Conversations surrounding fundraising costs in nonprofits are often highly charged debates. Some people feel that nonprofits must show that they have no or very little fundraising expenses. Others draw a theoretical “line in the sand” for the maximum amount of fundraising that they believe is appropriate for any organization.
My favorite article on this subject is “100 % Goes to Charity” by Lee Draper published in 2003 by Foundation News and Commentary. In this article, Dr. Draper states that “indirect costs, overhead, and administrative expenses do not convey the correlation of expenditures to the quality and quantity of the fundraising.” The issue has also been explored in great detail in Dan Pallotta’s 2008 book, Uncharitable.
No matter your view on fundraising expenses, all nonprofits should be sure to have a clear procedure in place for appropriately calculating and allocating fundraising costs. Such fundraising costs should be clearly indicated in financial reports, the audit, and the 990. The Standards for Excellence: An Ethics and Accountability Code for the Nonprofit Sector® states that nonprofits should realize charitable contributions from fundraising activities that are at least three times the amount spent on fundraising and the nonprofit’s board should annually review the percentage of the organization’s overall expenditures spent on program, administration and fundraising.
Did you know? The Standards for Excellence® program’s educational resource packet, “Fundraising Costs” is free to Standards for Excellence Institute® members. It is available through the members only section of the Standards for Excellence Institute® website. Hard copies are also available upon request.