A nonprofit's visible service rests on less visible work that deserves honest planning, clear explanation and appropriate support.
By Arbab Naseebullah Kasi, Chief Executive Officer - CEO, Feel Worldwide Foundation Inc.
The finished picture depends on the threads beneath it: a painted metaphor for the work that sustains a mission.
The photograph shows the moment everyone hoped for: a class underway, a community event opening or a delivery reaching its destination.
Outside the frame, someone arranged the space, checked the records, answered questions, paid the bills and made sure the people doing the work had what they needed.
Those activities are easy to overlook because their success often looks like an absence of problems. The room is available. The information is accurate. The equipment works. Nobody has to interrupt the session to repair a preventable gap.
For nonprofit leaders, this creates a difficult communication task. The visible service is usually easier to explain than the work that makes it dependable. Yet a budget that recognizes only the visible moment can leave the organization struggling to provide it again.
A more useful conversation begins with a practical question: what does it actually take to deliver this work responsibly?
Look behind one ordinary day of service
Choose a real activity your organization already understands. Walk through what happens before, during and after it, including the work that participants do not see.
For an explicitly illustrative example, consider a small adult-learning programme. The class requires a facilitator and learning materials. It also depends on registration arrangements, scheduling, equipment preparation, participant communication and someone keeping financial records in order.
Some tasks belong specifically to that class. Others support several activities or the organization as a whole. The categories matter, but the first step is to notice the work before deciding where it belongs.
Ask the people who carry it out. A coordinator may know about repeated calls that never appear on the timetable. A finance colleague may identify reporting work that starts after the last session. A volunteer may be paying for supplies because nobody has created a reliable purchasing process.
Treat those observations as information to investigate. They are not automatic proof that every current process is necessary or well designed. They help reveal the real arrangement, including where apparent savings depend on someone quietly filling a gap.
Do not ask one percentage to explain an organization
The word “overhead” can turn a complicated operating picture into a simple judgment. A lower number sounds virtuous. A higher one sounds uncomfortable. Neither reaction tells us enough about the quality of the work.
The National Council of Nonprofits explains that overhead generally combines management and general expenses with fundraising expenses. Its guidance also warns against using overhead as a stand-alone measure of effectiveness and emphasizes transparency about both finances and outcomes. It notes that appropriate cost allocation can require professional judgment. National Council of Nonprofits guidance
That leaves leaders with a more demanding responsibility than defending a percentage. They need to explain what a cost supports, why it is reasonable and how the organization knows whether its work is useful.
A low ratio does not answer whether records are dependable or whether staff have the support to do their jobs. A high ratio does not establish that an investment was wise. The underlying decisions still need examination.
The aim is an honest description, not a more attractive label. Moving an expense into a different column to make a proposal look better would not change what the organization needs or what the money pays for.
Different kinds of work have different cost structures
A research laboratory and a neighbourhood service programme may both be nonprofits while needing very different operating arrangements.
In a study published in May 2016, Bridgespan examined the financial records of 20 selected nonprofits. Using its study definition, indirect costs ranged from 21 percent to 89 percent of direct costs, with a median of 40 percent. Fundraising costs were excluded from that analysis. The corrected article explicitly identifies direct costs as the denominator, not total spending. Bridgespan's original analysis
These historical findings from a small selected group are not a recommended rate, a current sector-wide average or a ranking of organizational quality. They illustrate variation that a single assumed allowance can miss.
The denominator deserves attention whenever a percentage appears. An amount expressed as a share of direct costs is different from the same amount expressed as a share of total costs. Comparing two numbers without checking their definitions can make a funding conversation less accurate rather than more informed.
For your own organization, begin with its activities and evidence. What systems must work? What skills are required? Which resources are shared? What is changing? The answers offer a stronger basis for discussion than copying a percentage from another organization.
A funder can make its approach visible
MacArthur Foundation provides a public example of explaining an indirect-cost policy rather than leaving applicants to guess. Its policy, effective January 2020 and updated October 2024, provides indirect-cost recovery of 29 percent of project costs for applicable project grants. The published policy includes exclusions and exceptions, including general operating support and the expedited small-grants programme.
Its definition of project costs includes both project-specific costs and certain shared costs that directly benefit the project. The 29 percent is applied to that defined base. It is not 29 percent of the resulting total grant. MacArthur Foundation's indirect-cost policy
This example does not establish a universal entitlement or a rate that every nonprofit should request. Its practical value is the clarity of the arrangement: the categories, calculation and scope are available for people to examine.
A smaller funding conversation can benefit from the same kind of clarity. What does the funder consider eligible? Which definition is being used? What would remain uncovered? Those questions are easier to resolve before a commitment than after work has begun.
Make the unfunded part of a proposal visible
An appealing opportunity can still leave an organization with costs it has not planned to carry.
Consider another explicitly illustrative example. A community programme estimates $6,000 for the activities a funder will cover. It also identifies $1,200 of necessary support costs outside that offer. If no other suitable funding is available, the proposal contains a $1,200 gap. Calling the award generous does not resolve the gap.
The next step is to discuss the options openly. Could the scope change? Could the timing change? Is there an appropriate existing resource that can cover the difference? Would another supporter fund it? Each option should be checked rather than assumed.
A smaller programme that can be delivered responsibly may be a better commitment than a larger one that relies on unplanned personal spending or work nobody has agreed to do. That is a planning judgment to make with the people responsible, not a reason to dismiss every partially funded opportunity.
Write down what is known, what is estimated and what still needs agreement. The distinction helps prevent an optimistic assumption from becoming an invisible obligation.
Think beyond this month's activity costs
An organization can cover today's bills and still have important future needs that are absent from the conversation.
Nonprofit Finance Fund's full-cost framework considers both immediate and longer-term resources. Its six areas include total expenses, working capital, reserves, debt principal repayment, fixed-asset additions and resources for organizational change. This is a planning framework for understanding needs, not a statement that every expense or reserve contribution is eligible under every grant. Nonprofit Finance Fund's full-cost framework
The useful question for leaders is what the current picture leaves out. Is a computer nearing replacement? Is a shared process taking increasing amounts of staff time? Would expanding an activity require training or equipment before anyone new can participate?
These questions should lead to priorities, not an unlimited wish list. Distinguish an essential repair from an attractive upgrade. Explain the consequence of waiting, the alternatives considered and the basis of the estimate.
Where formal budgets, grant rules or accounting classifications are involved, work with the organization's finance lead or qualified adviser. A general discussion of operating needs cannot replace the terms of a particular award or the judgment needed for financial reporting.
Explain support costs through the work they enable
People are more likely to understand a cost when they can see its purpose. That does not require a dramatic beneficiary story or a claim that every administrative dollar produces a measurable result.
Instead of presenting an unexplained technology expense, describe the function it supports. Instead of treating coordination as a vague necessity, explain what must be scheduled, checked or communicated and who is responsible.
Keep the description proportionate. If the proposed system is intended to reduce duplicated work, say that it is intended to do so and explain how you will check. Do not present the hoped-for benefit as an achievement that has already occurred.
It can help to prepare a short explanation alongside each significant shared cost: the purpose, the basis for the amount and the consequence of not providing it. This is an original planning suggestion, not a required accounting format. It gives board members, staff and supporters something concrete to discuss.
Leave room for questions about efficiency. Respecting necessary support work includes asking whether it could be done more simply, whether an unused service should continue and whether a proposed purchase addresses the actual problem.
Give the invisible work a place in decisions
At the next planning discussion, select one programme and trace its dependencies. Invite the people who understand delivery and the people who understand operations to compare what they see.
Identify one overlooked need, one uncertain estimate and one process that might be improved. Assign the checking work to someone with time and authority to do it. Return to the findings before approving an expanded commitment.
This can make a budget conversation more useful without making it more elaborate. The point is to replace assumptions with an account of how the work happens.
A mission needs aspiration. It also needs the ordinary arrangements that allow people to act on that aspiration repeatedly and responsibly. Recognizing those arrangements does not diminish the service. It gives leaders a clearer understanding of what they are asking people to sustain.
What essential work behind your organization's visible achievements deserves a more honest place in its next planning conversation?
