What Percentage of Granting Organizations’ Expenses Goes to Administering Grants vs. Raising Funds?
Granting organizations play a crucial role in the philanthropic sector, providing much-needed funding to individuals, non-profits, and other entities. However, the operations of these organizations involve more than just distributing funds. They also need to raise funds and administer the grants, which includes processing applications, monitoring grant usage, and reporting outcomes. A common question that arises in this context is: what percentage of a granting organization’s expenses goes towards administering grants versus raising funds? This article aims to shed light on this topic.
Understanding the Expenses of Granting Organizations
Before diving into the specific percentages, it’s important to understand the different types of expenses that granting organizations incur. These can be broadly categorized into three areas: program expenses, administrative expenses, and fundraising expenses. Program expenses are those directly related to the organization’s mission, including the actual grants. Administrative expenses cover the costs of managing the organization, such as salaries, rent, and office supplies. Fundraising expenses are the costs associated with raising money, such as hosting events or hiring a fundraising consultant.
Percentage of Expenses for Administering Grants
The percentage of expenses that goes towards administering grants can vary widely among granting organizations, depending on factors such as the size of the organization, the complexity of the grants, and the efficiency of the organization’s operations. However, according to a study by the Urban Institute, the median administrative expense ratio for public charities in the U.S. is around 13%. This includes not only the costs of processing grant applications but also other administrative tasks such as financial management and governance.
Percentage of Expenses for Raising Funds
Similarly, the percentage of expenses that goes towards raising funds can also vary among granting organizations. According to the National Center for Charitable Statistics, the average fundraising efficiency ratio for public charities in the U.S. is around 10%. This means that for every dollar spent on fundraising, these organizations raise an average of .
Striking a Balance
While it’s important for granting organizations to minimize their administrative and fundraising expenses, it’s also crucial to ensure that these functions are adequately funded. After all, an organization that doesn’t invest in fundraising may struggle to raise enough money to fulfill its mission, and an organization that doesn’t invest in administration may struggle to manage its grants effectively. Therefore, the goal for granting organizations should be to strike a balance, spending enough on administration and fundraising to support their operations, while also maximizing the amount of money that goes directly towards grants.
In conclusion, the percentage of a granting organization’s expenses that goes towards administering grants versus raising funds can vary widely. However, on average, these organizations spend around 13% of their expenses on administration and around 10% on fundraising. The rest goes towards their program expenses, including the actual grants. By understanding these percentages, we can gain a better understanding of how granting organizations operate and how they use their resources to fulfill their mission.