Administrative Fee

What is the administrative fee at your organization? Would you be considered highly efficient with an admin fee of 6% or is your operation a little bit more costly at 15%? The administrative fee concept has always bothered me. The cost of doing business is not the same across the nonprofit sector, nor in every state or region. The administrative fee does not seem to answer the root questions supporters ask and yet it is often one of the first questions. I know our local United Way received an endowment solely to lower the cost of their administrative fee. While this may make the organization look good on paper, if the fund exists only to lower administrative fees and not to hire more staff or build a more sustainable program, then what value did that money really serve?

Your organization can have a low administrative fee and be inefficient with no connection to your mission. The reverse can be true as well. You can be a high performing nonprofit with a more expensive cost of doing business but make a lasting impact in your community. There are so many variables with different organizations included in factoring this fee. Do you only include program staff that work directly with client care or do you include the front desk person and support staff individuals?

The value in comparing administrative fee is that is provides some accountability for nonprofit organizations. Efficiency and good stewardship of donations is important in nonprofits today. Every organization should have an understanding of what it costs to fundraise and do the work that they do. But, we need some other indicators beyond administrative expenses. I’d love to see a statistic on how well a nonprofit is doing regarding mission fulfillment or how financially solid an organization is, as in, are they struggling to keep their doors open or will they be around for a while?

What are your thoughts on administrative fee? What does your organization do and what is your administrative fee?

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5 Responses to Administrative Fee

  1. Andy Savage says:

    I think you may be right. How does one deal with those organizations that do not put their mission to the forefront? I agree in principle with your statement but we need a comprehensive replacement…somethingbetter. The B corporation may have something for you here. They are measuring for-profit co pains but they represent a third party entity that judges the organization. I think that may work.

    Andy

  2. The arts nonprofit I worked for participated every year in a payroll deduction giving campaign in which our (and the other NPs’ fees) were prominently featured. There was always a flurry leading up to the campaign as our Finance Mgr. and E.D. worked with the Development Dir. to try to find ways to make the Admin fee look lower. You’d think education on how the percentage is arrived at/where the money goes would help, but how many donors/grantors are looking for a quick and easy way to determine “worthiness” and settle on low Admin fees, though the breakdown may show apples to oranges comparisons. I think @Andy Savage is onto something – a comprehensive replacement might be the way to go, though maybe that replacement lies in finding apples to apples comparisons like listing the sodium content in a pre-packaged food. I’m shocked that a NP would have to use an endowment just to bring down their Admin Fee percentage, but I’m impressed with the creative thinking.

  3. Donna Cook says:

    I work with a small non-profit that provides gifts for children in need during the holidays. Our administrative fee runs about 30%. We had two part-time paid employees…now only one. Everyone else is a volunteer.( I am the volunteer “President”/CEO.) We have a budget of about $40,000. We receive a large amount of in-kind donations that we do describe in our literature and grant aps. (Sometimes valued $20,000 and up, and our volunteers log in over 30,000 hours a year.) On paper, we look inefficient. But we provde gifts for over 4,000 children in the Greater St. Louis area, layettes for about 500 moms/newborns in need and wheelchair bags with toiletries for area Veterans and Seniors. http://www.brostl.org. We “live” rent free in the lower level of the Presbytery of Giddins – Lovejoy PCUSA St. Louis, MO

  4. Shannon Aronin says:

    I completely agree. Overhead has become a meaningless word. Every organization calculates it differently. In small nonprofits I’m not sure any staff fits into overhead. Even your development staff is contributing to program development in grant writing. Hospitals can be nonprofits and have a very high cost of doing business. I don’t think we need an overhaul of the organizations, but we do need standardized metrics that make more sense and that donors at all levels can understand. I recently got into a debate with someone who felt good about giving to charity:water because they have no overhead. So I looked into it and of course that’s not true. But they get their “overhead” funded by more sophisticated philanthropists who understand what it really takes to run an organization. Sigh. It’s an endless battle to improve this kind of understanding.

  5. Dana says:

    Great post and comments. Jason, I’ve linked this to The Collins Group’s Facebook page.

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