Ending the Overhead Myth — and Moving Toward a Solution

True or false: the amount of money a nonprofit spends on overhead has a direct correlation to a nonprofit's impact. If you answered "false," you are correct! The Better Business Bureau (BBB) Wise Giving Alliance, GuideStar, and Charity Navigator are tackling what they call the Overhead Myth head on. While overhead can help identify cases of fraud or mismanagement, it isn't an indicator of the impact and results of a charity or nonprofit's work.

Last year, these organizations jointly published a letter to the donors of America asking them to not judge nonprofits and charities solely on the percentage of their expenses that go to administrative and fundraising causes. Recently, GuideStar published a follow-up letter, but this time it is directed toward nonprofits.

Three Steps to an Overhead Solution

The letter asks nonprofits to do three things to move toward an Overhead Solution:

Demonstrate ethical practice and share data about your performance.
Manage toward results and understand your true costs.
Educate funders on the real cost of results.

Resources for Sharing Impact and Debunking the Overhead Myth

Sharing your data and establishing this openness with your funders, constituents, and community might seem daunting. On the back of the letter, there is a handy list of reading material and tools for sharing performance data. Here are a few:

The free GuideStar Exchange lets you share information about how your organization is governed.
The BBB Wise Giving Alliance’s Standards for Charity Accountability has recommended practices on governance, finances, fundraising, and more.
Read about how Charity Navigator rates accountability and transparency.
Find even more tools and resources on OverheadMyth.com.

Here at TechSoup, we're all for helping nonprofits find resources for sharing their impact. My colleague, Ariel Gilbert-Knight, first covered the Overhead Myth when the letter to donors was published. She also covered Charity Navigator CEO Ken Berger's rousing talk on meaningful impact.

The bottom line is that sharing is key. Nonprofits need to share data with their donors. They also must share best practices, tips, and ideas with fellow nonprofits that might be having trouble getting started with the process. Together, we can end this myth!

Are you sharing your impact with your community? What's your take on the Overhead Myth? Share with us in the comments.

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Ginny Mies is a Content Curator at TechSoup Global.

"Educate funders on the real cost of results." This includes regarding the costs of volunteer engagement. By reporting the value of volunteer engagement as an hourly monetary rate, organizations are implying that the value of volunteer engagement is that its free (unpaid) labor - and this not only doesn't truly value volunteer engagement, it also leads to the thinking, "Hey, let's lay off some paid staff and just get volunteers to do it!" It also implies that volunteers are cost-free - they are not. So educate funders on both the value of volunteers - why are some tasks better done by volunteers rather than paid staff (and vice versa?)? What is the mission of your organization's volunteer engagement? What are volunteers actually accomplishing that furthers your organization's mission? - and the real costs of recruiting and supporting volunteers (staff time to create tasks, to supervise volunteers, software to track volunteer information and activities, costs for criminal background checks, costs to train staff and volunteers in using various tools, etc.). This approach further helps debunk the overhead myth.

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Ending the Overhead Myth — and Moving Toward a Solution

Ending the Overhead Myth — and Moving Toward a Solution

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