Discovering The True Cost Of Programs


By: Joe Patti

In: Project & Time Management

For some time now the perception that a non-profit with a high overhead cost was inefficient has provided a disincentive for non-profit organizations to figure out the true cost of their programs.

Recently non-profit evaluaters like GuideStar, Charity Navigator and BBB Wise Giving Alliance  have been advocating for eliminating overhead ratio as a measure of effectiveness.  The federal Office of Management and Budget recently implemented rules requiring governments at all levels to provide at least 10% of the grant or contract total for indirect costs.

Even absent this shift in attitude, it is important for a non-profit organization to have a real sense of what the true costs of their activities are.

For example, the true cost of your education outreach programs isn’t just the salary of the single education coordinator and the fees to the participating artists. It is also the cost of the accountant to process all the tax documents for the artists and calculate the per diem and mileage for the school visits. It is the cost of the box office personnel to process the ticket orders and the stage hands to support the performance. It is the printing and mailing costs for posters and study guides. If the education person is frequently out in the field, it may also be the cost of the office secretary’s time to answer inquires and process paperwork in their absence.

The Bridgespan Group worked up a guide to help non-profits figure out the true cost of programs. It is not an easy process. The time line they layout spans over a month.  The guide is mainly aimed at medium to large non-profits with multiple programs or programs in many geographic areas.  They suggest smaller non-profits wouldn’t need to engage in the full process as outlined in the guide.

However, even if you are a smaller non-profit, if you have never really thought about the true cost of your programs, all that means is that it may only take you a week or two before you have a handle on the real program costs. This type of self-examination is important to organizational health.

For medium-large non-profits, the guide breaks down what may seem to be a daunting task into manageable steps, provides direction on which staff positions  should be responsible for providing data and includes worksheet templates to use as part of the process.

Regardless of size, going through all your programs and recognizing all the personnel and resources that are being directed toward programs may result in some surprises that contradict assumptions about how little effort and money they require.

Would you believe the small Japanese guy ate twice as much as the big American in 2003
The small guy in the middle consumed twice as much as the big guy on the right in 2003
Joe Patti
Joe Patti
In addition to writing for ArtHacker, I have been writing the blog, Butts in the Seats ( since 2004. I am also an evangelist for the effort to Build Public Will For Arts and Culture being helmed by Arts Midwest and the Metropolitan Group. ( I am currently the Theater Manager for the Rialto Theater in Loveland, CO. Across my career I have worked as the Executive Director at The Grand Opera House in Macon, GA, at University of Hawaii-Leeward Community College, University of Central Florida, Asolo Theater, Utah Shakespearean Festival, Appel Farm Arts and Music Center and numerous other places both defunct and funky.
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