Editing Non-governmental organization (section)

=== {{anchor|Overhead costs}}Overhead ===
[[Overhead (business)|Overhead]] is the amount of money spent on running an NGO, rather than on projects.<ref name=Overhead1>{{cite web |url= http://www.fundsforngos.org/budget-for-ngos/defining-terms-budget/ |title=Defining certain terms in a budget |publisher=Funds for NGOs |date=18 September 2011 |access-date= 24 December 2013 |url-status=live |archive-url=https://web.archive.org/web/20140113151014/http://www.fundsforngos.org/budget-for-ngos/defining-terms-budget/ |archive-date= Jan 13, 2014 }}</ref> It includes office expenses,<ref name=Overhead1 /> salaries, and banking and bookkeeping costs. An NGO's percentage of its overall budget spent on overhead is often used to judge it; less than four percent is considered good.<ref name=Overhead1 /> According to the World Association of Non-Governmental Organizations, more than 86 percent should be spent on programs (less than 20 percent on overhead).<ref>{{cite web |title=Code of Ethics & Conduct for NGOs Compliance Manual |website=World Association of Non-Governmental Organizations |url=http://www.wango.org/codeofethics/ComplianceManual.pdf |archive-url=https://web.archive.org/web/20100401020450/http://www.wango.org/codeofethics/ComplianceManual.pdf |archive-date=2010-04-01 |url-status=live |access-date=11 April 2012}}</ref> [[The Global Fund to Fight AIDS, Tuberculosis and Malaria]] has guidelines of five to seven percent overhead to receive funding;<ref>{{cite web |title=National NGOs Serving as PRs Excluded from the Global Fund's Policy on Percentage-Based Overhead Costs |url=http://www.aidspan.org/index.php?issue=174&article=2 |date= 24 Jan 2012 |first1=David |last1=Garmaise |website=Aidspan |url-status=dead |archive-url=https://web.archive.org/web/20130927114828/http://www.aidspan.org/gfo_article/national-ngos-serving-prs-excluded-global-funds-policy-percentage-based-overhead-costs |archive-date= Sep 27, 2013 }}</ref> the [[World Bank]] typically allows 37 percent.<ref>{{cite book |last1= Gibbs | first1=Christopher| last2=Fumo|first2=Claudia |last3=Kuby|first3=Thomas |title=Nongovernmental organizations in World Bank supported projects : a review |year=1999 |publisher=World Bank |location=Washington, D.C. |isbn=978-0-8213-4456-9 |page=21 |url=https://books.google.com/books?id=77m7ExDp8DQC&pg=PA21 |edition=2nd}}</ref> A high percentage of overhead relative to total expenditures can make it more difficult to generate funds.<ref>{{cite book |editor2-last=Crowther |editor1-first= Güler|editor1-last= Aras|editor2-first= David |title=NGOs and social responsibility |year=2010 |publisher=Emerald |location=Bingley, UK |isbn=978-0-85724-295-2 |page=121 |url=https://books.google.com/books?id=T9mgFMJQhCsC&pg=PA121 |edition=1st}}</ref> High overhead costs may also generate public criticism.<ref>{{cite book |last=Kassahun |first=Samson |title=Social capital for synergistic partnership : development of poor localities in urban Ethiopia |year=2004 |publisher=Cuvillier |location=Göttingen |isbn=978-3-86537-222-2 |page=153 |url=https://books.google.com/books?id=TSjsfco0elIC&pg=PA153 |edition=1. Aufl.}}</ref>

A sole focus on overhead, however, can be counterproductive.<ref>{{cite web |last1=Schmitz |first1=Hans Peter |first2=George E. |last2=Mitchell |date=9 March 2010 |url=http://hausercenter.org/iha/2010/03/09/navigating-effectiveness/ |title=Navigating Effectiveness |website= Humanitarian & Development NGOs Domain Blog |publisher=The Hauser Center for Nonprofit Organizations, Harvard University |url-status=dead |archive-url=https://web.archive.org/web/20160502111108/http://hausercenter.org/iha/2010/03/09/navigating-effectiveness/ |archive-date= May 2, 2016 }}</ref> Research published by the [[Urban Institute]] and [[Stanford University]]'s Center for Social Innovation have shown that rating agencies create incentives for NGOs to lower (and hide) overhead costs, which may reduce organizational effectiveness by starving organizations of infrastructure to deliver services.<ref>{{Cite web| url=http://www.urban.org/publications/311055.html| title=The Pros and Cons of Financial Efficiency Standards| date=August 1, 2004 |first1=Mark A. |last1=Hager|first2=Ted |last2=Flack |website=Urban Institute | access-date=29 November 2012| archive-date=26 April 2013| archive-url=https://web.archive.org/web/20130426101444/http://www.urban.org/publications/311055.html| url-status=dead}}</ref><ref name="ssireview">{{Cite web | url=http://www.ssireview.org/articles/entry/the_ratings_game/ | title=The Ratings Game |website=SSIR |first1=Stephanie |last1=Lowell|first2=Brian |last2=Trelstad|first3=Bill |last3=Meehan |date=Summer 2005 |url-status=dead |archive-url=https://web.archive.org/web/20150719221016/http://www.ssireview.org:80/articles/entry/the_ratings_game |archive-date= Jul 19, 2015 }}</ref> An alternative rating system would provide, in addition to financial data, a qualitative evaluation of an organization's transparency and governance:
# An assessment of program effectiveness
# Evaluation of feedback mechanisms for donors and beneficiaries
# Allowing a rated organization to respond to an evaluation by a rating agency<ref name="ssireview"/>