What Percentage of Donations Go to Administrative Costs?

As contributors, we want our money to help the cause we care about. However, administrative expenditures such as salaries, rent, utilities, and other overhead expenses are incurred by every nonprofit organization. Therefore, it’s critical to understand what proportion of donations are used for administrative expenses.

A charity should devote at least 65% of its total spending to program activities and no more than 35% to fundraising and administrative costs, according to the Better Business Bureau’s Wise Giving Alliance. This means that a minimum of 65 cents of every dollar donated must really be used to offer the program or service.

The organization’s net profit from the fundraising effort is divided by the activity’s total cost to calculate fundraising ROI (return on investment). The fundraising ROI would be 4:1 ($10,000 divided by $2,000) if an organization raised $10,000 and spent $2,000 on fundraising. A higher ROI indicates that the organization’s fundraising efforts are more successful.

Calculated by dividing program expenses by total expenses, a decent fundraising efficiency ratio should be at least 75%. This shows that the organization is devoting a sizeable percentage of its resources to achieving its goals and using the remainder to pay for overhead and fundraising expenses.

Another crucial indicator for assessing the success of fundraising activities is the price of raising one dollar. It is determined by dividing the overall cost of fundraising by the total amount collected. The cost to raise a dollar, for instance, is $0.10 if a company spends $10,000 on fundraising and raises $100,000. A decreased cost per dollar raised shows that the organization is making effective use of its resources to raise more money.

The final factor is the administrative fundraising rate, which is the proportion of total costs that an organization spends on fundraising and administration. An organization’s use of its resources to fulfill its objective and provide program services is indicated by a lower administrative fundraising rate.

In conclusion, donors should make sure that their donations are being used effectively to support the cause they care about, even though administrative fees are necessary for a nonprofit organization to operate effectively. Donors can choose where to direct their funds by understanding the many measures used to assess administrative and fundraising effectiveness.