If I Was Your Grant Writer: I'd Tell You the 25% Rule Is Bullshit

I don't usually think much of it when I see a weird eligibility requirement pop up; every funder has its quirks, but when I saw the same bullshit requirement twice in one week with two completely unrelated clients in two different states… my gears started to grind.

Both organizations were considering private foundation opportunities and would have been strong candidates; however, both were tripped up by the same rule: administrative and fundraising expenses combined couldn't exceed 25% of total organizational expenses, as shown in their most recent 990.

And just like that, in my best Carrie Bradshaw voice, I couldn't help but wonder: when did investing in a sustainable organization become a red flag? Before we ever opened an application, drafted a narrative, or discussed project outcomes, two promising funding opportunities were already off the table.

What really got me, though, was how close both organizations were to qualifying. One was about 1% over the threshold, and the other was closer to 2%. That's it! These weren't organizations with bloated budgets or questionable spending habits. They weren't wasting money or making poor financial decisions. They were healthy, well-run nonprofits doing meaningful work in their communities. Yet because they landed slightly above an arbitrary percentage, they were automatically out.

Honestly, the more I think about it, the more frustrated I get.

I understand why funders include requirements like this. It's their way of directing more money toward programs and services, and that's a reasonable goal. Nobody wants to fund waste.

But if this were a Sex and the City episode, this is the part where Carrie realizes everyone's expectations are completely unrealistic, someone (AKA me) starts crying into a cosmopolitan, and we are left wondering how exactly nonprofits are supposed to become sustainable while being penalized for the very investments that make sustainability possible.

The nonprofit sector is constantly being told to operate more like for-profit businesses. Build strong systems. Invest in leadership. Diversify revenue. Strengthen fundraising. Improve data collection. Create long-term sustainability plans. Pay staff livable wages. Demonstrate measurable impact. The list goes on, and I agree with all of it; however, none of it is free. Then, as soon as an organization accomplishes all this, we’re suddenly side-eyeing them because it costs far more than pocket change. Somehow, we've created a sector where nonprofits are expected to operate like sophisticated businesses while being judged for investing in the very infrastructure required to do it.

What a load of fucking bullshit.

The truth is, whether I agree with these requirements doesn't really matter because they're becoming more common, and that's exactly why I'm writing about it.

So, if I was your grant writer, I'd tell you to know your numbers. Understand your administrative expense ratio and take the time to review your Form 990 to make sure it’s actually correct. 

At the same time, I'd caution you against assuming a higher administrative expense ratio automatically signals organizational weakness. Sometimes it means you're investing in leadership, paying competitive wages so talented staff stick around, strengthening your fundraising efforts, upgrading your technology, or building the infrastructure needed to support long-term growth.

None of those things are inherently bad. In fact, they're often the very things funders say they want nonprofits to do.

The reality is that sustainable organizations cost money to operate. If we genuinely want nonprofits to be healthy, stable, and capable of creating long-term impact, then we have to stop treating every investment in organizational capacity like it's evidence of inefficiency because, personally, I'd rather see a nonprofit investing in its future than starving itself to meet an arbitrary percentage established by people who've never actually run a nonprofit.

And just like that, Carrie had her answer: maybe we've spent so much time obsessing over percentages that we've lost sight of what it actually takes to build a healthy organization. 

P.S. If this kind of raw, occasionally spicy nonprofit commentary is your thing, I'd love to have you in our newsletter community!