How much should a Canadian charity spend on overhead?

Across the whole Canadian charitable sector, 19% of spending goes to management and administration, professional and consulting fees, and travel. That's above the 15% donors are often told to look for, and it describes all $69 billion the sector spends.

The 80/20 rule is the most persistent dead rule in Canadian philanthropy. It came out of the old disbursement quota, it was eliminated in the 2010 federal budget, and people still quote it as though it binds.

What exists now is narrower, and it applies only to fundraising costs as a share of fundraising revenue: under 35% is unlikely to raise questions, above 70% raises concerns. The 2012 revision of that guidance deliberately gave the ratio less prominence, so it's one factor among several rather than the test.

Our position, plainly: the overhead ratio is a bad measure and it should be retired. A hungry person would rather have half a loaf of bread than five percent of a slice. What matters is the size of the loaf, and low overhead doesn't grow loaves. It usually means the opposite, a charity that can't measure its work, keep good staff or build the systems that make the next dollar go further. Dan Pallotta made this case in The way we think about charity is dead wrong, and it holds up.

A charity reporting almost no administrative cost has usually made a filing choice, not found an efficiency.

The ratio also flattens organizations that aren't comparable. A direct-service charity, a granting foundation and an advocacy organization have structurally different cost bases, and so do a $400,000 grassroots organization and a $40 million hospital foundation, because rent, insurance and one administrator land very differently across those revenue bases. Comparing them on one percentage tells you almost nothing. Comparing a charity to genuine peers, matched on revenue and on what it actually does, tells you a great deal.

The rule still in force is the disbursement quota: 3.5% of non-charitable-use property up to $1 million and 5% above that, for fiscal periods beginning on or after 1 January 2023.

Questions people also ask

Is there a maximum overhead percentage in Canada?

No. The 80/20 charitable expenditure rule was repealed in 2010.

What is the average overhead for a Canadian charity?

In 2023, charities reported 77% of expenditures on charitable activities, 4% on gifts to qualified donees and 19% on other costs.

Is low overhead a good sign?

Usually not on its own. Very low reported administrative cost more often reflects how expenses were classified, or an organization with no capacity to measure and improve its own work.

What is a good fundraising cost ratio?

The CRA treats under 35% as unlikely to raise questions, but it assesses the charity's circumstances rather than the number alone.