The GuideStar Blog retired September 9, 2019. We invite you to visit its replacement, the Candid Blog. You’re also welcome to browse or search the GuideStar Blog archives. Onward!

GuideStar Blog

Trying to Make Sense Out of Fundraising Data

As part of the redesign of the Form 990 for fiscal years beginning in 2008, the IRS created Schedule G, "Supplemental Information Regarding Fundraising or Gaming Activities". Part of the information requested is a list of paid fundraisers compensated at least $5,000, the gross receipts generated by the engagement, the amount paid to the fundraiser, and the amount received by the organization. I have been puzzling over how to use this and other Form 990 data to reach some understanding about how organizations go about fundraising. What I have gotten, as much as anything, is a reminder of how easy it is to lie with statistics, and how hard it is to work with problematic data.

Going into this, I knew that I wanted to look at more than a one-year snapshot, so I limited my data set to organizations that had filed a Schedule G for at least two consecutive years, starting with FY2009. What I was trying to avoid is the situation that arises, for example, when an organization contracts with and pays a fundraiser in one fiscal year but does not see results from that engagement until a subsequent fiscal year. I then set about cleaning the data set, which was a distressing exercise. More than one third of the records had to be discarded for various reasons: missing or ambiguous information, data that did not add up correctly, records that should not have been included in the first place (e.g., a bake sale run by volunteers that did not cost the organization money), etc. More or less satisfied with the data, I ended up with 11,808 engagements for 2,091 organizations conducted by 2,896 distinct individuals or companies.

My first task was just to see how much it all was (and please note that it is here that I will begin to lie with statistics). It was a lot - $11.9 billion raised, $2.5 billion to the fundraisers, and $9.4 billion (79 percent) to the organizations. That looked pretty good to me, and I was tempted to call it a day and declare professional fundraising a miracle. But looking at the top 500 engagements (in terms of money received by the organization) showed that they were really successful (accounting for $5.8 billion of the money going to charities and only 8 percent paid to the fundraisers). That means that in the other 11,303 engagements, 36 percent of the total receipts were paid to the fundraisers.

The chart below summarizes the results of the individual engagements:

Fundraising Engagements by Results
Pct. Received by the Charity Number of Engagements Pct. Of Engagements
90% or more

2581

21.9%

80 - 90%

1566

13.3%

70 - 80%

946

8.0%

60 - 70%

717

6.1%

50 - 60 %

611

5.2%

0 - 50%

2479

21.0%

In the red

2913

24.7%

This doesn't look so good at all. Fully 45 percent of the engagements resulted in the charity losing money or keeping less than 50 percent of the proceeds. But remember, some of the engagements were pure consulting contracts that weren't intended to produce revenue. I wanted to look at overall results, not just individual engagements. When you sum up all engagements over a number of years, things look better:

Summation of all of a Charity's Engagements
Pct. Received by the Charity Number of Charities Pct. Of Charities
90 – 100%

522

25.0%

80 - 90%

404

19.3%

70 - 80%

221

10.6%

60 - 70%

165

7.9%

50 - 60 %

142

6.8%

0 - 50%

319

15.3%

In the red

322

15.4%

So, when taken together, almost 55 percent of charities are keeping at least 70 cents of every dollar raised through professional fundraising engagements.

But this is still the wrong question to be asking. Suppose that in the process of getting ready to sell your house, you are thinking of remodeling the kitchen and the master bedroom. You would not evaluate the efficacy of this decision by looking at the cost of one or both of these in a vacuum, but rather by estimating whether they will increase the resale value of the home by more than the cost of the renovations. The problem with the approach taken by the annual Pennies for Charity reports prepared by the Attorney General's Charities Bureau in New York is that they only consider the engagements instead of taking a holistic view of an organization's fundraising program.

Take, for example, one of the organizations in my data set, Defenders of Wildlife. From FY09 to FY12, they reported 23 separate fundraising engagements on Schedule G. The results seem pretty horrible. These engagements raised $3.4 million dollars, but Defenders of Wildlife had to pay fundraisers $6.2 million dollars, for a loss of $2.8 million. However, if you look at their overall contributions and fundraising expenses for the period, they raised contributions of $109.7 million against total fundraising costs of $8.9 million, meaning that they spent eight cents to raise a buck (without endorsing Charity Navigator's scoring system for fundraising efficiency, I note that this level would give Defenders of Wildlife 10 points out of a possible 10). In the case of Defenders of Wildlife, the professional fundraising expenses are part of an overall fundraising program that is very successful.

I went back and looked at total contributions and total fundraising fees for the 322 organizations whose professional fundraising engagements over the period had ended in the red – 112 (35 percent) of them would get 10 points out of 10 from Charity Navigator, 106 (33 percent) would get 7.5 points out of 10, and 74 (23 percent) would get 5 points out of 10. Only five of them would qualify for no points.

Of course, none of this means that the professional fundraising engagements are the driver that makes the other fundraising efforts successful, and I certainly found some pretty horrible examples of waste. I could write a page of caveats about the data that I used. But my conclusion is that you cannot deduce anything useful about the success of an organization's overall fundraising program by looking only at the individual paid fundraiser engagements.

This post concentrated only on the organizations that hired fundraisers. In a follow-up post, I will talk about the fundraisers themselves.

Topics: Nonprofit Leadership and Practice