How we measure efficiency
Overhead (or efficiency) is defined as the percentage of total expense that is used for general, administrative, and fundraising costs and is calculated as follows:
General, Administrative & Fundraising Expenses / Total Expense
What is MTI’s overhead rate? It varies each year, and for FY 2013 our rates were:
- 3.9%, which includes the value of donated time, medicines and other supplies (“in kind” gifts or GIK) in Total Expense calculation
- 21.7% using cash expenses only in Total Expense calculation
While including GIK in Total Expense figures is common industry practice, we believe it is important to clearly show the impact and to show both ratios.
A large percentage of our total expenditures come from donated supplies and materials used in our programs, but the valuations we use are estimates only and can distort the calculation of efficiency. The resulting overhead percentage can be misleading and cause donors to believe that, for example, 96 cents of every dollar goes directly to programs versus other expenses.