We have all heard the popular proverb, “give a man a fish and you feed him for a day; teach a man to fish and you feed him for a lifetime”. Everyone agrees, but few pay for the fishing rod.
Successful businesses invest in skills, people and infrastructure. In the same vein, donors need to fund these areas for charities to deliver social impact.
The challenge for charities
Donors often prefer funding programmes that support individual recipients directly over charitable overhead* expenses. This leads to negotiations for lower overhead costs or unwillingness to support programmes with high overhead costs. Many charities cave in to such expectations for fear of losing a potential funder.
Understandably, all donors want to achieve maximum impact for their gift, but reducing overheads is only good up to a point where the sustainability of the charity is not affected. All organisations incur manpower, training, rental and administrative costs at the very least. If charities are pressured to keep overhead costs unsustainably low, they will operate at sub-par levels and enter a vicious cycle of starvation.
At the Community Foundation of Singapore, we have learnt that when charities receive limited funding to cover overhead, service delivery is affected because charities have to divert resources to fundraise for the shortfall.
There is growing recognition that efficiency is not determined by low overhead costs alone. Depending on the type of services or programmes, overhead can vary greatly across charities. For instance, a charity that distributes food rations via volunteers will have far lower overhead than a nursing home that hires skilled staff round-the-clock to provide care.
CFS works with its charity partners to present the true programme costs needed for social impact. With that in mind, we also work with donors to map out sustainable and impactful ways of giving.
We need to continue to have such conversations about true costs; the funding of overhead is just the tip of the iceberg in our search for sustainable social solutions.
Community Foundation of Singapore
*Overhead typically includes manpower, training, rental and administrative expenses.