Donors and watchdogs look at the program expense ratio — the share of spending that goes to mission (programs) versus administration and fundraising. Program expense over total expense.
The example
$520k program of $650k total.
| A | B | |
|---|---|---|
| 1 | Item | Value |
| 2 | Program | 520000 |
| 3 | Total | 650000 → 80% |
The formula
The formula:
How it works
How it works:
- Program expense is spending directly on the mission; total expense adds admin and fundraising.
- Divide for the program ratio — the headline efficiency figure.
- The remainder is overhead:
1 - program_ratio(admin + fundraising). - Common guidance is ~65%+ to programs, but healthy overhead funds the org’s capacity.
The “overhead myth.” A rock-bottom overhead ratio can signal underinvestment in staff, systems, and evaluation — not virtue. Sector leaders now argue overhead alone is a poor measure of effectiveness. Report the ratio, but pair it with outcomes; starving infrastructure to hit a number can weaken the very programs donors care about.
Try it: interactive demo
Program expense and total expense.
Variations
Overhead ratio
The remainder:
Admin ratio
Management only:
Fundraising ratio
Cost of raising:
Pitfalls & errors
Overhead isn’t waste. Too-low overhead can mean an under-resourced org — pair with outcomes.
Consistent classification. How costs split between program and admin drives the ratio — be consistent.
Same period. Use one fiscal year for all expense figures.
Practice workbook
Frequently asked questions
How do I calculate the program expense ratio in Excel?
What's a good program ratio?
How do I split out admin and fundraising?
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