General operating expenses and the truth about nonprofit overhead

Overhead, referring to nonprofit overhead expenses, (also known as administrative costs or general operating expenses) is a common buzzword in grant writing in fact, it’s often a bad word in any sort of fundraising, grant writing or otherwise.


General operating expenses: a necessary evil?


But general operating expenses continue to be one of the biggest fundraising challenges in nonprofit grant writing. Nonprofits often desperately need help funding administrative costs. Thus, they seek general operating grants or hold fundraisers and collect donations that help keep the lights on rather than funding direct services like programs. That’s the trouble. Overhead is taboo, but so necessary for the every day operations of any given nonprofit.


Perfect proportions


So what’s the ideal proportion of general operating expenses, or overhead, to program costs in a nonprofit budget? Everyone is seeking that magic number that will appear reasonable, efficient, and attainable. Nonprofits worry that if their overhead costs are too high, foundations won’t want to give them money. That is changing, slowly, but is still true in a lot of cases.


No magic number


The difficult thing is that there is no magic number across the board. Foundations don’t have a single industry standard percentage for nonprofit overhead. Some foundations, happily, will advertise what they see as an ideal ratio of general operating expenses to overall expenses. Other foundations look to rates set by the  Better Business Bureau and Charity Navigator.


That’s unfortunate because every nonprofit operates a little differently. Some are run by volunteers and have little to no overhead expenses. Others may have a lot of general operating expenses for one reason or another. It’s simply impractical to apply a single standard to every single nonprofit out there.


Changing perspectives


More and more, nonprofits are trying to change the perception of overhead as taboo. Nonprofit employees deserve to be paid well, compensated fairly. They shouldn’t live in poverty because their chosen career is in the charity sector and charities should have tiny overhead budgets with low salaries.


More good news


The other good news is that more and more foundations are open to funding general operating expenses. It’s simply a matter of knowing where to look for these types of grants.


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  • Avatar for Darlene Penner

    Darlene Penner

    28.10.2014 at 00:07 Reply

    Great article. Very helpful. I am in the process of learning about Grant Writing to help as a volunteer at a new nonprofit I’m connected with. They’ve never applied for a grant, but just do fundraising events and offer aid trips, to help the poor, which helps to cover operating costs. It’s tough for them. I hope I can help them. Any advice on where I can get Grant writing training online? I would like to learn more. thanks.

    • Avatar for admin


      28.10.2014 at 07:28 Reply

      Hi Darlene,

      Nonprofits applying for their first grants are going to have a tough time no matter who is helping them, so don’t feel bad if success does not come quickly and easily. Your local community college or university may offer online grant writing training. The Foundation Center is also a great place to look.

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