In this political climate, when so many of us nonprofits are rallying to put out one fire after another, many of the things we have been used to and have been putting up with no longer make sense. Many of us in the sector have been making the argument against restricted funding and for general operating for years. Here’s a report from GEO. Here’s one from CEP. Here’s a piece from my colleague Paul Shoemaker. And I’ve made impassioned pleas here, here, and here. But despite countless arguments by dozens of leaders, we still have foundations who restrict funds, who set arbitrary numbers for “indirect expenses” and “overhead.”
But there has been one argument that we have not stressed enough to funders and donors, but now it is urgent that we do so: The focus on overhead is no longer just annoying, it’s perpetuating inequity and injustice.
Imagine a group of firefighters rushing to a site to take care of a wildfire. Now, imagine every half mile someone stops the fire truck to have this conversation:
Person: Hey, I want to make sure that my tax money is being used to pay only for the water, not the hose you’re using, right?
Firefighter: Uh, yeah, no worries, someone else is paying for the hose. You’re only paying for the water. We really have to–
Person: And you guys are volunteers, correct? I would hate to pay for your salaries…
Firefighter: No. Sir, we’re in a hurry, a fire is raging and people are trapped inside their—
Person: Whoa, buddy, cool your jets! If you want me to keep funding your operations, you’re going to have to answer some questions. It’s called accountability. Now, did you get my instructions about only 10% of my funds paying for your firefighting suits, but only if someone else matches an equal amount?
Firefighter: Yes, we got that notice. We spent all of last week working on a report. You’re only paying for water, not the hose. You’re actually not paying for any part of the suits because we have another taxpayer who only wants to pay for suits, but not the fire pole or fire truck. Someone else is paying for the firetruck, but not on Wednesdays, but luckily, today is Tuesday. Now, if you don’t mind—
Person: You have a fire pole? Why can’t you use stairs?
Firefighter: Sir, you’re not paying for any part of the pole, so why do you care?
Person: I just want to make sure you’re being responsible and keeping your overhead low so that most of the money is going to the water to put out fires.
That would be so hilarious, right? Nope. This is what it feels like to many of us on ground, forced to collectively spend millions of hours every year trying to untangle which funder is paying for insurance, who is paying for rent, who is paying 10% indirect, and who is paying 20%, all in a burdensome and demoralizing game of funding Sudoku. And all while communities are suffering under the weight of poverty, racism, xenophobia, hunger, and environmental degradation, to name a few.
The more we distract the firefighters and slow down their work, the stronger the fire becomes. Then the fire may spread, burning down one house and then another, until whole neighborhoods are consumed. In the same ways, the more we distract nonprofits from their work, the more we enable the flames of injustice and inequity to rage on.
This week, I talked to a single mom who is making plans for a friend to take care of her seven-year-old if she gets deported. As a parent of two kids, I can try to sympathize, but I don’t think any of us who hasn’t been in this situation can really understand what it’s truly like to live in a constant state of fear and worry.
We need nonprofits to focus on their work, especially organizations with language and cultural skills, because people are hurting, whole communities are hurting. And this is another argument that we haven’t made very often regarding “overhead”: It screws over these grassroots organizations, and thus screws over communities of color and other marginalized communities. The focus on “overhead” leaves behind organizations led by communities of color, LGBTQ communities, rural communities, and communities of disabilities.
Organizations led by these communities do critical work. Nowadays, these organizations are at the forefront of the battles to protect our neighbors and our civil liberties. Their work has doubled or tripled in the last few months, often with the same or dwindling level of resources.
Yet they still get punished because they don’t have the same resources in terms of staffing or even time to comply with unrealistic funding expectations. Many don’t have a full-time accountant or bookkeeper or CFO. Because these orgs don’t have the staff and time resources to engage in arcane Excel magic to get their “overhead” rate down, they risk being seen as irresponsible and not as “efficient” as larger organizations, which affects funding and creates a painful cycle that allows inequity to proliferate.
I’m glad for the work of organizations like Philanthropic Initiative for Racial Equity (PRE), which uses a racial and equity lens on funding and funding practices. “Overhead” is one of those practices we must use these lens on.
Because there is no standard definition or process to measure it, overhead is just an illusion that helps to avoid the much harder work of measuring community benefits. We nonprofits have been going to happy hour and complaining about how annoying funding restrictions are, laughing about how ridiculous it is when a funder or donor says something like, “I want to make sure this money goes to programs, not to staff wages.”
But the “Overhead” Myth is no longer a laughing matter. Families are being torn apart. Parents and children are living in fear. Hate crimes have increased. The policies for equity and inclusion we’ve helped to advance over the past few decades are getting erased day by day.
Funders and donors, if you are restricting funding and focusing on “overhead,” you are actively preventing nonprofits from doing their work. You are helping to spread the fires of injustice. And at the same time, you are also disenfranchising the organizations led by communities of color and other communities most affected by inequity.
I know that sounds harsh. I know that no one is intentionally trying to disenfranchise anyone or waste nonprofits’ time. But this is what’s been happening. So many hours, so much energy is lost over this concept of “overhead.” Our society cannot afford for us to be distracted by archaic philosophies like overhead. Provide unrestricted funds, focus on outcomes, and let us do our work. We nonprofits have plenty of work to do. When the flames of injustice rage on, do you want us to put them out, or do you want us to spend that time figuring out who is paying for the hose, who is paying for the water, and whether our ratio of hose-to-water is too high?
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