Understanding Overhead Costs
Wheat Ridge Ministries joins GuideStar, Charity Navigator, and BBB Wise Giving Alliance in the pledge to end the overhead myth. Instead of focusing on the percentage of charity’s expenses that go to administrative and fundraising costs—commonly referred to as “overhead”—we need to focus on what really matters: impact.
In June 2013, GuideStar, Charity Navigator, and BBB Wise Giving Alliance published an open letter to the donors of America denouncing the “overhead ratio” as a valid indicator of nonprofit performance. The letter, signed by all three organizations’ CEOs, marks the beginning of a campaign to correct the common misconception about the importance of a low overhead ratio.
The open letter, published on www.overheadmyth.com, states that “Overhead costs include important investments charities make to improve their work: investments in training, planning, evaluation, and internal systems—as well as their efforts to raise money so they can operate their programs. When we focus solely or predominantly on overhead…we starve charities of the freedom they need to best serve the people and communities they are trying to serve.” The letter goes on to recommend that donors focus their attention on more relevant factors behind nonprofit performance: transparency, governance, leadership, and results.