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Determining Your Costs

No more than 30 percent of your budget should be spent on indirect expenses.  This is an accepted standard in nonprofit financial management.  If your indirect expenses exceed this percent, you need to take a good look at the efficiency of your operations.  Funders tend to view lower indirect expenses as a positive sign of an organization’s effectiveness. 

Keep in mind that funders will limit the amount of their grant funds that can be spent on indirect expenses.  If your percentage of indirect expenses exceeds the amount allowed by a grant, you will need to identify other funds to subsidize the difference such as fees, fundraisers, or other unrestricted revenue sources.