Can you imagine asking for $100, and telling your donor up front that $80 will go to the telemarketing company that interrupted his dinner, and only $20 to your non-profit?
You know that it takes money to raise money for a cause. And your donors, for the most part, can accept the reality that some part of their donation must go to cover overhead expenses. But there are costs... and then there are costs.
Just think how this week’s headlines play to the public you’re going be asking for renewed support in the coming holiday season:
These headlines are just a few of those appearing in the Canadian media over the past few days as the result of a CBC News investigation.
The “optics” are bad enough – but, for some non-profits, the implications of high fundraising costs may be more serious yet – revocation of their registered charitable status.
The [Canada Revenue Agency, which regulates Canadian charities] recommends that no charity spend more than 35 per cent of revenue on fundraising and can revoke the registered status of any organization whose expenses seem disproportionately high.
Yet the CBC found examples in nearly every province in which local, provincial and national charities for years spent upward of 70 or 80 per cent of their revenues to pay the companies that organized their fundraising drives...
And some charities actually lost money – that is, they had to pay out to external fundraisers more money than the fundraisers brought in for them!
Try explaining that to your donors...
Only in Canada? Not by a long shot.
Concerns about fundraising costs – and about accountability in the charitable sector in broader terms – have no borders.
We’ve seen similar concerns raised in the United States and around the world, especially as a side-effect of the global recession, with money tighter than it’s been since the Great Depression. People do want to help – the giving spirit is alive and well, even in these tough times – but donors are anxious to put their dollars where they’ll “do the most good.” That means an ever-greater demand for transparency and an assurance that their dollars are going to support your cause, not primarily to administration or fundraising costs.
The Canada Revenue Agency’s fundraising guidelines recognize that registered charities depend on donations and “may incur costs in their efforts to raise funds for their charitable work” but, as the CBC story notes:
A charity spending 70 per cent or more on fundraising, whether or not those expenses are for an external company, "is not considered to be devoting its resources to charitable activities" and raises red flags, according to the CRA website.
In cases where a high percentage of revenues is being paid to a non-charitable external fundraiser, a charity must be able to show that it has taken adequate measures to control costs, including determining the fair market value of the fundraising services. [emphasis mine.]
The Canadian Red Cross responded to the CBC story promptly and appropriately on their website, explaining briefly why they use external fundraisers among other methods and what the fundraising costs are for their organization, with a link to the annual report that gives more detailed financial information.
Otherwise, so far, there hasn’t been much in the way of public comment from the non-profit sector, beyond the specific groups named in local spin-off news stories.For the most part, those named groups have been justifying their fundraising costs as a practical matter, making the (valid) point that they simply don’t have the internal resources to conduct a major fundraising campaign, and so need to hire outside help to stay afloat.
Certainly, many small non-profits are in exactly the same position, as those of us who work in that environment are all too keenly aware.
But how well does that resonate with your donors, when all they see is that a marketing company gets most of the money they’ve sent to help underprivileged kids or keep the shelter open for one more day?
You may find it instructive to read some of the 817 comments (at the time of writing) on the CBC story, take a few notes about the recurring themes, and do some hard thinking about how your non-profit might address those concerns. Do check your own tax department for helpful fundraising guidelines and best practices. And if you’re working with an external fundraising company, you might want take a close look at the terms of your contract – from the viewpoint of your donors.
Yes, the cost of fundraising is an increasingly touchy issue for non-profits, and especially so for small non-profits without a big public profile and name recognition to trade on for funds... What are you doing to rein in fundraising costs, and/or to communicate those tough fundraising realities to your donors? Please weigh in with a comment!