Philosophy: A charity should use its resources in a responsible, effective and efficient manner to achieve results in furtherance of its mission. The Council believes that the ratio of program expenses to total expenses is an indicator of such use. Donors should reasonably expect that substantially more than half of their contribution and the organization’s expenses be used for program services. Management and fundraising expenses should be reasonable in relation to the results of the organization and reasonable over time.

Standard: At least 70 percent of the organization’s annual expenses are for program activity and not more than 30 percent for management/general and fundraising combined.

Reserve Limits

Philosophy: While the Council believes that organizations should maintain a reasonable level of cash to safeguard against unexpected financial challenges, maintaining excess reserves indicates the organization is not maximizing the use of its resources in pursuit of its charitable mission. In such cases, it may not be appropriate to continue soliciting from the public.

Standard: Unrestricted net assets available for current use are not more than twice the current or next year’s budgeted operating expenses.

Financial Health

Philosophy: The Council believes that a charity should use its resources prudently and should maintain a healthy financial picture. When making a contribution, donors want to know that the organization has the financial strength to pursue its mission on a long-term basis.

Standard: The organization does not have persistent or increasing operating deficits.

Board Fiduciary Oversight

Philosophy: The Council believes that the governing board is responsible and accountable for the financial management of the corporation.

Standard: The governing board approves an operating budget prior to the beginning of each fiscal year and receives financial reports, at least quarterly, comparing actual to budgeted revenue and expenses.