You give $100. How much actually helps the cause, and how much gets spent asking someone for the next $100? That is the basic question behind the fundraising efficiency ratio, a metric that looks at how much a nonprofit spends to generate charitable contributions.
The short answer is simple arithmetic: divide fundraising expenses by total contributions. Spend $20,000 to raise $100,000 and the ratio is 0.20, or 20 cents per dollar raised. Charity Navigator gives full marks at $0.20 or less and no credit above $0.50, but it only applies that test to donor-funded charities raising more than $2 million a year, which leaves most small and rural nonprofits outside the benchmark entirely.
It is a fair thing to wonder about, especially when donors hear stories about expensive campaigns, endless mailers, big events, or organizations that seem to spend an awful lot just to keep fundraising. Charity Navigator currently uses fundraising efficiency as one component of its financial assessment, calculating how much an organization spends to raise $1 in contributions.
But useful does not mean definitive. A low fundraising cost can reflect efficient operations, but it can also come from an established donor base, volunteer labor, an unusually large gift, or limited investment in growth. And spending on staff, technology, outreach, or fundraising itself is not automatically wasteful; underinvesting in this infrastructure can actually weaken nonprofit impact.
So, rather than chasing one “perfect” number, this guide looks at how the ratio works, what benchmarks mean, which other financial signals matter, and how to put all of that into context when giving in Miami County.
How the Fundraising Efficiency Ratio Works: A Starting Point for Nonprofit Financial Analysis
At its simplest, the fundraising efficiency ratio tells you how much a nonprofit spends to raise $1 in charitable contributions. It is one of the more straightforward numbers used in nonprofit financial analysis, because it takes a potentially fuzzy question — How expensive is this organization’s fundraising? — and turns it into something donors can actually compare.
The basic formula is:
Fundraising expenses ÷ charitable contributions = fundraising efficiency ratio
So imagine a nonprofit spends $20,000 on fundraising during a period and raises $100,000 in contributions:
$20,000 ÷ $100,000 = 0.20
In plain English, the organization spent 20 cents to raise each $1.
That general approach matches Charity Navigator’s current methodology. Its 2026 guide defines fundraising efficiency as the amount an organization spends to generate $1 in charitable contributions. For organizations to which the metric applies, Charity Navigator uses average fundraising expenses divided by average total contributions across the three most recent fiscal years, rather than relying on one potentially unusual year.
What goes into “fundraising expenses” can be broader than people expect. The National Council of Nonprofits describes them as costs involved in seeking, soliciting, or securing charitable contributions, including the fundraising portion of an employee’s salary and fees paid to fundraising consultants.
Current Form 990 instructions also include expenses related to fundraising campaigns, solicitation materials, advertising connected to fundraising, professional fundraising services, and allocated overhead. Direct expenses of fundraising events can be reported somewhat differently on Form 990, which is one reason two superficially similar organizations may not always produce perfectly comparable numbers.
Something important to note: there is not one universal calculation used by every evaluator. So the ratio answers one very useful question: How expensive is it for this organization to generate donations?
What it does not answer is: How effective is this organization at accomplishing its mission? That distinction is probably the most important thing to understand before using the number to decide where to give.
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What Is a Good Fundraising Efficiency Ratio?
Nobody loves imagining a donation disappearing into an endless loop of mailers, gala expenses, ads, consultants, and yet another fundraising appeal. That is why the fundraising efficiency ratio can feel so reassuring: it gives donors a concrete number to look at when asking how expensive it is for an organization to raise money.
But what is considered a good fundraising efficiency ratio? There is no single number that works for every nonprofit.
Useful benchmarks, not a universal cutoff
There is no official number that separates a “good” fundraising efficiency ratio from a bad one, but independent charity evaluators give us useful reference points.
Under Charity Navigator’s 2025 methodology, applicable donor-supported organizations receive the highest score for fundraising efficiency when they spend $0.20 or less to raise $1. Costs between $0.20 and $0.50 receive progressively fewer points, while spending more than $0.50 per dollar receives no points for that metric.
CharityWatch uses another framework. It considers an organization highly efficient when it spends $25 or less to raise $100 in public donations and directs at least 75% of expenses toward programs. Importantly, CharityWatch does not treat fundraising cost as a standalone verdict; its ratings combine fundraising efficiency with program spending and other financial analysis.
So there is no magic line where:
- $0.19 = good nonprofit
- $0.21 = bad nonprofit
These benchmarks are better used as reference points. Organization size, cause, donor base, fundraising strategy, and even an unusually large gift can move the ratio substantially from one year to another.
Why fundraising costs can vary
Two equally responsible organizations can have very different ratios because fundraising itself does not look the same everywhere. Costs can change depending on:
- The nonprofit’s size and age
- The cause it serves
- Whether it already has a loyal donor base
- Its reliance on events, direct mail, digital campaigns, or major gifts
- A new capital campaign or expansion effort
- Investments in staff, technology, or public awareness
- An unusually large contribution that temporarily makes the ratio look exceptionally low
Several circumstances can make higher costs reasonable, including a newly created organization, unusual bequests, challenges associated with a particular cause, and external events beyond the nonprofit’s control.
And very low expenses are not automatically a virtue either. Candid warns that nonprofits can actually weaken their long-term effectiveness by underinvesting in the people, technology, systems, and infrastructure they need to operate well. A tiny overhead or fundraising number can look attractive on paper while hiding an organization that lacks the capacity to grow or deliver its mission effectively.
So fundraising efficiency is worth examining. It just should not be allowed to make the whole decision by itself. And that is exactly where donors can get into trouble: a ratio measures the cost of raising money, not the value ultimately created with it.
Why a Low Fundraising Ratio Does Not Automatically Mean Greater Impact
A low fundraising ratio can look great on paper. If one organization spends 10 cents to raise a dollar and another spends 25 cents, it is tempting to assume the first one must be using donations more responsibly. But that number tells us about the cost of raising money, not necessarily about the quality or scale of the work that money makes possible.
This connects to what nonprofit researchers call the overhead myth. A 2026 analysis from Candid warns against judging nonprofit effectiveness primarily by how little an organization spends outside direct programs.
Staff, technology, communications, facilities, training, and other infrastructure are not distractions from the mission; they are often what allow the mission to happen at all. Chronic underinvestment can lead to staff turnover, weak systems, and organizations that simply do not have the capacity to grow their impact.
The National Council of Nonprofits makes the same point even more directly: there is no universal overhead percentage that proves one nonprofit is more effective than another. It recommends looking instead at what the organization actually accomplishes in its community.
MICOCF’s own history offers a useful local example. Before our Foundation had a full-time employee, volunteer board members balanced MICOCF with their regular jobs. Executive Director Tammy Booe described the organization as staying operational but struggling to grow or even make more residents aware that it existed. Once grant funding made a full-time position possible, she began speaking at local chambers, Rotary clubs, schools, and other organizations across Miami County.
If nobody has time to explain that a community foundation exists, fewer people know they can use it. Sometimes awareness, staff capacity, and infrastructure are part of what eventually creates more impact.
That does not mean those particular MICOCF expenses should be classified as fundraising expenses; we would need accounting records to determine that. The story illustrates a broader point: spending less is not automatically the same thing as doing more.
A Better Nonprofit Financial Analysis: What Else Should Donors Look At?
A fundraising efficiency ratio can tell you something useful, but a solid nonprofit financial analysis should go further. The better question is not simply, How cheaply does this organization raise money? It is, Is this organization financially healthy, transparent, and actually accomplishing what it says it will?
1. Where does the money go?
Start with the basic expense categories: program services, management and general expenses, and fundraising. Form 990 reporting makes those categories visible, which helps donors see how resources are being allocated.
Program spending is worth examining, but it should not become another simplistic “higher is always better” score. Charity Navigator’s current methodology uses a program expense ratio as one financial-health metric, but it does not evaluate charities on that number alone.
2. Is the organization financially sustainable?
A nonprofit can look efficient today and still be financially fragile tomorrow. Look at assets and liabilities, reserves or working capital, major year-to-year swings, and whether revenue seems overly dependent on one source.
Charity Navigator’s 2026 framework also considers liabilities relative to assets and, for eligible organizations, working capital, specifically because those figures help show whether a nonprofit can withstand revenue gaps and keep programs operating.
3. Is the organization transparent?
Good transparency makes it easier for donors to understand both the numbers and the story behind them. Useful things to look for include:
- Recent Form 990 filings or financial statements
- Clear descriptions of programs
- Leadership and governance information
- Explanations of how donations are used
- A willingness to answer reasonable donor questions
The National Council of Nonprofits describes financial transparency as central to preserving donor and community trust, while Candid encourages donors to use Form 990s alongside program, leadership, and financial information rather than treating the tax filing as the whole picture.
4. Is anything actually changing?
This is the piece a spreadsheet cannot answer by itself: impact.
Did students receive scholarships? Were programs sustained? Did families receive services? Was a historic resource preserved? Did the organization respond to a real community need?
Charity Navigator’s current system reflects this broader approach too: beyond finance and accountability, it separately evaluates areas such as impact and measurement, leadership, planning, and organizational culture.
For donors, the more useful formula is:
Efficiency + sustainability + transparency + demonstrated impact
—not simply lowest overhead wins.
How to Use Fundraising Efficiency Before You Give
A fundraising efficiency ratio is most useful as a question starter, not a final verdict.
Five quick checks before you donate
- Check what the ratio actually measures. Is it based on one year or several? Which expenses count as fundraising, and which contributions are included in the denominator?
- Look at more than one year. One capital campaign, major event, or unusually large gift can make a single year look much better—or worse—than the organization’s normal pattern.
- Compare similar nonprofits. A small rural community foundation and a national charity running large direct-mail or digital campaigns operate very differently. Charity Navigator itself classifies organizations by size and operational model rather than treating every nonprofit as identical.
- Read the number beside the impact. Ask what those expenses helped make possible: scholarships, grants, services, community programs, or other measurable outcomes. Candid specifically recommends pairing financial transparency with evidence of impact instead of using overhead alone as a proxy for effectiveness.
- Ask when something looks strange. A sharp increase in fundraising costs is worth understanding. Transparent nonprofits should be able to explain changes in expenses, strategy, or results; the National Council of Nonprofits identifies openness about finances and fundraising practices as an important part of maintaining donor trust.
Worth asking about: fundraising costs climb for several years without corresponding growth in contributions or mission activity.
Not automatically alarming: one year rises because the organization invested in a new campaign, donor system, event, communications effort, or additional capacity.
The goal is not to find the nonprofit with the prettiest ratio. It is to understand why the number looks the way it does and whether the organization can connect those expenses to responsible, visible work.
For organizations still forming, starting a nonprofit in Miami County is the first step, and donors comparing ratios can cross-check against ratings from the watchdog groups. The share of spending that reaches programs is the closely related number donors ask about.
Use the Fundraising Efficiency Ratio as a Tool, Not a Verdict
Caring about efficiency is smart. Donors should absolutely want to know whether an organization is using its resources responsibly. But a fundraising efficiency ratio is only one part of that picture. It tells you how much a nonprofit spends to raise charitable dollars; it does not tell you, by itself, whether the organization is financially sustainable, transparent, well governed, or creating meaningful results.
That is why the best giving decisions usually combine the numbers with the story behind them. Review MICOCF’s public financial information, explore the funds and local causes it supports, and ask questions about how a particular fund works. Then pair that information with the impact you actually want your gift to make in Miami County.
Giving with confidence does not mean finding the charity with the smallest expense column. It means understanding what an organization spends, why it spends it, and what that investment makes possible for the community.
Are you interested in learning more or contributing to our cause? Reach out with any questions you may have. With just one click, you can transform lives. Your donation has the power to create a significant change.
