Although the nonprofit sector is taking steps to end the
"overhead myth," which equates low overhead with success
and ignores other critical factors, many organizations are still
measured by their financial ratios and spending instead of their
outcomes. This misguided approach can threaten a nonprofit's
mission and its long-term survival, so organizations need to
educate funders about the true cost of their work and shift the
focus to their results.
Low costs don't mean high performance
A nonprofit has three main categories of expenses. Program
costs are those directly related to the activities for which a
nonprofit exists. Fundraising costs are tied to the
activities an organization undertakes to obtain contributions.
Management and administration costs are not identifiable
with a specific program or fundraising activity, but are essential
to the conduct of those activities and to the nonprofit's
existence. This includes things like management
