In a recent column, the Baltimore Sun’s Jay Hancock slammed the relationship between nonprofit organizations and for-profit fundraisers. He had received a telephone call on behalf of an organization to which he had previously donated, and after some digging, discovered that the nonprofit had only received 51% of the funds collected the last year from this same for-profit telemarketing company. Outraged by this discrepancy, Hancock wrote, “Your reaction, however, ought to be the same. Ignore them. Yes, even if it’s your favorite nonprofit and you always give money, just say no. Politely decline and hang up.” These are very strong words. The Standards for Excellence Institute has not chosen a side in this debate, however we do stand by our written code and expect our members to do the same.
The Standards for Excellence®: An Ethics and Accountability Code for the Nonprofit Sector provide clear guidance in the area of fundraising revenue and expenses and honoring donor intent. Section 7A of the code states, “A nonprofit’s fundraising costs should be reasonable over time. On average, over a five year period, a nonprofit should realize revenue from fundraising and other development activities that are at least three times the amount spent on conducting them.” This 3:1 ratio is the minimum standard required to maintain the Seal of Excellence from the Institute.
However, the true power of the 3:1 principle lies in the freedom it gives to nonprofit managers. It allows them to deliberate and determine the most effective way to allocate scarce resources to raise essential support while still maintaining reasonable expense to revenue ratios. Imagine if a reporter called you at work and said he knew your organization contracted a for-profit company to solicit your donors for end-of-year contributions or that you had spent large amounts of money on advertising campaigns to encourage donations. ,How great is it that you would be able to respond by clearly stating that over the past five years your organization has meet the high standard of a 3:1 revenue to expenses ratio across all of your fundraising efforts. You can tell the reporter that even if you lose a large part of the cut for this specific fundraising campaign, your organization’s overall operations meet their goals and stand up to the highest public scrutiny.
A nonprofit organization adhering to the Standards for Excellence may engage in any egal and ethical fundraising strategy as long as it meets the demands of the 3:1 fundraising ratio and honors the intent of donors. Ethics, accountability, and best practices don’t mean your nonprofit must become a cookie cutter organization that operates according to some formula. Quite the opposite- the Standards for Excellence guidelines give your organization the capacity and freedom from worry to creatively engage your donors and constituents.
For more information, see the Financial Cost and Fundraising Practices educational resource packets. This and other packets are free to Standards for Excellence Institute members through the members’ only section of our website. Hard copies are also available upon request. We also offer one-on-one technical assistance for members only. Not a member? Join now!