Capping fundraising ratios: should there be a maximum cost per pound raised?

The debate in brief

Few questions provoke more frustration in the charity sector than: "How much of my donation goes to the cause?" The public wants a simple answer. The sector insists there is not one. Somewhere between these positions lies a genuine and unresolved argument about whether there should be a maximum acceptable cost for raising a pound.

Fundraising ratios, the amount a charity spends on fundraising for every pound it raises, are one of the most visible and most contested metrics in the sector. The Charity Commission requires charities to report fundraising costs in their annual accounts, and these figures are publicly available. Media coverage routinely highlights charities with high fundraising ratios, and public polling consistently shows that donors care deeply about how much of their money reaches the front line.

The sector's response has been almost unanimously opposed to caps or benchmarks. Charities argue that fundraising is an investment, that new charities need to spend more to build a donor base, and that arbitrary thresholds would punish organisations working in unpopular causes or with hard-to-reach donors. The public, meanwhile, continues to judge charities by their fundraising costs, whether the sector thinks they should or not.

Quick takeaways

The arguments

The case against caps

The charity sector's opposition to fundraising ratio caps is near-universal, and the arguments are well-rehearsed. The Chartered Institute of Fundraising, NCVO, and the Charity Finance Group have all argued that fundraising ratios are a poor measure of efficiency because they ignore context.

A new charity launching its first regular giving programme may spend 50p or more for every pound raised in its first year. That is not waste; it is investment. The donors acquired this year will give for years to come, and the lifetime return may be five or ten times the initial acquisition cost. Judging that charity by its year-one ratio would be like judging a business by its first quarter revenue without looking at its customer acquisition strategy.

The cause itself matters enormously. Charities working on popular, high-profile issues such as cancer, children, and animals find it far easier to attract donations than those working on stigmatised issues such as prisoners' rehabilitation, drug dependency, or immigration advice. A charity working on an unpopular cause may need to spend significantly more per pound raised simply because the fundraising environment is harder. A cap would effectively punish charities for working on causes the public finds less appealing.

There is also a real risk that caps would distort behaviour. If charities know they will be judged or penalised for exceeding a threshold, they may cut fundraising investment to stay below the line, even when additional investment would generate significant net income for beneficiaries. The paradox of fundraising ratios is that spending less on fundraising can mean raising less in total, leaving beneficiaries worse off.

The case for some form of benchmark

The public's instinct that charities should not spend unlimited amounts on fundraising is not unreasonable. There are genuine cases where fundraising costs are disproportionate, where charities spend more on raising money than they deliver in services, or where fundraising agencies extract significant income while the charity itself sees little net benefit. Without any benchmark, there is no basis for distinguishing between a charity that is investing wisely in growth and one that is haemorrhaging money on ineffective fundraising.

The Charity Commission has periodically flagged concerns about charities with very high fundraising ratios. In its 2020 research on charity accounts, the Commission noted that a small but significant number of charities were reporting fundraising costs that exceeded 50% of their total expenditure, and that in some cases the commission payments to professional fundraisers absorbed the majority of the gross income raised.

Consumer research supports the idea that the public wants some form of standard. The Charities Aid Foundation's annual UK Giving report and the Charity Commission's Public Trust surveys have consistently found that donors rank "proportion of money going to the cause" as one of the most important factors in deciding whether to support a charity. If the sector refuses to engage with this concern, the public will continue to make judgements based on whatever information is available, which is typically the crude ratio of fundraising costs to income.

Advocates of benchmarks argue that the answer is not a hard cap but a framework that helps donors understand what reasonable fundraising costs look like in different contexts. A charity launching a new appeal might reasonably spend more than an established one with a loyal donor base. A benchmark system that accounted for charity size, age, and cause area could provide useful context without creating the perverse incentives that a flat cap would produce.

The accountability gap

A third perspective is that the debate about caps is a symptom of a deeper problem: the sector's failure to develop and communicate meaningful measures of fundraising effectiveness. The charity sector talks about "investment in fundraising" rather than "fundraising costs," and while the reframing is conceptually sound, it can come across as evasive when the public is asking a straightforward question.

The overhead ratio myth, the idea that lower overheads automatically mean a better charity, has been debunked many times. But debunking a myth is not the same as replacing it with something better. The sector has not offered donors a clear, accessible alternative to the fundraising ratio as a way of assessing whether a charity is raising money responsibly. In the absence of such an alternative, the crude ratio persists.

The evidence

The Charity Commission's annual return data shows enormous variation in fundraising ratios across the sector. Analysis by the Charity Finance Group found that among charities with income over one million pounds, the median fundraising cost ratio was approximately 18p per pound raised, but the range extended from under 5p to over 60p. The variation correlated strongly with charity size, age, and income mix: charities heavily dependent on public fundraising had higher ratios than those with significant statutory income or investment returns.

Academic research has reinforced the sector's concerns about the behavioural effects of ratio-based judgements. A 2014 study by Gneezy, Keenan, and Gneezy published in Science found that when overhead costs are covered by a separate funder, donors give significantly more, suggesting that overhead aversion is a real psychological barrier to giving. Research by the Overhead Myth campaign in the United States, led by GuideStar, Charity Navigator, and the Better Business Bureau Wise Giving Alliance, found that organisations penalised for higher overheads invested less in staff development, technology, and infrastructure, reducing their long-term effectiveness.

The Charity Commission's Public Trust and Confidence survey has consistently found that the proportion of funds reaching the cause is one of the top three factors influencing public trust in charities. In 2025, 41% of respondents said that knowing more about how charities spend their money would increase their trust, and 29% cited concerns about fundraising costs as a reason for reduced confidence.

In the United States, several states have attempted to impose caps or disclosure requirements on fundraising ratios. The Supreme Court struck down a North Carolina law capping professional fundraiser fees at 20% in Riley v. National Federation of the Blind (1988), ruling that it violated the First Amendment. This precedent has limited the scope for legislative caps in the US, though disclosure requirements remain widespread. In the UK, where there is no equivalent constitutional protection for fundraising speech, legislative caps would face different legal terrain but have never been seriously proposed.

Current context

The debate about fundraising ratios has been given new energy by the cost-of-living crisis. With household budgets squeezed, donors are scrutinising charity spending more closely. The Charities Aid Foundation's UK Giving Report 2025 recorded a decline in the number of people giving to charity for the fifth consecutive year, and those who continue to give report being more selective about which charities they support and more attentive to how their money is used.

The Charity Commission's updated Statement of Recommended Practice (SORP) for charity accounting, effective from January 2025, has improved the transparency of fundraising cost reporting. Charities must now provide more detailed breakdowns of fundraising expenditure, including the costs of donor acquisition, donor retention, and fundraising management. This additional granularity should, in principle, help donors and regulators distinguish between investment in growth and genuinely disproportionate spending.

The rise of charity comparison platforms has added a new dimension. While the UK does not have a direct equivalent of the US's Charity Navigator, platforms such as Charity Excellence Framework and Open Charities provide data on charity finances, and media outlets periodically publish rankings based on fundraising efficiency. The sector has criticised these rankings as misleading, but their popularity reflects genuine public demand for comparative information.

The Fundraising Regulator's Code of Fundraising Practice does not address fundraising ratios directly, focusing instead on how fundraising is conducted rather than how much is spent on it. The Charity Commission's approach has been to query outliers rather than set thresholds: charities whose annual returns reveal unusually high fundraising costs may receive correspondence from the Commission asking them to explain the figures, but this falls short of formal regulatory action.

Last updated: April 2026

What this means for charities

Charities should be honest with themselves about their fundraising economics. Not every charity should be spending the same proportion of income on fundraising, but every charity should know what its fundraising costs are, how they compare to relevant benchmarks, and whether the investment is generating adequate returns.

Boards and trustees should be asking for fundraising return-on-investment data, not just income figures. The relevant question is not "how much did we spend on fundraising?" but "what is the net income generated per pound of fundraising expenditure, and how does that compare to the previous year and to similar organisations?" A rising fundraising ratio is not inherently a problem if it reflects deliberate investment in growth that will pay off over time. A static or declining ratio that reflects inertia rather than strategy is a much greater concern.

Communication with donors matters. Charities that proactively explain their fundraising investment, why they are spending what they are spending, and what return they expect, tend to fare better in public trust terms than those that are defensive or evasive. The sector's instinct to resist any discussion of fundraising costs, for fear that any figure will be used against them, is understandable but counterproductive.

The most effective response to public concern about fundraising ratios is not to argue that the question is wrong but to answer it honestly and in context. Charities that can demonstrate that their fundraising investment generates strong returns for beneficiaries have a powerful story to tell. Those that cannot should be asking why.

Common questions

What is a fundraising ratio?

A fundraising ratio is the amount a charity spends on fundraising for every pound it raises in voluntary income. If a charity spends 200,000 pounds on fundraising and raises 1,000,000 pounds, its fundraising ratio is 20p per pound raised, or 20%. The ratio is calculated from figures reported in the charity's annual accounts.

Is a high fundraising ratio always bad?

No. A high ratio can reflect deliberate investment in growth, particularly for newer charities building their donor base. What matters is whether the spending generates adequate net income for the charity's beneficiaries over time. A charity spending 40p per pound raised but growing its income by 30% per year may be making a better investment than one spending 15p per pound raised but seeing no growth.

Why does the sector resist fundraising benchmarks?

The sector argues that fundraising costs vary so widely depending on charity size, age, cause area, and income mix that any single benchmark would be misleading. Charities working on unpopular causes or in their early years of fundraising will inevitably have higher ratios than established charities with loyal donor bases. The concern is that benchmarks would punish charities for factors outside their control.

Do donors actually care about fundraising costs?

Yes. Polling consistently shows that donors rank the proportion of money reaching the cause as one of their top concerns. The Charity Commission's Public Trust survey found that 29% of people citing reduced confidence in charities pointed to concerns about fundraising and administration costs. Whether donors should care as much as they do about ratios is debatable; that they do care is not.

How can I find out what a charity spends on fundraising?

Charities registered in England and Wales must file annual accounts with the Charity Commission, which are publicly available on the Commission's website. The accounts include a breakdown of expenditure by category, including fundraising costs. Scottish charities file with the Office of the Scottish Charity Regulator (OSCR), and Northern Irish charities with the Charity Commission for Northern Ireland.

Has any country successfully capped fundraising costs?

No country has successfully maintained a hard cap. The US Supreme Court struck down state-level caps as unconstitutional in the 1988 Riley v. National Federation of the Blind case. Some jurisdictions require disclosure of fundraising ratios to donors, which is a less restrictive approach. In the UK, there has been no legislative attempt to cap fundraising costs, though the Charity Commission monitors outliers.

Key sources and further reading

• Charity Commission Annual Return Data -- Charity Commission for England and Wales. Publicly available financial data for registered charities, including fundraising expenditure.

• Public Trust and Confidence in Charities 2025 -- Charity Commission / Gov.uk. Survey data on public attitudes to charity spending and the factors influencing trust.

• UK Giving Report 2025 -- Charities Aid Foundation. Annual data on charitable giving trends, donor motivations, and attitudes to charity spending.

• The Overhead Myth -- GuideStar, Charity Navigator, and BBB Wise Giving Alliance, 2013. Joint letter and campaign arguing against the use of overhead ratios as a primary measure of charity effectiveness.

• Riley v. National Federation of the Blind of North Carolina -- US Supreme Court, 1988. The ruling that struck down state caps on professional fundraiser fees as unconstitutional.

• Charity SORP (Statement of Recommended Practice) -- Charity Commission, updated 2025. The accounting framework governing how charities report fundraising costs in their annual accounts.

• Paying More Than We Should: The Cost of Overhead Obsession -- Charity Finance Group, 2016. Sector analysis of how overhead aversion affects charity investment decisions.

• Avoiding the Overhead Myth: How Charities Can Better Communicate Their Costs -- NCVO, Knowhow Nonprofit. Guidance for charities on explaining fundraising investment to the public.