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?