Stop saying that 80% of nonprofit funding comes from individual donors Its misleading.

They look at whether the overhead rate is excessive due to expenses unrelated to your mission. If the IRS sees any red flags, your nonprofit could get audited, and your board will have to justify the expenses. You can typically find your administrative expenses on your annual income statement between the cost of goods sold and the operating profit sections. Divide your total sales by your total administrative expenses to calculate your sales to administrative expenses ratio. Or let’s compare fundraising expenses for a local zoo with expenses for an international university with thousands of loyal alumni. Non-profit boards are in a constant struggle to define the correct level of fundraising and operational expenses.

Income Sources

My calculation indicates that our hypothetical nonprofit saw about a 5% increase in recurring donations this month. So, although it’s good news the organization saw an increase in monthly recurring donations, 5% is actually below the 10% benchmark. To start, you’ll need a range of each of your donors’ total contributions for a given period.

Your Nonprofit Has Lost an Executive. Now What?

• Understanding the main types of nonprofit fundraising is crucial for developing a well-rounded and effective fundraising strategy.
• Rita Auritt is Manager and Governance Advisor at BoardEffect which is a division of Diligent Corporation.
• Platforms like Facebook and Instagram can significantly increase your organization’s visibility, helping you connect with potential donors on a personal level.
• There are several ratios that nonprofits may consider including with their regular financial management and reporting.
• What’s important to keep in mind is that portions of your staff’s salaries can probably be allocated to program expenses.
• This misconception has been recognized by agencies such as Charity Navigator, and in 2023, the administrative expense ratio was removed from Charity Navigator’s rating system.

Jennifer was named YPTC Partner in 2007 and served as YPTC Managing Partner from 2018 to 2024. As an advocate for excellence in nonprofit financial accounting services for nonprofit organizations management, Jennifer has dedicated herself to educating Executive Directors and Board members on best practices in the field. When Jennifer joined YPTC in 2003, the firm consisted of just over 10 staff members. Since then, she has helped grow YPTC into one of the fastest growing accounting firms in the country. Throughout this growth, Jennifer has fostered countless opportunities for staff members to grow and expand their skills, contributing to YPTC’s consistent recognition as a Best Place to Work. Jennife’s passion for promoting the nonprofit’s mission-driven work extends beyond her professional endeavors.

To get the big picture of your nonprofit’s fundraising performance, you should conduct a detailed SWOT analysis.

• To make the most of Facebook Live Fundraising, it’s important to be creative in how you interact with your supporters.
• I don’t write grants or run campaigns, but I help you figure out what’s realistic, achievable, and aligned with your team’s strengths.
• In reality it was the smaller charity that could least “afford” to lose this development officer – and the net loss was surely far more than $10,000.
• My calculation indicates that our hypothetical nonprofit saw about a 5% increase in recurring donations this month.
• Here are five items you should prioritize in your marketing budget (plus an extra honorable mention, just for good measure).

Large costs can also be staged out over a few years to spread expenditures out over time. Rent, bills, utilities, Internet and telephone bills are all fixed expenses. These expenses are the most common operating costs, as a nonprofit organization may not be able to perform general services, programs or tasks without these readily available.

And that’s not to mention how common measurements of financial health, like percentage of budget going to programs for example, are impacted by inconsistencies in reporting. The media and donors have access to your IRS Form 990 through GuideStar, an online database, and they use the data to inform their opinions about your nonprofit’s performance. Watchdog groups attempt to hold nonprofits accountable by policing their spending. However, much like the IRS, they don’t have a consistent, reliable way to assess nonprofit spending on fundraising.

Online Fundraising Events

Twitter polls provide a way for nonprofits to engage supporters and gather feedback. These polls can create a sense of involvement among supporters, encouraging more active participation and donations. Sponsorship request letters offer nonprofits a way to establish partnerships with businesses. These partnerships can provide substantial support, enhancing the nonprofit’s resources and reach. Bake sales offer nonprofits a fun and interactive way to raise funds.

If you choose to charge a consultation fee, you should be open and honest with your clients about it. In addition, you should make sure that the price is fair, taking into account both the value of your services and market rates. If you price too much, you risk turning away potential customers, and if you charge too little, you risk damaging your reputation and level of skill. You’ve got the budgeting basics down, but how do you ensure your budget is ultimately effective?

Understanding and Managing Nonprofit Overhead Costs

While a lower FER is generally better, remember every organization is different, and the right balance depends on factors like your size and goals. If your organization relies on a broad base of small donors rather than a few major ones, your percentage (and your FER) will look different. Both FER and the administrative expense ratio are important to donors because they indicate how much of their contributions go directly to your cause.

April 14th, 2025

by Phong in Bookkeeping

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