Overheads - How charities work

All charities try to be as efficient as possible, but there are some things they need to spend money on.

Any organisation needs some essentials in order to run effectively, such as

somewhere for people to work from
computers
transport
insurance
accounting.

Charities try to spend as prudently as possible but without making false economies.

The back office is just as essential as the front line

People often talk about money ‘going to the front line’, and charities want to make sure that they make the biggest difference possible with every pound they spend. But it’s not really possible to work out a proportion that goes ‘to the front line’, because you can’t distinguish the front line from the things that are needed to support it.

For example, if an international development charity delivers emergency relief to a country following a natural disaster, most people would agree that the money it spent on those things is going to the front line.

But to provide that relief lots of other things were needed:

people to organise buying the things at the best price
transporting them
and of course raising money to pay for them.

Without these the charity couldn’t have done its job.

It can be a false economy for a charity to skimp on some of the ‘back office’ it needs to get things done properly. No charity wants to spend more than it has to on computers for example, but poor IT systems could lead to inefficiencies and lost time.

Charities are very conscious of needing to spend money as carefully as possible. They make every effort to get good deals on what they buy, and not to spend more than they have to. Trustees and managers are always juggling what money to spend now and what to invest to ensure the charity can run efficiently and effectively in future.