Enter each cost and the % going to each function — each row should total 100%. Defaults are illustrative.
| Expense | Amount | Prog % | M&G % | Fund % |
|---|---|---|---|---|
| Salaries & benefits | ||||
| Rent & occupancy | ||||
| Professional fees | ||||
| Office & supplies | ||||
| Technology | ||||
| Travel | ||||
| Other |
| Function | Amount | % of total |
|---|---|---|
| Program services | — | — |
| Management & general | — | — |
| Fundraising | — | — |
| Total expenses | — | 100% |
Program ratio = program expenses ÷ total expenses. Charity raters often look for roughly 65%+ on program, but context matters: the “Overhead Myth” letter from Charity Navigator, BBB Wise Giving Alliance and the former GuideStar warns against judging nonprofits on this ratio alone.
The funding that doesn’t force you to starve overhead
The starvation cycle happens because restricted grants underfund M&G. Good Circles builds unrestricted income — about 10% of each merchant’s net profit, conservatively ~$72 per active supporter per year (an estimate), recurring and free for your nonprofit — the kind of money that lets you fund real infrastructure instead of hiding it.
Claim a Founding Nonprofit spot →Sources & tools
Free first
- IRS Form 990 & instructions — the official Statement of Functional Expenses and how to report it.
- The Overhead Myth — why the overhead ratio is a poor measure of effectiveness.
- Propel Nonprofits — cost allocation — free guidance and templates for allocating shared costs.
Paid — optional labor-savers
- Nonprofit accounting software / a bookkeeper — tracks functional expenses automatically by class or fund. Worth it when manual spreadsheets no longer keep your allocations consistent.
Last verified 2026-06-17. Figures and rules change — verify at the source before you act.
FAQ
What are functional expenses?
Functional expenses classify spending by purpose rather than by type. The three functions are program services (your mission work), management and general (M&G, the cost of running the organization), and fundraising. The IRS Form 990 requires this breakdown in the Statement of Functional Expenses.
How do I allocate a shared cost across functions?
Allocate on a reasonable, documented basis — for example, splitting a staff member’s salary by the share of their time spent on program, management, and fundraising, or splitting rent by square footage. Keep your method written down and apply it consistently.
What is a good program-expense ratio?
Many charity raters look for roughly 65% or more of expenses going to program, but there is no universal rule and context matters. Underfunding overhead to inflate the ratio (the “starvation cycle”) harms organizations, so allocate honestly rather than to a target.
Is the program ratio the only thing funders look at?
No. The sector’s “Overhead Myth” campaign urged funders to look at results, transparency, and financial health rather than the overhead ratio alone. Use this ratio as one input, not a verdict.