The Myth of the Inefficient Nonprofit

By: Porter Durham, Partner

“Nonprofit efficiency.”

The words can appear contradictory together, at least in the minds of many donors. The phrase lands like “Jumbo shrimp” or “Deliberate speed,” or worse yet, “Government efficiency.”

In truth, the nonprofit sector, like any other, has some very efficient players. They deploy funds carefully, thoughtfully, and on time. And they do so with a minimum of operational cost, what in the business world would be referred to as “drag” or “friction.” Great nonprofits also raise funds from donors efficiently, spending less time and money to gather more support. This effort at reducing friction means that more donated money actually gets to the organization’s programs, to do the work the donor intends.

So what does unnecessary friction in this donative system actually cost, and how does a thoughtful philanthropist figure out how much of his donation is actually getting to the desired object or purpose? As is usual in many such situations,  numbers help to tell the story, and over time, calculable best practices present themselves.

Several studies concerning donative and fundraising efficiency have been undertaken over the years. One of the most comprehensive, although dated to a degree, was posted by Syracuse University in 2017 in its blog Accounting@Syracuse. It reviewed the IRS Form 990’s of some of the largest and best known nonprofit organizations in the the US. It used as its baseline the published “best practices” of the Charities Review Council and Charity Watch. Both organizations consider an organization using between 65-75 percent of its donation funds for programming to be highly efficient. This would leave 25 to 35 percent of funds for fundraising (if applicable) and administrative expenses. Other sources, as recently as 2025, suggest that for fundraising efficiency alone, for each dollar raised, the organization should only be spending 20 cents or less to raise that dollar (Kindsight Blog). Arguably, for a private foundation, the cost per each dollar deployed to programs should be even less, given that there are no imbedded fundraising costs.

About Grant Philanthropic Advisors:
We’re an independent firm helping clients to focus and maximize their philanthropy—in turn, strengthening the fabric of our communities. Founded in 2019, we help donors move from responsive patterns of giving by assisting clients to identify values and become more strategic in their philanthropy. Our goal is to help donors to become more effective as change-makers. We work with foundations (large and small staff teams), donor advised fund holders, multi generational families, individuals, philanthropy supporting organizations and corporations to design philanthropic strategies.