Different types of nonprofit organizations have different cost structures.
Flat and too low overhead rates, regardless of the nonprofit profile, hamper nonprofits’ operational stability, depriving them from the means to invest in essential organizational infrastructure.
At governance level, create the ground for questionable workarounds and fundamental inefficiency embedded in the efforts to fit overheads hurdle rates at the expense of the program impact focus.
A last but not least consequence is the undermining of trust between the actors on both sides of the funding equation.
Sector segmentation, correct terminology and cost classification are essential procedural steps to support a wind of change in funding. Nonprofits must step up on transparency, communication and education efforts on what-it-takes to deliver and accelerate the impact.
Pay-What-It-Takes Philanthropy, Jeri Eckhart-Queenan, Michael Etzel, Sridhar Prasad, May 2016,