Nonprofit organizations' awareness of and preparation for legislation, regulation, and increasing scrutiny

Legislation, regulation, and accounting standards are factors in a nonprofit organization's overhead (general and administrative expense plus fundraising costs), and rising overhead can harm the public's perception of the organization's ability to fulfill its mission, thus impeding its ability to raise funds. This project explores nonprofit employees' and board members' awareness of and concern about external issues that can impact overhead; what kinds of responses nonprofits might consider in light of pressure to reduce overhead; and the most effective way to provide education if awareness was found to be subpar. Awareness was measured using an online questionnaire; responses from nonprofit senior leadership, fundraising leadership and management, and members of boards of directors were especially significant as these are the nonprofit cohorts that generally make decisions that impact overhead. Findings indicated a disconnect between the value placed on the overhead rate by donors to nonprofit organizations and the organization's likely response to rising overhead. These findings suggest a need for significant dialog between nonprofit organizations and donors about overhead, an industry-wide effort to understand donors' tolerance for overhead, and additional research among nonprofit leadership to resolve discrepancies in perception at various levels. The continued ability of the nonprofit community to carry on its work is dependent on its fundraising ability; that in turn is dependent on having an overhead rate that is acceptable to donors.