Will foundations fund overhead or administrative costs for nonprofits? What is an acceptable overhead rate?
Although many foundations prefer to support direct programmatic activities, many do give grants to help nonprofits cover administrative costs, also known as general operating expenses or overhead costs.
Overhead rate for an operating budget
There is no single accepted standard percentage of overhead that can be applied to every nonprofit organization. Nonprofits spend varying amounts of their budget on administrative costs, depending on the scope and structure of their operations. However, some organizations that rate charities, such as the Better Business Bureau and Charity Navigator, have their own benchmarks, which prospective donors might choose to follow to evaluate a nonprofit's levels of efficiency.
Overhead rate for a grant proposal
Similarly, there is no single accepted overhead rate that applies to every nonprofit organization, or one that is used by all grantmakers. Many funders have policies regarding the percentage of overhead that they will allow within a project budget. Some do not allow any overhead at all to be included, while others allow overhead to be a specific percentage of total costs or personnel costs. To learn more about proposal budgeting, take our free course, Introduction to Project Budgets, available online or as an in-person class.
How to find funders that give for general operating expenses
For actionable advice on building relationships with funders, check out 10 Insider Tips to Raise General Operating Support from The Chronicle of Philanthropy.
To find funders who give grants for general operating expenses, you can use Foundation Directory, our searchable database of grantmakers. Perform a search by Support Strategy for "General support," in addition to search terms for Subject Area and Geographic Focus.
Subscribe to search from your own location, or search for free at our Candid partner locations. Eligible nonprofits with revenue or expenses under $1M can also gain a free year of access to Foundation Directory Essential through our Go for Gold! promotion.
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Staff pick
The Chronicle of Philanthropy
10 Insider Tips to Raise General Operating Support
This article from The Chronicle of Philanthropy provides actionable advice on building relationships with funders. Note: You may need to create a free account to view the full article.
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Staff pick
BridgeSpan Group
Nonprofit Overhead Costs: Breaking the Vicious Cycle
When nonprofit organizations are able to invest adequately in staffing and infrastructure-- “overhead”--they are better able to carry out their missions.
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BridgeSpan Group
Nonprofit Organizations Shouldn't Compromise “Good Overhead” (Even in Tough Times)
In tough times like today’s, funders are likely to scrutinize organizational overhead more than ever. But in conducting due diligence on a nonprofit, a would-be donor should never assume that low overhead is a sign of efficiency.
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Nonprofit Quarterly
The Nonprofit Overhead Baby and the Bathwater: A Need-to-Know for Boards
A thorough understanding of overhead can suggest whether a nonprofit's programs could be delivered in a more efficient and/or stable way. Trustees serious about overhead should keep in mind some important patterns highlighted by our recent analysis of the overhead of several thousand nonprofits.
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SeaChange Capital Partners [pdf]
Understanding Overhead: A Governance Challenge for Nonprofit Trustees
Overhead is a vexing issue for nonprofits and a potential source of financial risk, so trustees serious about risk management must understand the particular risks associated with overhead. This report, intended as a companion piece to our earlier report, “Risk Management for Nonprofits”, will help trustees better understand this important issue and thereby be more effective in exercising their oversight and governance duties.