(COLORADO SPRINGS) — A University of Colorado, Colorado Springs professor is defending the Colorado Healing Fund’s overhead costs after criticism about spending 10% of donations on expenses.
Jessica Berrett is an assistant professor who explained that the backlash toward the fund is the result of a concept called the ‘overhead myth.’
Professor Berrett said the overhead myth is ‘the false notion that overhead spending is negatively related to nonprofit effectiveness, and when I’m talking about nonprofit effectiveness, I’m talking about the outcomes and the impact that a nonprofit is creating in a community.”
Professor Berrett said that based on a study she published earlier this year, the relationship between overhead spending and nonprofit effectiveness is actually a positive one.
“When organizations are investing into their overhead, they are actually able to be more effective. Now I will say with that, I did see that when organizations are spending more than 15% overhead, that the relationship is still positive but there is a diminishing return… we are still seeing that non-profits can be spending upwards of say 15%, 20% and it’s not going to have that negative impact that often donors think it might have,” said Professor Berrett.
Berrett explained that nonprofits cannot operate when 100% of donations go to programs, and she encourages donors to think about what it takes for a nonprofit organization to run.
“They’ve got staff, a website to manage those donations coming in, credit card fees, accounting. So there are going to be those expenses that are coming in that nonprofits need to cover,” Professor Berrett said.
She wants donors to focus more on what an organization is achieving for a community with donations rather than focus on how an organization is spending donations.
“Organizations that are trying to kind of, conform to the donor expectation and keep their overhead as low as possible, what we are seeing is it is starving the organizations of necessary infrastructure and overhead expenses, and so then they’re ultimately not going to be as effective as they could be,” said Professor Berrett.
The Colorado Healing Fund did secure underwriting support to cover overhead costs in assisting victims of the Club Q tragedy.