Report: High Program Spending Keeps Nonprofits in the “Starvation Cycle”

A new benchmarking report from the BDO Institute for Nonprofit Excellence finds that even with substantial revenue streams, organizations face pressure to keep overhead costs low. The culprit: high levels of spending on programs and services.

The need to keep a overhead expenses low, even with significant revenues coming in, remains a major pain point for nonprofits, according to a new report.

In Nonprofit Standards: A Benchmarking Survey, the BDO Institute for Nonprofit Excellence reveals that, on average, 77 percent of nonprofits’ total expenditures go to support programs and services. It notes that Charity Navigator made a comparable finding that 70 percent of nonprofits spend at least three-quarters of their revenue on services.

“This type of high programmatic spending could mean that organizations are under-funding necessary infrastructure—new technology, employee training, and fundraising expenses—a phenomenon known as ‘the starvation cycle,’” the report says. “The prevalence of restricted donations could also be a contributing factor to the high program-related spending.”

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Report: High Program Spending Keeps Nonprofits in the “Starvation Cycle”

A new benchmarking report from the BDO Institute for Nonprofit Excellence finds that even with substantial revenue streams, organizations face pressure to keep overhead costs low. The culprit: high levels of spending on programs and services.

The need to keep a overhead expenses low, even with significant revenues coming in, remains a major pain point for nonprofits, according to a new report.

In Nonprofit Standards: A Benchmarking Survey, the BDO Institute for Nonprofit Excellence reveals that, on average, 77 percent of nonprofits’ total expenditures go to support programs and services. It notes that Charity Navigator made a comparable finding that 70 percent of nonprofits spend at least three-quarters of their revenue on services.

“This type of high programmatic spending could mean that organizations are under-funding necessary infrastructure—new technology, employee training, and fundraising expenses—a phenomenon known as ‘the starvation cycle,’” the report says. “The prevalence of restricted donations could also be a contributing factor to the high program-related spending.”

Read the full article