 |
 |
 |
 |
 |
 |
 |
|
Sign up to receive PND e-newsletters. |
|
| |
|
| Cost to Raise $1
Posted by Julie Rodda   on 5/4/2011, 8:38 am
VIP Poster
Hello All,
from a discussion on the AFP message board, I found this response very well thought out, and thought it may be of benefit to this group as well. Enjoy and respond!
Things to Consider Regarding Cost-to-Raise $1
* Concerns are frequently raised by Board members regarding the cost to raise $1. Obviously, we all are working to increase income and decrease expenses to help improve that number.
* Some charities have costs paid by related entities within the organization and actually claim $0 in fundraising expenses. However, this is very misleading! The CEO of one Foundation shared on this email list several years ago that they had “no costs to raise a dollar for our campaign because all of the donations are going back out for research and the Foundation is covering all of the expenses.”
* Did you know there is no national standard for how to determine your cost to raise $1? Some charities include salaries, some do not. Some include administrative costs (such as use of building space, utilities, etc.) and some do not. Some suggest a portion of the CEO’s salary should be included if that person helps with fundraising. Some include costs of internet donations (3-5% of each gift just for PayPal or other companies) and some do not. Some count planned gifts made that year (even if they are not paid that year) and others do not. No apple-to-apple comparison is available. When comparing organizations and their costs to raise $1, be aware there is a good deal of marketing “spin” going on because of these differences. So, comparing your cost to raise a dollar to the charity down the street that your board member also is part of is not a reasonable method of judging your own performance. Using cost to raise a dollar as a tool to compare charities has no basis in fact since there is no standard for how to compute the figure. However, it is reasonable to look at your own costs each year and use that as one part of your performance review.
* There also is no national standard for how much it should cost to raise $1. Data from the national Association of Fundraising Professionals (AFP) suggests a mature fund development program should be able to achieve a bottom-line-cost-benefit ratio of 20 to 30-cents to raise a dollar. Tom Cullinan, of the (AFP) reported, “I know of a midwestern Catholic diocese that over the past 10 years has ranged from as much as 31 cents to as low as eight cents with a mean of 19.7 cents and median of 21 cents in that time.”
* The Council of Better Business Bureaus limits fundraising costs to 35-cents for each dollar raised.
* The National Charities Information Bureau allows a 40-cent per dollar raised overhead ratio.
* Our own average is well below all three standards, ranging from 7-cents to 23-cents per dollar over the past decade with an average of 14-cents. When other charities you are involved with share this information, do you know what is/is not included in how they determine that number?
· There is no standard for how to include planned gifts in determining your cost to raise $1. How do we factor in planned gifts promised in one year, but not paid until perhaps many years later? Should they be included in the year the money comes in?
* No matter how you look at it, even a 30 or 40-cent investment to earn $1 is a good deal for your charity. Some will frown at that suggestion and suggest costs should be below 10-cents to raise a dollar. That’s fair. However, it’s also fair to ask your board members if they would buy a stock for even 50-cents that would return a dollar to them.
* By way of information only, we spend about 50-cents to make $1 at our charity golf event. That does not include salaries, administration costs, etc. If we allocated the expense for the time I spend on the golf outing to the event costs, then the number would be above 50-cents. Allocating some costs to the golf outing would, in turn, lower our costs to raise $1 for the other dollars raised throughout the year. You begin to understand how much of this talk can simply be “spin.”
David A. Kremer,
Executive Director
Order of St. Camillus Foundation, Inc.
10200 W Bluemound Rd, Wauwatosa, WI 53226
|
Julie Rodda
http://www.roddaconsulting.com/Solutions for Non Profit Organizations
| |
