The Case of the Overhead Overload

From the files of the Generosity Gumshoe

Jim Barker / / CC BY-NC-SA

She walked into my office last night, dripping in cold cash and hot tears. She was a rich socialite from one of those mini-mansions on the edge of town. Before I could lay out my philanthropic detective fees, she spilled her guts. Five shots of bourbon later (for me, she only had three), here’s what I knew.

Four months ago, she was a happy donor, comfortable in her giving. Like most donors, she responded to fundraising requests that tugged her heartstrings but assured her the organizations had integrity and could make smart use of her donations. She shied away from organizations that seemed wasteful, you know the ones. And yet, there was one Smarty-Pants Guy that kept sending her articles on “effective giving” and suddenly her confidence was shattered like cheap glass donor recognition plaques crashing to the floor. There’s always that one guy.

First, he forwarded a video by a slick salesman by the name of Dan Pallotta. Pallotta was provocative and charming, and he put the mental moves on her like nobody’s business. Before the end of his pitch, she was convinced that the way we think about charity is dead wrong. Suddenly she’s a canary for the praises of investing in nonprofit salaries, fundraising programs, and other overhead costs. She says it made sense – she doesn’t ask her favorite restaurant to only charge her for the actual ingredients in her cocktail and couscous salad. Turns out the poor dame didn’t research the controversy around Pallotta’s previous fundraising firm and the beef philanthropy heavyweights like Phil Buchanan and others have with him.

Then she received an appeal from a charity shouting, “Look at us – 97% of your donation goes directly to our programs! And, we’re rated 4 stars by Charity Navigator!” Sounded awfully tempting so she dropped the group a C-Note and checked out this Charity Navigator. Those jokers told her that charities shouldn’t spend more than 25% on overhead and gave her a bunch of Top 10 lists for good and bad behavior for fundraising and compensation. I didn’t even have to open a new case to tell her that nonprofits can cook overhead and fundraising ratios faster than my bookie Big Belly Bob. And even the good ones (nonprofits, not bookies) have suspect numbers because the IRS doesn’t provide clear guidance on how to allocate costs. Go figure the feds screw something up.

Smarty Pants Guy sent her more articles from the philanthropy rags like this and this. Real smart writers, see, but they go for nuance and the gray areas of the problem. Who has time for nuance these days?

Then she saw a CNN show Above the Law: America’s Worst Charities and now the canary’s singin’ the blues. High overhead costs, paid family members, expensive fundraising contracts, outright fraud…all kinds of flimflam artists running supposed charities and bilking old ladies for cash. I’d plug those palookas full of daylight myself, but I ain’t that kind of private dick.

I told her the CNN show doesn’t tell the whole story. They never do. The newshounds found 50 real bad apples in an orchard of more than a million nonprofits. The hype leads you to believe the 50 are the front for a whole mob of bad charities when Guidestar’s data shows only 6.8% of charities reported spending more than 50% on overhead. Not outstanding news, but not the majority.

After her third shot of the strong stuff and half a box of hankies, the dame asks me, “Mr. Generosity Gumshoe, what am I to do? Can you investigate all these nonprofits for me?”

Dollar signs danced in my eyes as I imagined having enough jack to pay off Big Belly Bob, ditch my rusted heap, and take this dame to Tahiti. Plenty of advisors to wealth donors make easy cash answering those questions. But Grandma Gumshoe raised me to be ethical and moral (“or else the cane, boy!”) and I couldn’t bring myself to charge the socialite for easy answers. So, I told her:

  1. Turn off the news and the emails from Mr. Smarty Pants. Instead, trust your instincts, find the things that make your heart sing, and enjoy being generous.
  2. If tax deduction’s your thing, check out for free and look for the green checkmark.
  3. If you want to learn more about an organization, the five questions at Charting Impact are a pretty damn good place to start. If you don’t understand or like the answers, it’s OK to walk away. There a million nonprofits in this naked country, that was just one of them.
  4. If you’re really stuck on overhead issues, the FAQ from this new Overhead Myth campaign is on the square, even if those hinky Charity Navigator folks like it too. Better yet, go visit the group in person. Nothin’ like laying eyes on their offices and staff to get wise to their work.
  5. If you still can’t decide, then get on the blower to your local community foundation and they’ll likely have a bead on the group. Or, I’ll do some snooping around free of charge.

It might have been my honesty. It might have been the booze. It might have been my rugged good looks. But the lipstick on my cheek and new appointment tomorrow night labeled “fundraising gala with socialite” tells me this is the start of somethin’ beautiful.

Hopefully she’ll pay for the drinks.