Allocation of Nonprofit Funds Among Program, Fundraising, and Administration
研究非营利组织在项目、筹款和行政三类支出上的最优预算分配，发现组织能力是关键因素，并指出慈善监管机构应同时考虑项目支出回报和未来需求，以避免“饥饿循环”。
Problem definition: U.S. nonprofits declare three types of expenses in their IRS 990 forms: program spending to meet beneficiaries’ needs; fundraising spending to raise donations; and administration spending to build and maintain capacity. Charity watchdogs, however, expect nonprofits to prioritize program spending over other categories. We study when such expectations may lead to the “starvation cycle” or underspending on administration and fundraising. Methodology/results: We characterize optimal budget allocations to program, fundraising, and administration spending categories using a two-period model, which also includes the nonprofit’s capacity, return on program spending (the net value of program spending to beneficiaries), and beneficiaries’ uncertain future needs. We find that the nonprofit’s capacity plays a significant role in the optimal allocation. The nonprofit should (a) at high capacity, spend only the necessary amount on administration to maintain its current capacity; (b) at moderate capacity, maintain its current capacity while limiting program spending in favor of fundraising; and (c) at low capacity, increase administration spending to expand its future capacity. When we compare the optimal allocations prescribed by our model to the actual spending levels reported by a foodbank network, we find that the foodbank underspends on administration and fundraising, suggesting the forces that lead to the starvation cycle may be in play. Another possibility is that the nonprofit’s own estimate of its return on program spending is higher than our estimate—At higher estimates of return on program, the gap between our prescribed solutions versus actual spending levels decreases. Managerial implications: Our paper introduces an important discussion on nonprofits’ starvation cycle and finds conditions that justify prioritizing administration and fundraising expenses. It also highlights that watchdogs should consider nonprofits’ return on program spending in addition to their capacity and future needs when evaluating them. Funding: T. O. Kotsi thanks the Onassis Foundation (Greece) for financial support. Supplemental Material: The online appendix is available at https://doi.org/10.1287/msom.2020.0660 .