Paying Attention to Fundraising Costs

In a report released in February 2008, Ellison Research found that the public still has great concern about nonprofits’ program, administration and fundraising breakdowns.  62% of the public polled stated that they think nonprofits spend more than a reasonable amount on administration and fundraising.  Because low overhead continues to be equated with efficient, effective organizations, nonprofits are pressured to demonstrate that they spend a high percentage of funding on its programs.  However, these percentages do not tell the entire story.  They do not necessarily convey meaning about the quality of a nonprofit’s programmatic and fundraising efforts. The Standards for Excellence® code encourages nonprofit managers to consistently review their fundraising efforts to ensure that their fundraising programs have the right mix of activities that are worth the time and effort put into conducting them.

The Standards for Excellence® code states that nonprofits should specifically review the efficiency of its fundraising program over the course of time and across the organization’s entire fundraising program.  Over the course of five years, an organization should strive to maintain a fundraising revenue to expense ratio of at least three dollars earned to every one dollar spent.  If an organization fails to meet the ratio, the staff and board should examine the fundraising activities to account for extenuating circumstances, and reevaluate certain activities to determine what is worth the effort and what efforts should be discontinued.

Did you know?  The Standards for Excellence® program’s educational resource packet, “Fundraising Costs,” includes a formula for calculating your fundraising revenues to expense ratios using the Form 990.  The packet is free and available to Standards for Excellence Institute® members.  It is available through the members only section of our website.  Hard copies are also available upon request. Log in to access this educational resource packet. Not a member? Join now!

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