---
title: A low overhead ratio means a good charity
summary: Overhead ratios say how a charity splits its costs, not what it achieves. A charity can spend almost nothing on overhead and achieve nothing, or invest in good systems and change thousands of lives.
verdict: misleading
conditions: [overhead-myth]
sources:
  - title: The Nonprofit Starvation Cycle
    publisher: Ann Goggins Gregory and Don Howard, Stanford Social Innovation Review
    year: 2009
    url: https://ssir.org/articles/entry/the_nonprofit_starvation_cycle
  - title: 3 Major Charity Groups Ask Donors to Stop Focusing on Overhead Costs
    publisher: The Chronicle of Philanthropy
    year: 2013
    url: https://www.philanthropy.com/news/3-major-charity-groups-ask-donors-to-stop-focusing-on-overhead-costs/
---

## Why people believe it

Overhead is one of the few numbers a donor can find, and it sounds like it answers the right question: how much of my gift reaches the cause?

## What’s true

Very high spending on fundraising or management can be a warning sign worth asking about. And the question behind the myth, whether my money is doing good, is exactly the right one.

## What’s misleading

The ratio can’t answer that question. It says how costs are split, not what they buy. Staff, data systems and evaluation are often what makes a program work, and charities that starve them to keep ratios low can end up less effective. In 2013 the leaders of GuideStar, Charity Navigator and the BBB Wise Giving Alliance, three groups that had popularized overhead ratios, published an open letter asking donors to stop treating overhead as a measure of performance.

## What to ask instead

What does this charity achieve per dollar, and how does it know? See the [Giver’s Checklist](/method/#checklist) and [the Overhead Myth](/diagnosis/overhead-myth/).