The Nonprofit Overhead Myth Explained The Nonprofit Show podcast

Content provided by American Nonprofit Academy. All podcast content including episodes, graphics, and podcast descriptions are uploaded and provided directly by American Nonprofit Academy or their podcast platform partner. If you believe someone is using your copyrighted work without your permission, you can follow the process outlined here https://staging.podcastplayer.com/legal.

The Nonprofit Show »
The Nonprofit Overhead Myth Explained

2d ago 30:51

MP3•Episode home

Are you still chasing a “low overhead” badge of honor? Gregg Indictor, Director at Your Part-Time Controller, confronts one of the nonprofit sector’s most persistent misinterpretations: the overhead myth. With cohosts Julia Patrick and Meico Marquette Whitlock, the conversation unpacks what "overhead" actually represents, why it’s often misunderstood, and how nonprofits can more accurately reflect their financial stewardship.

Gregg begins by demystifying overhead as merely the administrative costs necessary to support any organization’s operations—nonprofit or for-profit, saying, “There is no correct overhead ratio for any organization,” noting that effectiveness should be measured by mission impact, not accounting percentages.

This fast episode fully explores cost allocation, the process of categorizing and reporting expenses across functions—such as program services, management, and fundraising. Gregg walks through the Schedule of Functional Expenses found in audits and IRS Form 990, and explains how misallocating indirect costs can produce distorted financial portraits. His emphasis on methodology—such as time and effort tracking for personnel, or square footage for facility expenses—underscores the importance of reasonable and consistent cost assignment.

Gregg highlights a powerful metric: for most nonprofits, 80–85% of expenses stem from personnel and facilities. Yet not all of those costs are necessarily “overhead”—they could very well contribute directly to mission delivery, depending on how they are allocated.

One of the key moments involves Gregg’s perspective on restricted vs. unrestricted funds. He cautions against well-meaning development practices that inadvertently solicit restricted gifts, reducing an organization’s flexibility to cover essential functions. A simple shift in donor language—from “choose your program” to “support our mission”—can dramatically improve financial resilience.

As the trio discuss transparency and internal communication, Gregg advocates for cross-departmental access to financial information, encouraging organizations to present timely reports not just to leadership, but also to program and fundraising teams. This transparency supports better decision-making and breaks down operational silos.

00:00:00 Welcome and guest introduction

00:03:08 What is nonprofit overhead and why it matters

00:05:29 The problem with restricted funding

00:07:36 Understanding cost allocation

00:11:02 How overhead ratios are calculated

00:13:44 80–85% of expenses: what that really means

00:16:21 Allocating costs accurately and fairly

00:18:38 Why everyone in a nonprofit should understand finance

00:20:17 Internal transparency and financial reporting

00:22:06 Overhead myths vs. operational reality

00:24:20 Contributed vs. earned revenue

00:27:02 Changing the donor messaging to support sustainability

Find us Live daily on YouTube!

Find us Live daily on LinkedIn!

Find us Live daily on X: @Nonprofit_Show

Our national co-hosts and amazing guests discuss management, money and missions of nonprofits!
12:30pm ET 11:30am CT 10:30am MT 9:30am PT

Send us your ideas for Show Guests or Topics: [email protected]
Visit us on the web:The Nonprofit Show

822 episodes

#Non-Profit #Business #American Nonprofit Academy #Nonprofit Leadership #Nonprofit Boards #Nonprofit Finance #Nonprofit Training #Nonprofit Accounting #Nonprofit Business #Managing A Nonprofit #Nonprofit Tech #MBA #Nonprofit #Nonprofits Go Beyond Fundraising