Administrative and fundraising costs should not be used to measure the effectiveness of charities, according to a guide published this week by think tank New Philanthropy Capital.
The document, called The Little Blue Book, is a summary of the organisation's own approach to analysing charities, which involves asking for evidence of social impact. NPC will send free copies to 500 charities, trusts and foundations this week.
The guide says it is dangerous for funders to use reported fundraising costs to judge how effective charities are, because it is easier to raise money for some causes than for others.
The document says charities that have more than one objective should have a "clear justification" for having a range of activities.
John Copps, head of sector research at NPC, said: "Most grant-makers don't publish their criteria for assessing charities. But charities and trusts are struggling at the moment, so we hope this extra information will help."