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There are no nationally consistent norms or enforced standards for allocating expenses between the three categories.

One-fourth of nonprofits reporting $1 million to $5 million in contributions report zero fundraising costs, as do nearly one-fifth of those reporting more than $5 million in contributions.ġ3% of nonprofits report zero management and general expenses.ħ% charged all accounting fees to programs, and another 20% split them across more than one category-despite the fact that Form 990 instructions use accounting fees as an example of what is meant by management and general expenses. Our experience is that the standard most often quoted by foundations is 75%.īut, the traditional split of expenses between program, management/general, and fundraising is close to meaningless because there is little consistency between nonprofits in how they record these expenses.Ī study reported in Functional Expense Reporting for Nonprofits, The Accounting Profession’s Next Scandal?, by Kennard Wing, Teresa Gordon, Mark Hager, Thomas Pollak, and Patrick Rooney, published in 2006, found that:ģ7% of nonprofits with at least $50,000 in contributions report zero fundraising costs. If all expenses of your nonprofit organization are necessary and reasonable, and all are required for your agency to provide its services and serve its clients, then the way you split expenses on the statement of functional expenses should be irrelevant to funders.Īmong charity watchdog organizations, the Better Business Bureau says at least 65% of expenses should be for programs Charity Navigator says the most efficient charities spend 75%+ on programs and the American Institute of Philanthropy says at least 75% is ideal. Your answer to the question is typically taken from the statement of functional expenses, which breaks down expenses by three categories – program, management/general, and fundraising.

Starting today, you might choose to change the way you’ve been answering that question. Prospective funders often ask nonprofit organizations “What percentage of my donation goes directly to the cause?” If your correct answer to this question is anything less than 100%, no one should donate to your nonprofit organization.