How much should NGOs spend on ‘admin’ or ‘overhead’ costs?

In India, the law is largely silent with regard to admin threshold limits.

The only place where we find a reference to this is under the Foreign Contribution Regulations Act 2010 where it is stipulated that administrative expenses in excess of 50% of contributions received must be spent only with prior permission of the Ministry of Home Affairs. 50% on admin expenses is anyway a very liberal threshold. 

While there are no legal requirements for a predetermined maximum of overhead spending for charitable organisations, watchdog groups all over the world set maximum limits and police the spending habits of nonprofit organisations. Overhead includes a nonprofit’s administrative expenses, which are not directly related to the organization’s programs or services.

Internationally, Charity Navigator sets a goal of “less than 10 percent” of the nonprofit’s budget for fundraising spending and considers an organization that spends less than one-third of its budget on program expense to be failing in its mission. 

The Charities Review Council, located in Minnesota, recommends no more than 35 percent of spending on overhead and at least 65 percent of total spending on program expenses.

In India, 10% to 15% on overheads would be considered healthy and ideal and from 15% to 25% as fair. 25% to 35% would be acceptable depending in nature, scale and outreach of activity.

WHO’s travel budget!!!

Very recently the World Health Organization (WHO) came under flax for spending about US $ 200 million a year on travel, a figure that far exceeds what it spent on fighting significant public health problems such as AIDS or malaria.

The Associated Press (AP) news agency reported that WHO is struggling to get its own travel costs under control, as it pleads for more money to fund its responses to global health crises, citing internal documents. Despite new rules introduced to curb its travel budget, members of staff have been breaking rules by booking business class flight tickets and rooms in luxury hotels, AP reported.

In 2016, the agency spent US $ 200 million on travel while the figure was US $ 234 million in 2015, according to AP figures. In comparison, WHO spent only about US $ 71 million on AIDS and hepatitis! On malaria, it spent US $ 61 million, and it invested US $ 59 million to slow tuberculosis.

WHO Director-General Margaret Chan was reported to have spent US $ 3,70,000 on travel in 2015.

We agree that, travel is an essential aspect of WHO's global health work - convening experts for collective decision-making on health interventions or travelling experts anywhere in the world that requires technical assistance for global health, however, neither do these figures look good in the audited statements of account nor do they indicate judicious use of charity funds. There can be no justification for flying first class.

With 37,000 aid workers, Doctors-Without-Borders spends about US $ 43 million on travel per year, while the UN children’s agency UNICEF, which employs 13,000 people, spends US $ 140 million on global travel in 2016.

There are lessons to learn from this both by the donor and recipient community here in India. By comparison Indian NGOs are far more conservative and thrifty where is comes to overheads and yet donors, be they individuals or institutions continue to push NGOs to higher levels of thrift. As a wit recently said about a well-known Indian Foundation, “their new policy seems to be in advancing philanthropy through punishing NGOs and alleviating poverty by impoverishing NGOs”

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