This post originally appeared on GuideStar's blog.

"Overhead" can be a dirty word in nonprofit circles. It's typically referred to as the costs associated with actually running a nonprofit - administrative costs, fundraising costs, staff costs, etc.

The common belief is that many - if not most - donors don't want their donations used for anything other than supporting the mission of the organization. And, this belief is only exacerbated by stories in the mainstream media of high-profile nonprofits being poor stewards of donor dollars. It's also perpetuated by those of us in the nonprofit space who continue to apologize for the cost to raise a dollar.

So, is it myth or fact? GuideStar, BBB Wise Giving Alliance, and Charity Navigator say myth. In fact, they've teamed up in a campaign to end the Overhead Myth. Meanwhile, we recently conducted a survey of donors, the Donor Loyalty Study, to determine what creates a loyal bond between a nonprofit and its supporters.

One of the areas we looked at closely was money, and how nonprofits use the gifts they receive. More specifically, we wanted to understand if donors really do have strong feelings about how money is given (restricted or unrestricted funds), and how that money is used (what areas of investment within an organization do and don't ruffle feathers).

Here's what we found. Overhead concerns are, by and large, a myth.

Most donors (93 percent) are confident the organizations they support are spending money wisely; most donors feel informed about how money is being spent (86 percent); and 52 percent of donors trust the organizations they support to use money where it's most needed.

Additionally, attitudes toward restricted versus unrestricted funds are pretty evenly divided, with donors giving to each fairly equally. Even more interesting, high-wealth donors (donors with annual income of more than $200,000) are the MOST comfortable with donating to unrestricted funds (see charts below).

Image of Chart One

It's also important to note there are some areas where organizations spend money that cause more disappointment than others, but it all needs to be viewed in context. Why? Because, even those areas with the strongest negative reaction don't exceed 44 percent.

For example, "lobbying efforts" received the most negative reaction by donors as an area where money might be spent, with 44 percent of donors saying they'd be either disappointed or angry. However, 51 percent of donors are fine or happy with money being spent on "lobbying efforts."

As Michael Delzotti, Association of Fundraising Professionals (AFP) International Board Member so aptly put it during our User and Developer Conference this year, "We started this conversation by telling donors, 'Every dollar you give goes towards helping save a life; none of it is wasted.' Now we're suffering, and we need to start pushing back. Truth trumps myths about overhead. Be transparent."

It's certainly essential that organizations use the money with which they're entrusted wisely. And, for the most part, donors believe nonprofits are doing just that.


The preceding is a guest post by Andy Prince, Senior Director of Corporate Communications at Abila. He 's spent the last decade working with nonprofit technology providers, delivering public relations, social media, content, and thought leadership strategy.

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