The true cost of fundraising: Should donors care?

Abstract

In response for calls for greater accountability and transparency in the voluntary sector, this paper reports the results of a major new benchmarking study of the fundraising performance of the UK ' s Top 500 charities. It focuses on the performance of the key direct marketing media and in the light of the results, highlights a number of critical lessons that must be conveyed by charities seeking to gain the public trust.

Do the Ends Justify the Means? The Relative Focus on Overhead Versus Outcomes in Charitable Fundraising

“…In response to the popularity of charity-ranking websites that heavily weight overhead ratios, such as Charity Navigator and Charity Watch, there have been several appeals from researchers and practitioners to better inform the public about the perils of focusing too narrowly on overhead (Sargeant, Jay, & Lee, 2008;Williams, 2007;Wing & Hager, 2004). This has led to some creative, empirically informed solutions to dealing with negative reactions to overhead-or so-called "overhead aversion."…”

“…In response to the popularity of charity-ranking websites that heavily weight overhead ratios, such as Charity Navigator and Charity Watch, there have been several appeals from researchers and practitioners to better inform the public about the perils of focusing too narrowly on overhead (Sargeant, Jay, & Lee, 2008; Williams, 2007; Wing & Hager, 2004). This has led to some creative, empirically informed solutions to dealing with negative reactions to overhead—or so-called “overhead aversion.” For example, Gneezy et al (2014) found that simply reframing the target of matching funds (e.g., a wealthy donor whose contribution is used to pay for overhead) may drastically increase the amount that individuals donate compared with conditions in which the same matching funds are provided, but no money is explicitly diverted toward overhead.…”

Regulating Charitable Solicitation Practices – The Search for a Hybrid Solution

“…If Steinberg is right it follows that the use of an average fundraising cost percentage as either an essential element to determine allowable expenditure in the Statutory Cap Model or as a rule of thumb for determining reasonable expenditure in the Disclosure upon Receipt Model will be highly flawed and will result in donors making inferior decisions regarding the allocation of their resources amongst charities. Quite apart from whether donors should consider fundraising cost levels (Sargeant et al, 2008), it remains an open question as to whether they actually do (Tinkelman and Kamini, 2007; and Steinberg, 1991).…”