Final answer:
The Better Business Bureau recommends a non-profit organization's program expense ratio to be not less than 65%. This ratio assesses the percentage of total expenses dedicated to program activities, which is a key metric for evaluating a non-profit's financial efficiency.
Step-by-step explanation:
The Better Business Bureau (BBB) recommends that non-profit organizations maintain a program expense ratio of not less than 65%. The program expense ratio is a financial measure that calculates the percentage of a nonprofit's total expenses that go directly toward its programs and services that fulfill its mission. This ratio indicates how efficiently a nonprofit is using its funds, with a higher percentage suggesting more of the money it spends is going toward its program activities rather than administrative or fundraising costs.
For example, if a nonprofit has a total expense of $1,000,000 and it spends $700,000 on its programs, the program expense ratio would be calculated as ($700,000/$1,000,000) x 100% = 70%. This is above the 65% threshold recommended by the BBB, suggesting the nonprofit is allocating its funds effectively according to these guidelines.