How Nonprofits Can Better Manage Overhead Expenses [SUBSCRIBERS-ONLY]

Managing a nonprofit organization’s overhead (management and general) expenses is just as important as managing program and fundraising expenses. Most nonprofits would not dispute this statement. However, most organizations tend to put an inordinate focus on managing program and fundraising expenses and ignore or not give equal attention to managing overhead expenses.

There are only three expense categories required to be summarized on nonprofit financial statements (statement of activities and functional statement of expenses) under United States generally accepted accounting principles (GAAP): program, fundraising, and management and general. These categories also appear on the statement of functional expenses on page 10, Part IX, of the Form 990.

If managing overhead expenses was no big deal, this category would not be included in the “big 3” expense categories on the two most important financial reporting mechanisms, GAAP financial statements and the Form 990.

To correct this imbalance, we need to draw attention to, and take a more active role in, managing overhead expenses. Using these three approaches will help your organization gain momentum for more active management of overhead.