Two-Legged Stool: New Findings from California on Nonprofits and Overhead

Abstract

AbstractNonprofit overhead is a prevalent and controversial topic in the nonprofit and philanthropic sector. Online raters (such as Charity Navigator) point to the overhead rate as a key indicator of nonprofit worthiness. Different government entities use wildly different indirect cost rates when contracting with nonprofits, which translate into billions of dollars of funding being gained or lost. Foundations rarely have explicit guidelines, but most have informal rules of thumb that affect how a nonprofit can use grant funds. Meanwhile, nonprofit executives struggle to make sense of it all as they manage their operations amidst the conflicting requirements of their funding sources. To gain insights into how overhead costs are handled in nonprofits, the California Association of Nonprofits (CalNonprofits) conducted a survey of 451 California nonprofit executives, as well as interviews with elected members of county boards of supervisors and their staff throughout California in the spring of 2016. This paper reports on both of these, which were part of a larger initiative of CalNonprofits called The Nonprofit Overhead Project.