Program expense ratio

It's calculated as program service expenses ÷ total functional expenses, from Form 990 Part IX. Many watchdogs treat 75% or higher as healthy, though young or research-heavy organizations can legitimately run higher overhead.

It is one input to the CharityIndex financial grade — but it's a starting point, not a verdict: always read it alongside the multi-year trend and the organization's mission.

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• Program expense ratio, explained

Related terms

• Functional expenses — Functional expenses are a nonprofit's costs grouped by purpose — program services, management and general, and fundraising — as reported in Form 990 Part IX.
• Overhead — Overhead is the share of a nonprofit's spending that goes to management, general operations and fundraising rather than directly to programs.
• Cost to raise $100 — Cost to raise $100 is how much a nonprofit spends on fundraising to bring in $100 of donations — a measure of fundraising efficiency.