazine – written by Tate Watkins

• Sseko Designs fashions a footwear business, based in Portland and Uganda, to lift women out of poverty - Oregonian

And I know there’ll be a radio program coming out soon which includes an interview with the founder of Nisolo shoes.

Interestingly enough, all of these companies featured are in the business of making shoes.

When we think of helping the poor, it’s important to remember that often the biggest help we can give them is providing safe jobs that pay a living wage.

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Related Posts:

A Day Without Dignity

Enough with the Shoe Donations

Guideline #2 for volunteering overseas: Don’t volunteer to do what a local person could be paid to do.

Socially Conscious Shoes

TOMS Shoes: Good Marketing, Bad Aid

How to determine if an aid project is a good idea

Here is a list of last years’ winners.

And here is a link to this year’s nomination process.

In case you’re trying to remember posts on this blog, here is a list of my most popular posts from last year.

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Incomes, needs, rights, sponsorship and cash transfers - Wait… What?!

Haiti shows why poor communication stalls relief –report - Alert Net

A Seat at the Table: a Twitter-ful list of women crucial to foreign policy - The Levo League

Should you or shouldn’t you volunteer at a Cambodian orphanage? - Expat Living

Half The Sky; On The Ground – Webbed Feet - Interesting timeline and perspective on Kristof’s writing on sex trafficking.

My development blogging 2011 review – Development as anthropological object – an overview of development blogging in 2011.

TEN BIGGEST POSITIVE AFRICA STORIES OF 2011 – The New Yorker

How Ethiopia’s Adoption Industry Dupes Families and Bullies Activists - The Atlantic

Thoughts on doing no harm - Tim Hoiland - looks at two books on smart giving aimed at a religious audience.

The Truth About Foreign Aid – penelope m.c. – On a BBC 3-part podcast on foreign aid.

Donated Pills Make Some Charities Look Too Good On Paper - Forbes – on the over-valuing of medicine by nonprofits to improve their admin ratio.

Story Update – Three Cups of Deceit – Krakauer tracks the ongoing shenanigans over at CAI.

Passion Is Not Enough: The Most Common Mistakes Startup Nonprofits Make - Desiree Adaway

For those debating Sachs: Remember, it’s not REAL…. it’s economics. – Lessons I Learned

RCTs and aid effectiveness: Much to be said – How Matters - A compilation post tracking the debate on RCT’s (Randomized Control Trials) in aid.

Unintended consequences – – how much harm can doing good cause? – Nonprofit Update

Giving Wisely in 2012 – tips for donating and volunteering – Pursuit of Public Health

After all, Songkran is the major holiday in Thailand, but it passes virtually unnoticed in the U.S. each year. And how many Americans know when it’s Diwali – the festival of lights?

And what is it we want Africans to know about Christmas anyway. I remember in Thailand trying to explain how Santa Claus and the baby Jesus were part of the same holiday. I was also tripped up explaining what the resurrection of Jesus had to do with an egg-laying rabbit – but that’s a different holiday.

It appears I’m not the only one fed up with the song. Here’s a humorous post to kick of your Christmas festivities ‘Yes we know it’s Christmas’ say African musicians as they finally record a response to Band Aid.

1. TOMS Shoes: Good Marketing – Bad Aid

Hands down the big winner. This post is so popular that it’s often the most hit post each day. If I had to guess I’d also say it’s the most linked-to post as well – which would explain why it continues to get so many hits over a year after it was originally written (October 25, 2010).

2. Voluntourism: What could go wrong when trying to do right?

This guest post, written by Daniela Papi, was featured in the Cracked.com article 6 Socially Conscious Actions That Only Look Like They Help. Aside from facebook, the Cracked.com article was the biggest referrer of readers to my blog in 2011.

3. A Day Without Dignity

This was a counter-campaign to TOMS Day Without Shoes where people from around the world were invited to write blog posts and share pictures discussing shoes and/or dignity. This post is still often linked to by other blogs and college newspaper articles.

4. The DOs and DON’Ts of Disaster Donations

This post is extremely popular after each major disaster. With so many disasters in 2011, this post received repeated hits.

5. Articles Related to the Earthquake and Tsunami in Japan

A round up of articles and newspaper stores following the devastating earthquake and tsunami. In general, posts where I collect articles on a single topic are popular and often hit while the topic is hot.

6. Why waiting to give to Japan is a good idea

The controversial idea of actually waiting to give after a disaster – especially one as visible as the one in Japan – led to lots of hits and a flurry of media interviews.

7. Collecting “Three Cups of Tea” posts

Another popular compilation post tracking the response to the scandal surrounding Greg Mortenson and his nonprofit CAI.

8. Whites in Shining Armor

This is another perennial favorite. Having coined the term, this post is often linked to by posts and articles using the phrase “Whites in Shining Armor.”

9. Tracking the World Vision / NFL Shirt Donation Controversy

Another popular compilation post. This one followed the controversy surrounding World Vision and the NFL sending 100,000 thousand football shirts from the losing Superbowl team overseas every year

10. Why are there so many natural disasters lately?

The popularity of this post could easily be used as an indicator of a recent disaster. Hits to it spike immediately after each major disaster.

As my regular readers know, I took a five month hiatus from the aid world this summer. They might have also noticed that although I’ve returned, I’m not writing as often as I used to. In fact, I’m not writing blog posts much at all anymore. This is because my hiatus helped me reevaluate my priorities. I already knew that what I was doing was not sustainable, I had to figure out what to do in the short-run so that I could continue as a donor educator in the long-run.

One of the things I’ve decided is to decrease the amount of time I spend blogging. Being an aid blogger has given me some great opportunities. I’ve learned a lot by being a part of so many great debates and I’ve enjoyed exchanging ideas with people that really care about the impact of aid and development. I’ve also appreciated the opportunity to educate the wider public through numerous newspaper and radio interviews. Most of the reporters contacted me based topics I discussed in my blog.

Unfortunately, while blogging is a great opportunity it is also amazingly time consuming with little if any financial benefits. Tobias Denkus nicely stated this in his post My development blogging 2011 review. “As exciting as the idea of new and different forms of communication is and as interesting as it is to see new bloggers emerge, it is a reminder that blogging is a product of our times: Internet-based, sophisticated, time-consuming if done well and hopeless with regard to ‘value for money’.”

Anyone that thinks blogging is quick and easy should try doing it regularly for several years. Just look at the number of people that have stepped away from blogging this year:

J. from Tales from the Hood - It’s been fun, ladies and gentlemen. But now it’s time to say ‘good-bye.’

Aid Watch - Today, after two years and four months, we end the experiment that was the Aid Watch blog.

Matt from Aid Thoughts – I’ve really, really enjoyed working on this blog. However, as you might have noticed from the lack of posting, other responsibilities are currently rearing their heads.

Sean Stannard-Stockton from Tactical Philanthropy - But now it is time for me to take a break from writing and focus on other areas of my life. Starting today, I’m taking a sabbatical of indefinite length from writing this blog.

Blogging and developing this website have been a great strain on both my time and my finances. I cannot tell you the number of times I’ve considered just walking away from it all. Part of what I did this summer was debate whether this was the end of the line for me. But each time I think about leaving I receive letters from followers telling me how I’ve affected them or I’m sent news articles or links to online discussions where I can see that what I’m doing has an impact.

So what I’ve decided is to change my focus. I’m going to significantly decrease the amount of time I spend blogging and tweeting and instead work on developing guides and curriculum.

Writing guides instead of blog posts will give me more room to develop a concept and provide a broader and more nuanced understanding of that topic. The guides will also hopefully have more staying power than posts which can come and go so quickly.

The curriculum I develop will be for classes and clubs interested in teaching about smart giving. They will be designed to provide hands-on activities to help students understand concepts that can seem counter-intuitive and will put the students into the role of the person receiving the assistance. I feel that these activities could be far more powerful than reading someone repeatedly ranting on a topic of frustration.

A final benefit of the guides and curriculum is that they can sold instead of being available for free on the internet. If I’m going to remain a donor educator I’ve got to make it pay – and blogging just hasn’t done that for me.

In the new year my focus will be on fewer blog posts and more resources available on the website. My hope is that by doing this I can continue being a source of information for smart giving well into the future.

Wishing all of you happy holidays and a great new year.

Saundra

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Related post: Good Intentions’ Top Posts in 2011

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