Do you judge nonprofit performance by an “overhead ratio?” – that is, how much they spend on programs versus administrative costs? Have you heard of the Overhead Myth – the concept that the financial ratios are a proxy for nonprofit worthiness? Times are changing, with Charity Navigator no longer touting overhead ratios as a proxy for nonprofit performance and even the federal government stepping in to support overhead costs. How funders understand and approach overhead can make a significant difference in supporting the true costs and effectiveness of nonprofits and their programs.
AGF members and their trustees participated in this very important session about the Overhead Myth and overhead costs where they explored:
- What is overhead?
- New governmental regulations from the White House Office of Management and Budget (OMB) about overhead.
- What all of this means to funders and the sector as a whole.
- Social Velocity Blog posting on Overcoming the Nonprofit Starvation Cycle: An Interview with Ann Goggins Gregory
- Starvation Cycle Excerpts
- National Council of Nonprofits’ campaign to help nonprofits identify and obtain funding for their true costs
- National Council of Nonprofits OMB briefing sheet
- I AM Overhead video by the San Antonio Nonprofit Council
- Overhead and the OMB (Patrick McWhortor)
Alliance of Arizona Nonprofits CEO Patrick McWhorter provided an overview of the OMB ruling and what it means to the sector. Fred Ali, President and CEO of the Weingart Foundation and a leader in tackling the Overhead Myth in California, shared what California funders and state associations are doing to address overhead funding. Participants also had an opportunity to explore current practices and challenges that they, as local funders, have when considering funding overhead costs.