Why funding nonprofit overhead matters more than you might think

October 16, 2025

By Chad Dull, Chief Executive Officer

Not long ago, someone asked me what percentage of their donation “actually goes to the cause” and how much is “just overhead”. I get that question a lot. Maybe you’ve wondered the same thing. The idea is that dollars spent on overhead are somehow wasted — money that never directly benefits the real work of feeding families, educating children, or strengthening neighborhoods.

But here’s the truth: overhead isn’t waste. Overhead is the cause. It’s the rent that keeps the doors open, the salary that keeps a skilled staff member on the team, the technology that tracks outcomes, the insurance that protects the work, and the fundraising that makes future programs possible. Without those things, the programs we value would collapse under their own weight.

What is nonprofit overhead, really?

When we talk about overhead, we’re talking about all the things that support a nonprofit’s mission behind the scenes. It’s administration, staff development, technology, fundraising, and facilities. None of these pieces are as visible as a food pantry shelf or an after-school class — but all of them make those programs possible.

Overhead ensures that nonprofits can attract and retain staff, comply with laws, measure outcomes, and plan for the future. In other words, it’s the foundation that holds up the mission.

The myth of low overhead = efficiency

For decades, donors have been told that the less overhead a nonprofit has, the more efficient it must be. Watchdog groups reinforced that message, and many organizations felt pressure to keep their overhead ratios as low as possible.

But research shows this belief is deeply flawed. A study of more than 22,000 arts and culture nonprofits found that those devoting about 35% of their budgets to overhead performed best over time. Those that tried to scrape by on much less actually saw their performance decline. Other studies echo the same lesson: starving an organization of overhead starves its impact.

What donors are actually funding

When you fund overhead, you’re not writing a check for waste. You’re investing in the people, systems, and infrastructure that make nonprofit work sustainable. You’re helping an organization keep good staff, maintain the tools it needs to operate effectively, and build capacity to serve more people.

Overhead also funds resilience. It gives nonprofits the ability to weather a crisis, adapt to changing needs, and seize opportunities for innovation. Without it, they’re left lurching from one emergency to the next — something I’ve seen too often in our region. Dedicated staff burn out. Programs shrink. Opportunities slip by, not for lack of good ideas, but for lack of capacity.

Why operations funding strengthens impact

So maybe the question isn’t “How much goes to overhead?” but “What does this organization need to do its best work?” That shift allows us to see overhead as an investment in impact rather than a drain on it.

When donors provide unrestricted support — funding that can be used for operations as well as programs — they give nonprofits the room to breathe, adapt, and plan ahead. They make it possible for organizations to build long-term sustainability rather than just survive year to year. And they help ensure that community needs are met with consistency and quality, not just good intentions.

A call to action for La Crosse-area donors

Here in the greater La Crosse area, our nonprofits are doing incredible work, often with fewer resources than they need. As donors and funders, we can help by shifting how we think about overhead. Instead of seeing it as money that never reaches the mission, we can recognize it as the very thing that makes mission possible.

I hope that we can demystify nonprofit overhead once and for all. Let’s stop treating it as something to minimize and start treating it as something to invest in. Because when we fund the full cost of nonprofit work — not just the programs we can see — we’re building a stronger, more resilient community for all of us.

That’s the kind of overhead worth supporting.