Operating costs: why this is (really) not the right criterion for choosing where to donate

Emilie Combres

Communications Officer
Reading time: 5 minutes

In France, according to the National Institute for Youth and Popular Education (INJEP), nearly a quarter of people over the age of 16 have never donated to a charity—most often due to concerns about how their money is used.^[1] Many say they would rather “help directly,” usually because they fear their donations might be partly wasted on management, communication, or administrative costs. In our own discussions and in man-on-the-street interviews, this idea frequently resurfaces: “I don’t want my money going into offices or marketing.”

Behind this reluctance lies a persistent misconception: that a “good” charity is one that devotes nearly all of its budget to “fieldwork” and minimises any so-called overhead or administrative spending. However, this intuition is misleading and can sometimes do more harm than good. This article aims to explain why the percentage spent on overhead is not a good indicator for choosing a charity and what criteria you should look at instead to identify organisations that genuinely make a difference.

What exactly is meant by "operating costs"?

In the nonprofit sector, “overhead costs” encompass all expenses required for the organisation’s daily functioning: salaries of support staff (accounting, HR, and management), office rent, IT systems, donation management tools, legal fees, communications, and fundraising, as well as impact evaluation and monitoring mechanisms.

These expenses are often contrasted with “program costs,” meaning direct actions in the field—for example, purchasing bed nets in the case of the Against Malaria Foundation – Mieux Donner, or distributing vitamin A supplements for Helen Keller International – Mieux Donner. But this distinction is blurrier than it appears. Is an impact assessment conducted in the field part of the “mission” or an administrative cost? The time a project manager spends working in the field might involve both coordination and operational duties.

Moreover, accounting standards are not harmonised. In France, charities are not required to use a single standard when classifying expenses. As a result, two organisations can run similar activities but report very different overhead ratios simply due to differences in how they present their finances. This problem of comparability isn’t unique to France: a U.S. study (Lecy & Searing, 2015) showed that the absence of strict accounting standards sometimes allows charities to “massage the figures” to artificially lower their overhead, making cross-organisation comparisons highly unreliable.^[2]

No link between the level of operating costs and the actual impact

Besides being a fuzzy metric, numerous studies have shown that overhead ratios do not correlate with impact—that is, with the eventual number of lives saved or improved, or tonnes of CO₂ avoided. A charity that spends 25% of its budget on overhead can, in fact, be more effective than one spending only 5%, if the remaining resources are directed toward highly effective, well-targeted interventions.

What counts is not the precise accounting split but the ratio between resources used and results achieved. To obtain credible, lasting results, an organisation often needs to invest in its people, infrastructure, monitoring tools, and strategic planning. A study published in Science in 2014 (Gneezy et al.)^[3] showed that when overhead costs are covered by a benefactor, people actually give more—even though the organisation’s total expenses are the same. What changes is not efficiency, but perception.

Conversely, when charities try to show rock-bottom overhead ratios, they can fall into what’s known as the “nonprofit starvation cycle.” Put simply: the more donors demand low overhead, the more organisations trim essential functions, which weakens their effectiveness—leading to more mistrust, creating a vicious cycle.^[4] In a review of 25 years of data, Schubert and Boenigk (2019)^[5] found that German nonprofits cutting overhead did not see improved impact; sometimes they fared worse.

Why does this misconception persist?

The focus on overhead persists mainly because of a well-known psychological bias: it’s easier to understand a percentage than to evaluate actual impact. Numbers like “7% overhead” seem clearer than “one year of healthy life for €50.” This “evaluability bias” leads us to overvalue what we can easily compare, even when it’s not the most relevant criterion.

Past scandals have also reinforced public wariness. One of the most prominent involved the French Cancer Research Association (ARC) in the 1990s. This well-known charity raised large amounts to fund medical research, but in 1995 it was revealed that its president had embezzled funds for personal use. Beyond the fraud, the public was shocked by high general expenses, opaque remuneration, and dubious financial schemes, all of which fuelled the impression that money wasn’t going where it should. The scandal was huge, intensively covered in the media, and left a lasting mark on the collective imagination.

Since then, regulatory controls have become much stricter. In France, major public-interest charities must now publish their accounts, which can be consulted online or in the specialised press. The Court of Auditors also has the right to inspect organisations receiving public subsidies or donations with tax advantages—and regularly publishes detailed reports on their finances and fund use, even if these mechanisms don’t always audit ultimate real-world impact.

In other words, the ARC scandal doesn’t reflect how the sector operates today. Yet, the reflex to suspect non-field spending lingers, as if any expenditure besides “fieldwork” is inherently suspect. This view overlooks a basic reality: without management, strategy, or evaluation, an NGO cannot function efficiently. Well-spent overhead is often what enables field action to exist, endure, and improve.

Why is it time to change our perspective, and how can we achieve this?

Faced with this distrust, several actors in the nonprofit sector have called for a paradigm shift. In 2013, major American ratings platforms launched the campaign The Overhead Myth, urging donors to move beyond the overhead ratio as a performance^[6] indicator. At the same time, organisations like GiveWell assess nonprofits based not on administrative costs but on cost-effectiveness: concretely, how much does it cost to save a life or provide a year of schooling?

This approach deserves to be adopted in France: as long as people focus on cost ratios, nonprofits will be tempted to underinvest in their own effectiveness—and thus, their actual impact.

There are ways to shift this perception. Studies show that providing clear information about what overhead funds, and asking donors to consider the value added by these expenses significantly reduces resistance to funding such costs.^[7]

You can also use a simple analogy: when choosing a restaurant, you don’t ask what portion of your meal pays for the chef or the electricity bill. You assess the experience, the value for money, and the service. It’s the same for a nonprofit: what matters isn’t how much is spent on overhead, but what is achieved for every euro received.

Our approach at Mieux Donner and our advice

At Mieux Donner, we select charities not on their general expense ratios, but on their ability to demonstrate significant, concrete, and measurable impact—past or future. Some recommended organisations have very low overhead, such as the Against Malaria Foundation. Others, like the Clean Air Task Force, have higher operational structures but deliver equally impressive results.

For Mieux Donner itself, we systematically publish our full financial reports, and we do not take commissions on donations made through our platform to recommended organizations. This may help remove a psychological barrier for hesitant donors, allowing you to support high-impact programs with confidence.

But this change in perspective can’t come from charities alone. It also depends on civic engagement: daring to ask the right questions, talking about these issues with others, and sharing good practices. Only by overcoming this misplaced distrust can we redirect donations toward the most effective initiatives.

The idea that overhead costs are a good indicator of effectiveness is not only false—it’s counterproductive. It drives nonprofits to make risky tradeoffs, fuels mistrust, and weakens the real impact of donations.

Instead of seeking to minimise a percentage, let’s focus on maximising what really counts: lives saved, suffering alleviated, and lasting progress. The surest way to improve organisations is not to restrict their resources, but to help them use every euro as effectively as possible.

Notes and references

[1] https://injep.fr/tableau_bord/les-chiffres-cles-de-la-vie-associative-2023-dons-aux-associations/↩︎

[2] https://doi.org/10.1177/0899764014527175↩︎

[3] https://www.science.org/doi/10.1126/science.1253932↩︎

[4] Gregory, A.G. & Howard, D. (2009) « The Nonprofit Starvation Cycle ». Stanford Social Innovation Review
https://ssir.org/articles/entry/the_nonprofit_starvation_cycle↩︎

[5] Schubert, P. & Boenigk, S. (2019) « Empirical Evidence From a German Context ». NVSQ
https://doi.org/10.1177/0899764018824669↩︎

[6] https://mb.cision.com/Main/501/9429255/133588.pdf?↩︎

[7] Karlsson-Larsson, H., Moche, H. & Västfjäll, D. (2025) « Reducing Overhead Aversion… ». Current Research in Behavioral Sciences 8 : 100171
https://doi.org/10.1016/j.crbeha.2025.100171 ↩︎