OMB Uniform Guidance Could Help Prevent Nonprofit Banckrupcies

Friday, March 13, 2015

$0.88 of Every $1 for Programs: That’s Nothing to Brag About!

The New York nonprofit sector was shaken recently with the announcement that FEGS, a behemoth nonprofit with a solid long-standing track record in the human services sector, was shutting down because of a huge funding gap. Some believe that FEGS might have run into trouble because of reduced government reimbursement rates, which fail to cover the cost of running programs and providing services—a challenge for many nonprofits.

But, a larger issue looms. Nonprofits are coming up short on funding their full administrative costs and supporting the kinds of administrative capacity expansions—such as creating a research and evaluation team—critical to all well-managed organizations. Some people call these costs “overhead,” but “management” or “administrative costs” is much more fitting.