Charity Expenses Statistics (2026)

Q: What is the IRS requirement for program vs. overhead spending?

The IRS doesn't require that nonprofits spend any particular portion of their income on each category. It just wants nonprofits to report how they spend their money. However, charity watchdogs and grantmakers have their own benchmarks (typically 65–75% program spending).

Q: Is it bad if my nonprofit has high administrative expenses?

Not necessarily. There is no single accepted standard percentage of overhead that can be applied to every nonprofit organization. Context matters. Universities, hospitals, and research organizations legitimately have higher overhead. The key is transparency and demonstrating that overhead investments enable better mission delivery.

Q: How much should we budget for volunteer screening and background checks?

For most nonprofits, identity verification and background screening represents a modest, one-time expense per volunteer—typically under 1% of total administrative budget. VolunteerBadge offers $5 FCRA-compliant checks, making this investment accessible for organizations of any size.

Q: Can overhead costs be a fundraising advantage?

Yes, increasingly so. The belief that overhead is negative is changing. Funders who practice 'trust-based philanthropy' actively want to fund overhead that strengthens your infrastructure. Be transparent about your spending and its impact.

Q: What expenses should appear under 'program' vs. 'management and general'?

Any staff member who spends more than 10 percent of their time delivering programs should have that time directly allocated to Program Services. Estimates must be supported by time studies, job descriptions, or documented allocation logic. Good documentation is essential.

Q: How do I know if my nonprofit's expense ratio is healthy?

Charity evaluators look for ratios between 65% and 85%, depending on the nonprofit's type and size. That said, new organizations or those investing heavily may run lower ratios for a period of time, yet still be considered effective. Compare yourself to peer organizations in your sector.

Data-driven breakdown of nonprofit spending, program ratios, overhead costs, and financial benchmarks for U.S. charities—essential reading for nonprofit leaders.

The American nonprofit sector spends billions every year on its mission—but how efficiently, and where exactly does your dollar go? Understanding charity expense structures is essential for nonprofit boards, donors, and community leaders making informed decisions about resource allocation and financial health. This report synthesizes the latest 2024–2026 data on how America's nonprofits allocate funds across programs, administration, and fundraising, plus practical benchmarks from charity watchdogs and IRS Form 990 filings. For a deeper dive into nonprofit finances and sector trends, visit our nonprofit industry statistics hub.

Methodology & Honesty Note: This report sources data from the IRS, Candid, Lilly Family School of Philanthropy at Indiana University, charity watchdogs (Charity Navigator, CharityWatch, BBB Wise Giving Alliance), academic research, and Form 990 filings. We prioritize primary sources and real-world data; every statistic linked below is verifiable. Some figures reflect survey estimates or peer-reviewed research rather than comprehensive population counts. This is a living report, refreshed annually.

Key takeaways

3.5T U.S. nonprofits spend annually

75% benchmark for efficient program spending

97% of nonprofits have under $5M budgets

59% of U.S. nonprofits are "very small" (<$50K annual budget)

The Scale of U.S. Nonprofit Spending

U.S. nonprofits raise an aggregate $3.7 trillion and spend $3.5 trillion every single year. This spending power makes the nonprofit sector a critical economic force— an estimated 12.5 million people work for U.S. nonprofits, making it the third largest employer.

Yet the sector is dominated by small, community-focused organizations. The majority (59%) of U.S. nonprofits are "very small" with annual budgets less than $50,000, and 97% have budgets of less than $5 million. These organizations are lean and frugal, adept at deploying scarce resources effectively and making every dollar count.

Revenue from fees for services & government contracts 80%+

Revenue from individual giving 67%

Revenue from foundation grants 19%

Composition of nonprofit revenue sources, 2023–2024. Candid; Lilly Family School of Philanthropy

Program Spending: The Core Expense Benchmark

Donors, grantmakers, and nonprofit rating agencies focus heavily on one metric: what percentage of a charity's budget goes to programs versus overhead? Charity Navigator updated its rating system in 2023 and now generally gives full credit to those organizations whose ratio of program expenses is 70% or more of their total expenses. CharityWatch considers a charity to be highly efficient when program spending is 75 percent or higher.

Other benchmarks vary slightly but cluster around a similar range: The Better Business Bureau (BBB) Wise Giving Alliance says that generally no more than 35% of a nonprofit's budget should be spent on operating expenses. In other words, a nonprofit should be spending at least 65% of its expenses on programs.

75%

70%

65%

Nonprofit program spending benchmarks by leading charity watchdogs, 2023–2026. CharityWatch; Charity Navigator; BBB Wise Giving Alliance

Breaking Down Functional Expenses: Three Categories

The IRS and Financial Accounting Standards Board (FASB) require nonprofits to report expenses in three functional categories:

Program Expenses. Nonprofit program expenses are the direct costs an organization incurs to carry out its stated mission. These are the costs of delivering goods or services to beneficiaries in direct fulfillment of a tax-exempt purpose—costs that wouldn't exist without those mission-driven activities.

Management and General (Administrative) Expenses. Management and general expenses are those tied to your nonprofit's overall operations and management. These administrative expenses are used to keep the nonprofit running and are similar to the operating expenses of a corporation. Examples include executive salaries, accounting, legal services, board meetings, and office rent.

Fundraising Expenses. Fundraising Costs: Costs that involve seeking, soliciting, or securing charitable contributions. Examples: the portion of a staff member's salary allocated to development, the fees paid to a fundraising consulting firm, and the fees paid to register the charitable nonprofit for solicitation purposes.

Program Service Expenses ~75%

Management & General (Admin) ~15–20%

Fundraising ~10%

Typical functional expense allocation for efficiently-run nonprofits meeting watchdog standards. Note: distributions vary widely by organization type and mission. Nolo; FASB ASC 958

The Overhead Myth: Why Low Admin Costs Can Be Dangerous

A persistent misconception haunts the nonprofit sector: the assumption that low overhead spending equals good stewardship. Unfortunately, the desire to keep overhead costs as low as possible has had harmful effects on many nonprofits. Nonprofits are often pressured to keep overhead costs dangerously low to be more appealing to donors.

The "starvation cycle" occurs when nonprofits feel pressured to keep overhead costs down, and in-turn sacrifice infrastructure, general improvements, and investments that promote employee wellbeing. To cut down on overhead, organizations may fail to update equipment and technology, pay non-competitive salaries, skimp on employee benefits, and even replace paid staff members with volunteers—in turn sabotaging their efficiency and longevity.

In response, Charity Navigator, Guidestar, and BBB issued a joint statement acknowledging the problems it caused. Research supports this pivot: There's a growing body of evidence suggesting that organizations that invest more of their budget on overhead may actually be more likely to achieve their mission compared to those that skimp.

Strong nonprofit infrastructure—including robust compliance systems, staff training, and volunteer screening—requires investment, and that investment pays dividends in trust and operational stability.

Charitable Giving Trends: Where the Money Comes From

Understanding expense allocation starts with understanding income. The Lilly Family School of Philanthropy at Indiana University reported that the total US charitable giving reached $592.50 billion in 2024. That represents a 6.3% increase in nominal dollars (3.3% adjusted for inflation) over the prior year.

Individuals accounted for just over 66% of all charitable giving in 2024, contributing $392.45 billion. An AP-NORC poll found that roughly 76% of U.S. adults donated financially over the past year, though most contributions were $500 or less.

Total U.S. charitable giving (nominal dollars), 2022–2024. Lilly Family School of Philanthropy; Candid

Spending Patterns by Nonprofit Type & Size

Not all nonprofits spend in the same way. Charity evaluators look for ratios between 65% and 85%, depending on the nonprofit's type and size. That said, new organizations or those investing heavily may run lower ratios for a period of time, yet still be considered effective.

Administrative ratios depend on mission complexity, geography, program delivery model, and scale: research universities and large institutional research projects routinely show much higher "overhead" rates than small direct-service charities because their infrastructure supports research, compliance and facilities (examples cited include 48–68% overhead in academic contexts).

For example, a food bank may need minimal administrative overhead; a research institute or hospital system naturally requires higher infrastructure costs. Harvard University has a 68% overhead rate for on-campus research, while Iowa State University has a 48% rate. These are not signs of waste—they reflect mission complexity.

Common Overhead Expense Categories

Administrative and management costs typically include:

Administrative personnel: salaries and benefits for staff who handle your organization's general operations, but who aren't directly delivering your programs, such as your executive director, finance team, public relations, and HR staff.
Direct overhead costs or facility expenses for running the organization, such as leases, rent, mortgage payments, debt financing and interest payments, and utilities (water, electricity, and gas).
Professional services fees related to legal counsel, bookkeeping, auditing, and accounting for charitable organizations.
Insurance, compliance, and technology systems

For nonprofits implementing volunteer background checks and identity verification (critical for risk management), those costs fall into management and general expenses—a legitimate and necessary investment in organizational integrity.

How Nonprofits Should Budget for Compliance & Risk Management

82% of nonprofits say they are using AI somewhere in their operations, with financial tasks being the most commonly reported use. This shift reflects a broader recognition: good governance and compliance systems protect mission delivery. In 2026, expense management is no longer a back-office function. It is a public credibility system.

Nonprofits should allocate funds for:

Compliance and governance (audits, legal reviews, Form 990 preparation)
Staff training and professional development
Technology infrastructure for donor management, financial reporting, and safety
Identity verification and background screening for volunteers and staff—essential for organizations serving vulnerable populations
Internal controls and monitoring systems

These investments strengthen trust and prevent costly failures downstream. Character reference checks and comprehensive vetting are not luxuries; they are safeguards that protect your organization's reputation and the people you serve.

Donor Concerns & Financial Pressures in 2025–2026

Financial strain is acute. 55% of nonprofit leaders indicated that their top organizational concern going into 2025 was financial health. The majority of that group specifically cited revenue uncertainty amid increasing expenses as a key source of their worries.

The challenges are real: 92% of nonprofits bring in less than $1 million per year. With margins tight and missions expanding, many organizations struggle to justify "overhead" spending—even though that spending is often essential for survival.

When we focus solely or predominantly on overhead, we can create what the Stanford Social Innovation Review has called "The Nonprofit Starvation Cycle." We starve charities of the freedom they need to best serve the people and communities they are trying to serve. The people and communities served by nonprofits don't need low overhead, they need high performance.

What this means for your volunteer program

Expense management and volunteer screening go hand in hand. Allocating budget for background checks and identity verification is not an extravagance—it's a wise investment in organizational stability and donor confidence.

At VolunteerBadge, we've designed our background check service specifically for nonprofits. Our $5 FCRA-compliant background checks include identity verification, with no monthly fees or hidden costs. You pay per check, and every check strengthens your compliance posture and protects your mission.

When donors ask "where does my money go?"—and they will—you can confidently point to investments in robust governance, staff and volunteer screening, and internal controls. These are not overhead "waste"; they are the infrastructure that makes your mission trustworthy and sustainable.

Ready to strengthen your volunteer program with compliant screening? Sign up for VolunteerBadge today and join hundreds of nonprofits protecting their communities and their budgets.

For more on managing nonprofit finances and volunteer safety, explore our related articles: Affordable Volunteer Background Check: 2026 Compliance Guide, 100 Church Statistics (2026), and Volunteer Retention Statistics (2026).

Download the data

⬇ Download the data (.xlsx)

Frequently asked questions

Q: What is the IRS requirement for program vs. overhead spending?
The IRS doesn't require that nonprofits spend any particular portion of their income on each category. It just wants nonprofits to report how they spend their money. However, charity watchdogs and grantmakers have their own benchmarks (typically 65–75% program spending), which heavily influence donor perception and grant eligibility.

Q: Is it bad if my nonprofit has high administrative expenses?
Not necessarily. There is no single accepted standard percentage of overhead that can be applied to every nonprofit organization. Nonprofits spend varying amounts of their budget on administrative costs, depending on the scope and structure of their operations. Context matters. Universities, hospitals, and research organizations legitimately have higher overhead. The key is transparency and demonstrating that overhead investments enable better mission delivery.

Q: How much should we budget for volunteer screening and background checks?
This depends on your organization's size and risk profile. For most nonprofits, identity verification and background screening represents a modest, one-time expense per volunteer—typically under 1% of total administrative budget. VolunteerBadge offers $5 FCRA-compliant checks, making this investment accessible for organizations of any size. Bulk screening and import workflows simplify the process for growing volunteer bases.

Q: Can overhead costs be a fundraising advantage?
Yes, increasingly so. The belief that overhead is negative is changing. Indeed, more people are realizing that costs may have nothing to do with how effective a nonprofit is. Funders who practice "trust-based philanthropy" actively want to fund overhead that strengthens your infrastructure. Be transparent about your spending and its impact.

Q: What expenses should appear under "program" vs. "management and general"?
Any staff member who spends more than 10 percent of their time delivering programs should have that time directly allocated to Program Services. Estimates must be supported by time studies, job descriptions, or documented allocation logic. Guessing is no longer defensible. Good documentation is essential.

Q: How do I know if my nonprofit's expense ratio is healthy?
Charity evaluators look for ratios between 65% and 85%, depending on the nonprofit's type and size. That said, new organizations or those investing heavily may run lower ratios for a period of time, yet still be considered effective. Compare yourself to peer organizations in your sector, not universally. When in doubt, consult a nonprofit accountant.

Sources & references

About this report: First published July 2026. Last updated July 20, 2026. This is a living report, refreshed annually with the latest IRS Form 990 data, charity watchdog benchmarks, and nonprofit sector research. Educational content, not legal or financial advice; consult a nonprofit accountant or attorney for guidance specific to your organization.