Abstract

http://ssrn.com/abstract=2170740
 
 

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Anatomy of the Nonprofit Starvation Cycle


Jesse D. Lecy


Georgia State University - Andrew Young School of Policy Studies

Elizabeth A.M. Searing


Georgia State University - Andrew Young School of Policy Studies

November 1, 2012

Andrew Young School of Policy Studies Research Paper No. 12-27

Abstract:     
The nonprofit starvation cycle is a debilitating trend of under-investment in organizational infrastructure that is fed by potentially misleading financial reporting and donor expectations of increasingly low overhead expenses. Since its original reporting in 2008, the phenomenon has been referenced several times, but seldom explored empirically; this study utilizes twenty-five years of nonprofit data to examine the existence, duration, and mechanics behind the nonprofit starvation cycle. Our results show a definite downward trend in overhead costs, reflecting a deep cut in administrative expenses partially offset by an increasing in fundraising expenses. The organization’s size is instrumental to its behavior, with a sharp rise in overhead occurring when revenues equal $100 thousand, but diminishing at $550 thousand. Finally, the brunt of the cuts have fallen on non-executive staff wages and professional fees, which heighten the concern of ill effects from a fixation on overhead cost reduction.

Number of Pages in PDF File: 27

Keywords: Starvation cycle, overhead costs, accountability, expense ratios, nonprofit competition

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Date posted: November 4, 2012 ; Last revised: January 30, 2014

Suggested Citation

Lecy, Jesse D. and Searing, Elizabeth A.M., Anatomy of the Nonprofit Starvation Cycle (November 1, 2012). Andrew Young School of Policy Studies Research Paper No. 12-27. Available at SSRN: http://ssrn.com/abstract=2170740 or http://dx.doi.org/10.2139/ssrn.2170740

Contact Information

Jesse D. Lecy (Contact Author)
Georgia State University - Andrew Young School of Policy Studies ( email )
Public Management and Policy
35 Broad Street, 6th Floor
Atlanta, GA 30303-3083
United States

Elizabeth A.M. Searing
Georgia State University - Andrew Young School of Policy Studies ( email )
Department of Public Management and Policy
14 Marietta St NW, 3rd Floor
Atlanta, GA 30303-3083
United States
HOME PAGE: http://aysps.gsu.edu/pmap/phd-students/2011/elizabeth-searing

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