How to Calculate the Fundraising Efficiency Ratio

To calculate the fundraising efficiency ratio, divide a nonprofit’s total fundraising expenses by its total contributions for the same fiscal year. A result of 0.20 means the organization spent 20 cents to raise every dollar it brought in. The BBB Wise Giving Alliance treats anything at or below 0.35 as a passing mark under Standard 9 of its accountability guidelines.¹

The Formula

The math fits on an index card:

Fundraising Efficiency Ratio = Total Fundraising Expenses ÷ Total Contributions

Say a nonprofit reported $200,000 in fundraising expenses and $1,000,000 in contributions last year. Divide $200,000 by $1,000,000 and you get 0.20. Twenty cents of every donated dollar went toward the cost of asking for it. Multiply by 100 to express the result as a percentage. Donors and watchdog groups use both formats, so pick whichever your audience will read more easily.

Lower is better. An organization spending $50,000 to raise $1,000,000 (0.05, or 5%) is getting far more out of its development budget than one spending $400,000 to raise the same amount (0.40, or 40%).

Where to Find the Two Numbers on Form 990

Both figures come from IRS Form 990, the annual information return most tax-exempt organizations must file to keep their status under Section 501(c)(3).² Form 990 is public. Organizations must make it available for inspection, and databases like Candid and ProPublica host searchable copies online.

Total contributions sit on Part VIII (Statement of Revenue), Line 1h. That line adds up gifts, grants, and similar amounts received during the year, pulling together individual donations, foundation grants, corporate sponsorships, and comparable philanthropic support. It does not include government contract revenue or program service fees, which appear elsewhere on the form.³

Total fundraising expenses sit in Part IX (Statement of Functional Expenses), Column D. This column captures every cost tied to soliciting contributions: development staff salaries, direct mail campaigns, event logistics, postage, and the share of overhead attributable to fundraising. Part IX breaks all spending into four columns (total, program services, management and general, and fundraising), so you can see at a glance how the organization allocates its budget.³

Smaller organizations file Form 990-EZ instead. They report contributions on Line 1 of Part I, but the 990-EZ does not break expenses into the same functional columns. If you are evaluating a smaller nonprofit, you may need its audited financial statements or a fundraising expense breakdown from the organization directly.

Reading the Result

Most people find the “cost per dollar raised” framing easiest to grasp. A ratio of 0.12 means 12 cents to raise a dollar. A ratio of 0.35 means 35 cents. That language turns an abstract decimal into something a board member or prospective donor can evaluate on the spot.

CharityWatch uses a related metric, cost to raise $100, and maps it to letter grades. An organization that spends $4 or less to raise $100 earns an A+; one spending $60 or more gets an F.⁴ Converting between the two formats is straightforward: a ratio of 0.15 equals $15 to raise $100. A condensed version of the CharityWatch scale:

A+ (0–4% cost per $100): exceptionally efficient
A / A- (5–15%): strong performance, well below the industry ceiling
B+ through B- (16–30%): acceptable, though worth examining the underlying costs
C+ through C- (31–40%): below average; look at trends over time
D or F (41%+): a significant share of donations is consumed by fundraising costs

The BBB Wise Giving Alliance draws its line at 35 cents on the dollar.¹ Treat that as a ceiling, not a target. Many established organizations operate well below it.

Adjustments Before You Trust the Number

A high ratio does not always signal waste, and a low ratio does not always prove good management. Context matters more than most donors realize.

New organizations almost always show high ratios. Building a donor base from scratch costs far more per dollar raised than renewing gifts from people who already give. A startup nonprofit spending 50 cents to raise a dollar in year one may look alarming on paper, but if those donors give again for the next decade, the long-term cost drops sharply.

Event-heavy fundraising skews the number too. Galas, auctions, and charity runs carry direct costs (venue rental, catering, entertainment) that organizations running primarily online or direct-mail campaigns avoid. Two nonprofits raising the same total can post very different ratios simply because of the channels they use.

Size matters. Smaller organizations lack the economies of scale that bring per-donor costs down. A national organization sending 500,000 direct mail pieces negotiates bulk postage rates a local food bank sending 5,000 letters never will.

The ratio also says nothing about program quality. An organization could spend just 5 cents per dollar raised and still run mediocre programs. Fundraising efficiency measures one narrow dimension of financial health and should never be the sole basis for a giving decision.

Joint Cost Allocation

This is where the ratio gets slippery. When a nonprofit sends a mailing that both educates the public about its mission and asks for a donation, accounting rules allow the cost to be split between program expenses and fundraising expenses. Less spending shows up in the fundraising column, and the ratio looks better than it otherwise would.

Under FASB ASC 958-720, an organization can allocate joint costs this way only if the activity meets three tests: purpose (the activity would have been conducted even without the fundraising appeal), audience (the recipients were chosen for reasons beyond their likelihood to donate), and content (the communication includes program-related information that serves an educational purpose on its own). If all three are satisfied, the split is permitted. If any one fails, the entire cost goes into the fundraising column.⁵

Organizations report joint costs on Part IX, Line 26 of Form 990, which shows the total joint cost alongside the amounts allocated to program services and to fundraising. If Line 26 carries a large figure with a disproportionately small share assigned to fundraising, dig deeper. Aggressive joint cost allocation is one of the most common ways organizations make their ratio look more favorable than it really is. CharityWatch adjusts for this in its ratings.⁴

Watch the Trend, Not Just the Year

A single year’s ratio is a snapshot. The more useful exercise is calculating it for three to five consecutive years and watching the trajectory. An organization whose ratio climbs from 0.15 to 0.30 over three years is heading in the wrong direction regardless of where it falls on a rating scale in any given year. A young nonprofit whose ratio drops from 0.45 to 0.20 over the same period is doing exactly what a growing organization should.

Comparisons across organizations work best when you match similar types. A university with a mature alumni network and a disaster-relief organization that ramps up solicitation after emergencies operate in fundamentally different environments. Same mission area, similar size, similar age produces far more meaningful conclusions than raw ranking across the entire nonprofit sector.

One last practical point. If a nonprofit you are evaluating has no Form 990 available through Candid, ProPublica, or its own website, you cannot run this calculation at all. That absence is itself worth weighing.

1
Wise Giving Alliance. BBB Standards for Charity Accountability
2
Internal Revenue Service. Exemption Requirements – 501(c)(3) Organizations
3
Internal Revenue Service. Instructions for Form 990 Return of Organization Exempt From Income Tax (2025)
4
CharityWatch. Our Charity Rating Process
5
Internal Revenue Service. Instructions for Form 990 Return of Organization Exempt From Income Tax (2025) – Section: Part IX Line 26