Should Donors Be Willing to Give to Overhead?

Should Donors Be Willing to Give to Overhead?

by Bill High

In the giving world, the supposed magic standard is to spend no more than 10% of your budget towards overhead.  Similarly, I hear some foundations and some donors describe and prescribe that 10% is their benchmark for qualifying an organization.

The theory is that donors don’t want to pay for light bills, but instead want to pay for programs and impact.

On the other hand, I see some nonprofits go to great lengths to classify their efforts as something other than overhead.

However, a recent article in the Chronicle of Philanthropy (August 2016) notes a changing attitude among some foundations for funding overhead costs.  For instance, some major foundations like the Ford Foundation, the Gates Foundation, the Carnegie Foundation or the Lilly Foundation are now allowing up to 20% of project grants to go towards overhead costs.

Why the change?  Guidestar CEO Jacob Harold says, “we need to care about results, and we need to care about an organization’s health.”

For instance, if an organization delivers great results in meeting the needs of the poor, but their leadership is running on fumes and their building and technology are in a state of disrepair what have we gained by insisting on not funding overhead?

Perhaps more plainly I think we need to agree that solutions to our systemic problems represent the goal.  We should care less on whether those solutions take some overhead to get the job done.  Overhead is not the enemy in and of itself.  The real enemies are the problems of hunger, education, clean water and the poverty of spirit.  Let’s keep the overhead discussion rightly in line with the need for solution.

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Published January 24, 2017

Topics: Nonprofit Development


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