Overhead is a not just the precursor to the LCD projector, used by your middle school science teacher, along with transparent plastic sheets and sharpies, to project unintelligible equations onto a screen; it's part of the core costs of effective nonprofit service delivery.
Your nonprofit’s mission matters. And it costs something to deliver it! Knowing what it costs to deliver a nonprofit’s mission, and then having candid conversations with donors and others about those costs, can lead a nonprofit toward financial sustainability.
Knowing your nonprofit’s actual costs is common sense. Fortunately, an increasing number of enlightened donors, grantmakers, and government partners are recognizing the reality that essential costs include not only direct program costs, but other costs too – whether referred to as “overhead,” “management and general,” “administrative,” or “indirect costs.”
The outdated view that overhead is something to be avoided or a measure of efficiency used by donors to decide whether or not to support your organization, is rapidly changing. The focus is shifting away from meaningless ratios towards an evaluation of the nonprofit’s impact and effectiveness. Everyone who invests time, money, and other resources in a charitable nonprofit’s mission – the staff and board of a nonprofit, as well as individual donors, businesses, private foundations, and government – should be aware that “overhead” is really a way of explaining the actual costs necessary to deliver a nonprofit’s mission.
Read on for more information on overhead/administrative/indirect costs and join us, along with our nationwide network of state associations of nonprofits, and #OwnYourOwnCosts.
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