Can you imagine a for-profit business prevented from reinvesting in itself to promote growth and efficiency? A business that was restricted from implementing new technology, providing higher salaries for better job retention, or making infrastructure improvements? They wouldn’t be in business for very long.

Well, that’s the world in which nonprofit organizations currently live.

For decades, a dangerous myth has been perpetuated: that a "good" nonprofit spends as little as possible on itself. Donors and policymakers judge organizations by their "overhead ratio," a metric that treats the very tools of success — technology, fair wages, marketing, staff training and development and infrastructure — as if they were moral failings.

At Nonprofit Westchester, we are working to change this outdated way of thinking. As part of our 2026 Advocacy and Policy Agenda we are lobbying our elected officials and educating stakeholders on the necessity of appropriate overhead, aka core operating costs, to maintain and grow effective programs. Nearly 400 strong, our organization represents nonprofit organizations that hold together the fabric of our communities, providing services from childcare to those that address food insecurity, health, mental health, domestic violence, substance abuse and much, much more. All this, at a time when government services and funding are being reduced.

What does funding overhead do?

When we talk about "overhead," we aren't talking about gold-plated executive suites. We are talking about the cybersecurity that protects domestic violence survivors’ data. We are talking about the human resources department that ensures that workers are properly vetted and trained. We are talking about a living wage for workers who are the frontline of our community’s mental health crisis. By capping these costs at arbitrary levels — often 10% or 15% — we aren't "saving money"; we are forcing nonprofits into a "starvation cycle" that weakens services for people who need them most and forces costly staff turnover.

To support often challenging work and to ensure quality and best practices, nonprofits need to spend on finance, human resources, technology, data, compliance, marketing and professional development. Yet contracts often cap these expenses well below what is needed, leaving nonprofits to absorb these necessary operational expenses and unfunded mandates.

The consequences of these limits are visible across the sector. Nonprofits are frequently forced to use antiquated software, operate out of crumbling facilities, and pay salaries so low that their own employees qualify for the very social services the organization is trying to distribute. This is not fiscal responsibility; it is institutional neglect. Critics argue that limits are necessary to prevent fraud and ensure donor dollars reach the "needy." But this is not a true measure of impact. An organization could have 0% overhead and still be completely ineffective at its mission. Conversely, an organization might invest 30% on overhead to hire the best researchers and implement the most rigorous data tracking, resulting in a 500% increase in lives saved. Which one is the better investment?

New York nonprofits need these reforms

When a business invests in research and development or better infrastructure, we call it growth. When a nonprofit does it, we call it waste. This double standard is stifling innovation and the most effective service delivery at a time when social problems are becoming more complex.

To solve these problems, Nonprofit Westchester is calling for these reforms:

Eliminate arbitrary caps on administrative and overhead costs

Accept verifiable organizational calculations

Fund the full cost of mandated services

We must fund the actual price of doing business in the 21st century. That means allowing nonprofit leaders — the experts on the ground — to determine where dollars are most needed. It’s time to stop measuring how little a nonprofit spends and start measuring how much good it actually does, and can do.

Jan Fisher is executive director of Nonprofit Westchester.

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