How the focus on overhead disenfranchises communities of color and fans the flames of injustice

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[Image description: A lone firefighter standing on a road spraying water at some raging flames on our left and up an embankment. It looks to be a wild forest fire. The firefighter’s hose is connected to a truck that is facing us with its headlights on. Smoke and orange flames are in the background, along with silhouettes of trees being consumed by the fire.]

Hi everyone, before we start on today’s post, a couple of announcements. First my org is hiring a Development Director and an Operations Associate. (Make sure you like unicorns and Oxford commas). Also, you can now buy a t-shirt, mug, or notebook that says “I am a pita wedge for the hummus of justice.” And, finally, I’m on Instagram (@nonprofitwithballs), mainly taking pictures of stuff I find pretty while doing nonprofit work. Like this event wagon, and this gala centerpiece, and this 9-year-old keyboard

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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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  • Larry Kaplan

    Another reason to kick the foundation-only habit. Diversify your funding sources and this is less of an issue.

    • Katie Graf

      No one would argue that this is a great solution, but perhaps unrealistic for some smaller orgs. When you have only a few staff members, there may not be personnel that can dedicate the enormous amount of time it takes to do a major gift fundraising program right. Major gift fundraising is not something you can just toss onto someone’s to-do list. Also, many of the smaller orgs don’t have the ready donor base that say a college or hospital might have – their constituents, those tied most closely to the mission, may not be major donor prospects. Ideally, every org would be able to cultivate a variety of donor types – corporate, individual, foundation – but in reality many of the smaller orgs simply do not have the staff resources or relationships to build a major gifts program. That said, should that be a goal? Always.

      • Larry Kaplan

        “Tis better to light a candle than curse the darkness.” Even small shops can develop a modest individual fundraising program, and there are a number of online resources that can help you figure out how to do it — I suggest assigning a portion of staff resources that chase foundation grants and write proposals to a simple individual donor program.

        Notice I don’t say “major” donor — I am not necessarily talking about four figure donations or above. Most community-based nonprofits can, with modest effort, develop an outreach to local stakeholders who can make modest donations, perhaps in the $100 neighborhood. Add them up over time and it amounts to something. But don’t expect instant gratification — individual donor efforts require the cultivation of relationships over time, generating the kind of loyalty and commitment you never get from fickle institutional foundations. It is a long term proposition, but you have to start somewhere.

        My experience (I work exclusively with progressive community-based nonprofits) is that many nonprofit leaders are reluctant to go outside their comfort zones to cultivate individual donors — they often come from the program side of things and are more comfortable writing proposals and dealing with policy wonk program officers, rather than building relationships over time with people who simply believe in them and the cause.

        Finally, only an individual donor program can really deliver on the new phenomenon of “rage fundraising,” where progressive donors are reacting to the Trump Presidency by supporting the “resistance.” Foundations and business sponsors are risk-averse, sometimes conservative, and less likely to respond to these political dynamics in a significant way.

        Anyway, it all starts with a culture of fundraising — make the organizational commitment to undertake a modest effort that you know will take time to bear fruit. Never say it’s too hard.

        • Katie Graf

          Agreed – well worth the investment. As someone coming from a hospital foundation with quite a few more resources at our disposal, however, I am careful about judging the capacity of small nonprofits. We struggle with the complexities of multi-channel fundraising – data, segmentation, individual contacts, meaningful thank-yous, etc. While you don’t have to hit all of these marks right off of the line, good fundraising with individual donors is complex and time-consuming. While I support your recommendations, I would never presume to prioritize their mission for them and it takes a ton of $100 gifts to fund a program. It may only take one grant. In the long game does it make sense to grow the donor base? ABSOLUTELY. But it may take a long time to get there. And if foundations don’t initially help with unrestricted gifts to support operating, relieving some of the staffing pressure, it may never happen.

  • Hey Vu- I’ve been looking for research on how much value these funding restrictions are capturing in the non-profit sector as a whole.

    For instance, when people ask for budgetary information, I often want to give them two numbers: one if our funding is entirely unrestricted and one in which restrictions are placed. My typical estimate is that the costs we incur because of various restrictions are increasing our budget by as much as 30% (because we prefer to focus our money on where the value for us is—people, that percentage is going to be pretty high). That money is typically consumed by increased fundraising, grantwriting, accounting, and management and reporting needs—what many funders would consider “overhead”.

    So, I’m curious if anyone else has any estimates on how much money, throughout the country, this tail-eating snake is taking away from the communities that need it the most.

  • Mehitabel

    I think a lot of people need to hear some harsh truths right about now. Thanks for another good post.

  • Anonymous11

    Amen.

  • Judy Hppa

    Thanks!