Overhead ratios can help potential donors weed out spendthrift not-for-profits. Yet a narrow focus on this one metric tends to unfairly penalize organizations making reasonable current expenditures and strategic investments. To communicate with donors that “impact” (the indirect effects of measurable outcomes) is the best measure of nonprofit effectiveness, add supplemental financial statements and break out administrative items in your annual report. Such enhancements can help you explain how expenditures result in enhanced programs that positively affect lives.

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