The pandemic has amplified the challenges and misconceptions about nonprofit arts organizations and their financial operations, specifically concerning overhead and direct/indirect costs. Andrew Taylor (program director and associate professor of Arts Management at American University) joins Jill to discuss the prevalent issue of the "overhead myth".

Here are the key takeaways from episode 6:

The Overhead Myth: A prevailing practice in the nonprofit sector suggests that lower overhead costs signify efficiency and responsible financial management. This myth perpetuates misconceptions about how organizations should allocate their resources and don’t take into consideration different goals, audiences, and structures. Using a one-size-fits-all approach to measure efficiency or success is a misaligned understanding of an organization’s financial health.

Propel Nonprofits and Nonprofit Finance Fund as Resources: If a nonprofit is looking for support in understanding or reframing its financial reporting, Propel Nonprofits and Nonprofit Finance Fund provides financial resources, training, consulting, and tools for the sector.

Open Dialogue: Conversations between leaders, the board, and donors about nonprofit financial management can help change the perception of overhead and promote a better understanding of the unique financial needs of a nonprofit. Open dialogue can also encourage different perspectives and models for understanding nonprofit financial health and operational costs.

Direct and Indirect Costs: Jill and Andrew underscore the importance of distinguishing between direct and indirect costs. Nonprofits need to address both types of costs to deliver their services effectively and to understand financial health.

Jill and Andrew’s conversation underscores the need to challenge the overhead myth, recognize the unique financial nature of nonprofits, have open financial discussions, and equip future leaders with the knowledge and tools to manage nonprofit finances better.