Fundraising Ratio

The fundraising ratio (also called fundraising efficiency or cost to raise a dollar) measures what percentage of a nonprofit's total spending goes toward soliciting contributions, grants, and other support. This metric is calculated from the fundraising expense column on Form 990 Part IX (Statement of Functional Expenses). A lower fundraising ratio is generally better, indicating that the organization spends less on solicitation relative to its total operations. Industry benchmarks suggest that fundraising expenses should typically represent no more than 15-20% of total expenses for a well-established organization, though younger organizations or those launching major capital campaigns may temporarily spend more. The BBB Wise Giving Alliance recommends that fundraising expenses should not exceed 35% of total contributions. A related metric, the cost to raise a dollar, divides total fundraising expenses by total contributions received — if a nonprofit spends $0.25 to raise each dollar, its fundraising efficiency is considered strong. However, fundraising costs vary significantly by method: events and direct mail tend to be expensive, while online giving and major donor cultivation can be more efficient. Some organizations classify joint costs (activities that combine fundraising appeals with educational content) partly as program expenses, which can artificially lower the reported fundraising ratio. NonprofitTruth's Efficiency Score considers fundraising costs indirectly through the administrative overhead factor, which captures all non-program spending.