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Administrative Expenses of Volunteer Organizations

Why your favorite volunteer organization(s) deserve a little more of your money.
1st August, 2020

In many ways, running a volunteer organization is like running a business: you recruit people, pay for routine expenses, and set aside time not just for running the organization but also for growing it. Perhaps the key difference, however, is the absence of seed capital to run a volunteer organization. For small volunteer organizations, this lack of funding for administrative expenses (or so-called overhead) creates a catch 22, causing major obstacles to their survival.

The belief that truly effective volunteer organizations have zero or near-zero overheads has been debunked in academic journals [Lecy14, Coupet18, Gneezy14] and articles [Paynter16, Altshuler, Eckhart16, Gregory09]. Websites like The Overhead Myth and the (now defunct) Real Costs Project dedicate themselves to explaining that negative attitudes towards overheads impede the efficacy of non-profit and volunteer organizations. While aberrations exist, like the Wounded Warrior Project, which is alleged to have spent up to 40% of the donations on lavish hotel accommodations for its employees, the overwhelming academic opinion is that when a portion of the money is wisely spent on administrative expenses, it can become a force multiplier.

Yet, controversy persists. I admit, shamefully, that I vocally opposed volunteer organizations "pocketing" money in the name of overhead, until I had first-hand experience running a volunteer organization. Between 2011 and 2015, I, along with handful of other graduate students from the University of Texas at Austin, ran the Austin chapter of the Association for India's Development, a registered 501(c)(3) organization that supports a wide variety of grassroots organizations in India. We prided ourselves on being 100% volunteer-driven, so all donations went sent in their entirety to the organizations being supported in India. But midway through my tenure, I realized that we were hampering our own growth and productivity by being overly stingy on administrative expenses.

The costs came in various forms. First, there were direct, tangible costs that are easy to list in the accounting books, like the cost of booking meeting rooms, the cost of web hosting, the cost of making print materials for fundraising events, etc. Although these might seem paltry, it sometimes became difficult to support these recurring expenses on a student budget.

Occasionally, there were monumental expenses that require several months of careful planning, coordination, and budgeting. In 2012, we organized a fundraising concert involving Pandit Hariprasad Chauarsia, a famous flautist from India. While it was a record year in terms of donations, the cost of organizing the concert ran into tens of thousands of dollars. Frugality had to always be the norm.

Compared to these direct costs, however, indirect costs, like time, were more difficult to reign in. Menial tasks like making handouts for future fundraising events were a fun distraction from grad school research, but sometimes these tasks arrived at the wrong time, like just before a conference paper submission. In addition, every week, volunteers gathered to discuss the organizations that we should fund, and doing so meant that everyone had to do some homework so that we could have a productive discussion. These insanely informative discussions were like catnip to many of us, so it was hard to say No even when the discussions ran over time.

But our foremost concern at all times was staffing; specifically that (1) we were always understaffed, (2) sometimes volunteers bailed because something important came up, and (3) we had a high rate of turnover. Effectively, existing volunteers had to double up as outreach coordinators, last-minute drivers, email campaign managers, or even marathon trainers! All of this made it difficult to attract new volunteers and retain existing ones.

While my thoughts above may been to contradict it, running a volunteer organization is absolutely worth all the trouble. Without that experience, I would not have been exposed to some truly inspiring people, better understood the nuances about my home country, and forged friendships that I cherish, all while supporting grassroots organizations that are creating meaningful change.

So while running a 100% volunteer-driven organization is hard, a little bit of extra money can go a long way. Administrative expenses can become less of a burden and volunteers can feel a greater sense of worth, resulting in greater productivity. So this holiday season, considering adding a little extra to your donation to your favorite volunteer organization, perhaps specifically towards their administrative expenses. Your contribution could be the reason that the organization thrives!

References

[Altshuler] Norma Altshuler and Marissa Tirona, "Why Funders Should Pay for the True Costs of Nonprofits' Work - Not Just the Direct Project Expenses", The Chronicle of Philanthropy

[Coupet18] Jason Coupet and Jessica L. Berrett, "Toward a Valid Approach to Nonprofit Efficiency Measurement", Nonprofit Management and Leadership, 2018

[Eckhart16] Jeri Eckhart-Queenan, Michael Etzel, and Sridhar Prasad, "Pay-What-It-Takes Philanthropy", Stanford Social Innovation Review, 2016

[Gneezy14] Uri Gneezy, Elizabeth A. Keenan, and Ayelet Gneezy, "Avoiding Overhead Aversion in Charity", Science, 2014

[Gregory09] Ann Goggins Gregory and Don Howard, "The Nonprofit Starvation Cycle", Stanford Social Innovation Review, 2009

[Lecy14] Jessey D. Lecey and Elizabeth A. M. Searing, "Anatomy of the Nonprofit Starvation Cycle: An Analysis of Falling Overhead Ratios in the Nonprofit Sector", Association for Research on Nonprofit Organizations and Voluntary Action, 2014

[Paynter16] Ben Paynter, "Demanding That Nonprofits Not Pay For Overhead Is Preventing Them From Doing Good", Fast Company, 2016

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