Getting What We Pay For: Low Overhead Limits Nonprofit Effectiveness

This brief is the first of two that summarize results from detailed case studies of the financial management of nine nonprofit organizations. It focuses on the relationship between spending on administration and fundraising and the effectiveness of nonprofit organizations in carrying out their missions. Smaller organizations tended to invest less in organizational infrastructure, resulting in conditions that compromised their effectiveness. Part of the reason why these organizations invested less in infrastructure involved their reliance on grants with limits on how much could be spent on overhead costs. The overhead cost project is a collaboration with the Center on Philanthropy at Indiana University.