Why Funding Overhead Is Not the Real Issue: The Case to Cover Full Costs

Big strides recently have been made in the acknowledgment that overhead ratios are poor indicators of an organization’s impact or financial efficiency. Although the movement toward outcomes-based measurement offers a promising alternative to understanding impact, very little has been done to truly shift the sector’s understanding of what it takes—or even means—for nonprofits to be financially efficient and adaptable. The myths and misinterpretations of the true full costs of delivering vital programs have contributed to a chronically fragile social infrastructure for our communities.

Now more than ever, as the call to achieve high standards of outcomes-based measurement grows, we must hold ourselves to an equally high standard of understanding nonprofits’ full costs.