Nonprofit efficiency based on overhead ratios misleading?

I read an interesting article in NPQ making a case that judging efficiency based on overhead, salaries and other financial ratios may be misleading and a perpetuated myth. If you have concerned partners, board members, donors and community stake holders, here are some excerpts and a link to the full article.

The rise of the pervasive narrative that “overhead is waste” seemed to start down a more extreme path with the growth of charity rating services like GuideStar, Charity Navigator, and the BBB Wise Giving Alliance more than a decade ago. Despite many efforts to generate a more reasoned dialogue, there is a continuing and powerful mindset that charities are routinely “wasting money on overhead.”

An argument is made that “nonprofit scholars, managers, and donors should move away from concepts and measures of efficiency based on financial ratios, and toward ones that embrace maximizing what nonprofits are able to make and do.

“It’s a frustrating paradox that Congress doesn’t care very much about how much private CEOs—corporate CEOs—make. Basically, if it’s in the private sector, we’re not going to worry too much about it. But if it’s in government or nonprofit-land, it’s fair game.”

About Nonprofit Waste, Overhead, and Financial Subservience