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FACE, ACE and FCE ratios
While it is not legitimate to use ratios to compare the performance of one organisation with that of another, this hasn’t stopped researchers from conducting such analysis and seeking to plot trends and/or highlight poor or exceptional performance.
The ratio of fundraising and administration costs to total expenditure (FACE) is frequently used as a benchmark to measure the efficiency of charities. There is a general perception that a FACE ratio of more than 30% is a cause for a concern (i.e. a charity should spend at least 70p of every £1 donated on the cause), but there is no clear rationale for why this might be the case.
The ratio of fundraising and administration costs to total expenditure (FACE) is frequently used as a benchmark to measure the efficiency of charities. There is a general perception that a FACE ratio of more than 30% is a cause for a concern (i.e. a charity should spend at least 70p of every £1 donated on the cause), but there is no clear rationale for why this might be the case.
It has also been argued that a low FACE ratio should be an equal cause for concern. FACE ratios of less than 10% might suggest that the charity is not investing sufficiently in an administrative infrastructure to support its charitable work, nor is it making an adequate investment in fundraising to safeguard the charity’s future.
As a rough guide Andrew Hind recommends that in other than exceptional cases, FACE ratios should lie somewhere within the range 10-30%. Again, it is important to remember that there is no justification for the numerical value of these limits.
Further insights can often be provided by splitting non-charitable expenditures into administration and fundraising costs. The percentage of administration costs to total expenditures is known as the ACE ratio and in work by Sargeant and Kaehler (1999) 79% of charities were found to have administration costs of no more than 15% of all expenditures.
The ratio of fundraising costs to total expenditures (FCE) can also be calculated and is obviously of particular interest to fundraisers.
Averaging the performance of the Top 500 UK charities over the period 1992-6, Sargeant and Kaehler identified that a high proportion (46%) of nonprofits claim to spend less than 5% of their expenditure on fundraising. These figures seem somewhat at odds with what we currently know about actual fundraising performance.
The FCE ratio has been consistently shown in previous studies to be a function of:
The size of the organisation - There are economies of scale in fundraising activity that make it cheaper for larger organisations to raise funds than smaller ones. This is certainly true within the larger charities, although there is now some evidence to suggest that very small nonprofits may also achieve higher levels of performance, presumably because much of the time necessary to raise funds in smaller organisations is ‘donated’ by volunteers.
The nature of the cause - Research has consistently shown that some categories of cause find it more difficult to raise funds than others. It would thus be unfair to compare the performance of a UK addiction charity with that of an overseas aid organisation. The former would tend to find it more difficult to raise funds than the latter, reflecting public interest in these causes.
Age/Experience -Those nonprofits that are new to fundraising, or new to the use of certain techniques will find that it takes times to establish a reasonable pattern of performance. Many techniques require investment over a period of many years before an adequate return on investment can be reported. Thus the move by a nonprofit into the use of a new media or method of fundraising may adversely affect it’s aggregate fundratios in the short to medium terms.
There are of course many other factors that can influence the FCE, but these tend to have less marked effects on the ratio reported.
Descriptive Statistics of Cost Ratios (%)
Source: Sargeant and Kaehler (1998) – Reproduced By Kind Permission of the Charities Aid Foundation
As a rough guide Andrew Hind recommends that in other than exceptional cases, FACE ratios should lie somewhere within the range 10-30%. Again, it is important to remember that there is no justification for the numerical value of these limits.
Further insights can often be provided by splitting non-charitable expenditures into administration and fundraising costs. The percentage of administration costs to total expenditures is known as the ACE ratio and in work by Sargeant and Kaehler (1999) 79% of charities were found to have administration costs of no more than 15% of all expenditures.
The ratio of fundraising costs to total expenditures (FCE) can also be calculated and is obviously of particular interest to fundraisers.
Averaging the performance of the Top 500 UK charities over the period 1992-6, Sargeant and Kaehler identified that a high proportion (46%) of nonprofits claim to spend less than 5% of their expenditure on fundraising. These figures seem somewhat at odds with what we currently know about actual fundraising performance.
The FCE ratio has been consistently shown in previous studies to be a function of:
The size of the organisation - There are economies of scale in fundraising activity that make it cheaper for larger organisations to raise funds than smaller ones. This is certainly true within the larger charities, although there is now some evidence to suggest that very small nonprofits may also achieve higher levels of performance, presumably because much of the time necessary to raise funds in smaller organisations is ‘donated’ by volunteers.
The nature of the cause - Research has consistently shown that some categories of cause find it more difficult to raise funds than others. It would thus be unfair to compare the performance of a UK addiction charity with that of an overseas aid organisation. The former would tend to find it more difficult to raise funds than the latter, reflecting public interest in these causes.
Age/Experience -Those nonprofits that are new to fundraising, or new to the use of certain techniques will find that it takes times to establish a reasonable pattern of performance. Many techniques require investment over a period of many years before an adequate return on investment can be reported. Thus the move by a nonprofit into the use of a new media or method of fundraising may adversely affect it’s aggregate fundratios in the short to medium terms.
There are of course many other factors that can influence the FCE, but these tend to have less marked effects on the ratio reported.
Descriptive Statistics of Cost Ratios (%)
| Measure | ACE | FCE | FACE |
| Mean | 10.4 | 7.8 | 18.2 |
| Minimum | 0.1 | - | 0.1 |
| Maximum | 42.8 | 40.7 | 57.8 |
| Lower Quartile | 5.5 | 1.8 | 10.7 |
| Median | 9.3 | 5.7 | 16.2 |
| Upper Quartile | 13.6 | 12.0 | 23.7 |
Source: Sargeant and Kaehler (1998) – Reproduced By Kind Permission of the Charities Aid Foundation
