Giving Compass' Take:

• The overhead myth - the assumption that nonprofits using a significant portion of their funding on staff, resources, equipment, data collection, and program design are wasting donors' money - is impeding the ability of Puerto Rico nonprofits to serve their community in the wake of Hurricane Maria. 

• Why is this myth so persistent? How can funders help to change the public conversation about overhead? 

• Learn about better ways to judge impact.

At its origins, overhead is an accounting term. In the nonprofit sector, vital activities and operations, including staff compensation and fundraising costs, fall into the overhead category. In countless annual reports to donors, you can see the myth epitomized in colorful pie graphs that boast about percentage spent on direct services and programs vs. spending on, well, everything else.

This binary approach impedes missions. How can nonprofits recruit and retain top talent to work on complex social problems if investments in staff compensation are considered frivolous? How can they grow and become more effective if investments in marketing and fundraising are shunned?

I recently returned from a sobering visit to Puerto Rico, where I met with nonprofit teams leading crucial disaster relief and recovery projects. Six months after Hurricane Maria hit the island, toppling the island’s electricity grid and shattering lives, leaders with varied hurricane-related missions—from addressing homelessness to reducing domestic violence to offering youth development programs—all identified the same urgent need: funds for overhead.

“Many nonprofit organizations have not been able to reopen their doors after the hurricane,” said Edwin Edgardo Otero-Cuevas, a GlobalGiving partner in Puerto Rico who manages fundraising for La Fondita de Jesus.

Nonprofits in Puerto Rico simply don’t have the resources they need to keep the lights on, Edwin explained. With additional overhead resources, nonprofit leaders on the island said they’d hire more staff to serve more people displaced by Hurricane Maria.

Read the full article about the overhead myth by Marlena Hartz at GlobalGiving.