{"id":2667,"date":"2026-07-15T02:43:56","date_gmt":"2026-07-15T02:43:56","guid":{"rendered":"https:\/\/betterfunding.org\/?p=2667"},"modified":"2026-07-15T02:43:57","modified_gmt":"2026-07-15T02:43:57","slug":"insights-challenging-the-elephant-in-the-room-administrative-and-overhead-costs","status":"publish","type":"post","link":"https:\/\/betterfunding.org\/es\/insights-challenging-the-elephant-in-the-room-administrative-and-overhead-costs\/","title":{"rendered":"Insights | Challenging the elephant in the room: administrative and overhead costs"},"content":{"rendered":"

If you’ve ever applied for a grant, you’ve probably been asked some version of this question:<\/p>\n\n\n\n

“What percentage of your budget goes towards administration?”<\/strong><\/p>\n\n\n\n

This is such a common question that most non-profits expect to be asked it, but at Better Funding  we’re not convinced it’s the useful indicator many people assume it to be. <\/p>\n\n\n\n

Funders should absolutely expect organisations to be accountable. They have a responsibility to make sure their money is being spent wisely, that programmes are making a difference, and that communities are benefitting from the funds.<\/p>\n\n\n\n

But somewhere along the way, we’ve started treating low administrative costs as a sign of a more effective organisation, and that does a disservice to both non-profits and funders.<\/p>\n\n\n\n

How do we determine \u201cadministrative costs”?<\/strong><\/h3>\n\n\n\n

One of the obvious challenges is that there doesn’t seem to be a shared definition of administrative costs.<\/p>\n\n\n\n

One funder might count finance staff as overheads. Another might split those costs across projects. Some organisations include IT, HR, communications, monitoring and evaluation and governance; others don’t. This creates confusion and frustration for many organisations.<\/p>\n\n\n\n

So when we’re all measuring different things, we need to question whether these percentages are telling us anything useful.<\/p>\n\n\n\n

Why are we still relying on this measure? <\/strong><\/h3>\n\n\n\n

Administrative costs have become one of the most familiar metrics in philanthropy. Many funders ask about them almost automatically, and many organisations anticipate the question before it is even asked. But perhaps the more interesting question is why we continue to place so much weight on this figure in the first place.<\/p>\n\n\n\n

Like many funding practices, it has been passed from one generation of funders to the next until it has become accepted as a marker of organisational quality. Yet as funding evolves to better reflect complexity, local realities and long-term organisational health, it is worth asking whether administrative percentages are still telling us what we think they are.<\/p>\n\n\n\n

A measure that may once have been intended to promote accountability has gradually become a proxy for effectiveness, despite there being little evidence that organisations with lower overheads consistently achieve better outcomes.<\/p>\n\n\n\n

Chasing an arbitrary number<\/strong><\/h3>\n\n\n\n

The pressure to keep overheads low creates some skewed incentives.<\/p>\n\n\n\n

We’ve all seen organisations proudly announce that “95% of every pound goes directly to our programmes.” It sounds impressive, but what does it actually mean?<\/p>\n\n\n\n

In reality, many organisations end up moving costs around in their budgets because they know what funders want to see. Not because they’re trying to be dishonest, but because they’ve learned that certain numbers are viewed more favourably than others, or a specific percentage might even be specified in a funder\u2019s terms and conditions.<\/p>\n\n\n\n

This is certainly not the culture of openness and transparency that we\u2019d like to promote. <\/p>\n\n\n\n

Running a good organisation costs money<\/strong><\/h3>\n\n\n\n

Good organisations and effective programmes don’t run themselves. If you want reliable financial management, you need a good accountant. If you want staff who are well supported, you need HR.<\/p>\n\n\n\n

And if you want to keep people safe, monitor your impact or comply with regulations, all of that costs money too.<\/p>\n\n\n\n

Perhaps one of the biggest ironies is that many of these so-called “administrative costs” are actually the very things that help organisations manage risk.<\/p>\n\n\n\n

Strong financial systems, safeguarding measures, monitoring and evaluation, cybersecurity, staff training, governance and internal policies all contribute to making organisations more accountable, resilient and effective. Yet these are often the first costs that organisations feel pressure to minimise in order to present a more attractive budget.<\/p>\n\n\n\n

Funders rightly expect organisations to demonstrate good governance and sound risk management. But if we want organisations to have the systems and capacity to manage risk well, we also need to recognise that these investments come at a cost.<\/p>\n\n\n\n

The same applies to collaboration. Funders often encourage organisations to work in partnership, build alliances and engage meaningfully with communities. Yet collaboration isn’t something that simply happens alongside programme delivery. It requires time to build relationships, coordinate with partners, facilitate meetings, navigate different perspectives and learn together.<\/p>\n\n\n\n

These activities are rarely visible as direct programme costs, but they are often what make programmes stronger, more sustainable and more responsive to the communities they serve. If we value collaboration, our budgets need to recognise the real cost of making it possible.<\/p>\n\n\n\n

None of these things directly deliver a programme, but they are an absolute necessity to making good programmes possible.<\/p>\n\n\n\n

Sometimes it feels as though non-profits are being judged for spending money on the very things that help them operate well and deliver programmes effectively.<\/p>\n\n\n\n

People are not overheads<\/strong><\/h3>\n\n\n\n

Behind every budget line are the people who make an organisation’s mission possible.<\/p>\n\n\n\n

Whether intentionally or not, the pressure to minimise administrative costs can communicate that investing in people is somehow less legitimate than investing in programmes. Yet organisations don’t deliver impact on their own. People do.<\/p>\n\n\n\n

When organisations feel they need to keep overheads as low as possible, they can become reluctant to improve salaries, provide staff benefits, invest in professional development or strengthen organisational wellbeing because they are concerned about how those costs will be perceived by funders.<\/p>\n\n\n\n

Ironically, these are often the investments that help organisations retain experienced staff, build stronger teams and deliver better outcomes for the communities they serve.<\/p>\n\n\n\n

If we value impact, we should value people.<\/p>\n\n\n\n

What could we ask instead?<\/strong><\/h3>\n\n\n\n

We’d much rather funders spent less time worrying about administrative percentages and more time asking more valuable questions like:<\/p>\n\n\n\n