Issue 1- Summer 2013: Straight talk with donors about fundraising costs

Speech BubbleWe train everyone in the organization about the cost per dollar raised so they can speak to donors confidently

That’s Ted Garrard of SickKids Foundation talking about how his team — all 150 of them — explains fundraising costs to supporters.

Are you there yet? Probably not, if a random survey of major charity websites is any indication. FAQs for donors cover things like accountability, ethical fundraising, and the organization’s commitment to use contributed funds wisely. But the closest most of them get to discussing costs is the proud statement that they do not pay commissions to fundraisers. Now these are all good things.

But they don’t bespeak a candid acknowledgement that fundraising costs money, let alone a desire to help donors perceive it as an investment in mission achievement. Assuming your board is comfortable with your fundraising strategy and expenditures, how do you take the next step of giving donors the explanations they deserve?

How to share hard truths

Let’s look at a charity that has to justify some fairly tough statistics. At first glance, for those who believe charities should be nearly cost-free, the MS Society of Canada has some explaining to do. Its administrative costs of 7.1% plus fundraising costs of 42.2% suggest that roughly $0.50 of every dollar raised pays for internal expenses, not programs.

“Nonprofit doesn’t mean‘without cost.’ Telling people your story takes resources.” — Tim Maloney, Mercy Ships Canada


But keep reading on the MS Society’s Cost of Fundraising page

You’ll learn about the millions of dollars the Society funnels to client services, research, education and awareness, volunteer development and

You’ll learn it’s volunteer-driven, with over a million donors and 100,000 event participants.

You’ll learn that unlike most health charities, it receives almost no government support (3% of total revenue, compared to 70% for most health charities) and few bequest dollars. A donor profile linked to that page features a volunteer who is thrilled he can donate a life insurance policy — because “many of our members are challenged to even qualify for life insurance.”

Only after clicking through to another page do you find the predictable material about ethical codes, regular audits, privacy, efficiency and non-commissioned fundraising. Even there, you’ll find direct links to volunteer involvement, client services and research.

Some of our most grassroots events like our walking and cycling events have significant costs associated with them: staff to coordinate the event and manage thousands of volunteers who help organize the events, producing and mailing approximately 200,000 tax receipts annually, marketing materials to encourage participants to raise funds, prizes to reward fundraising efforts, security, and rental of start/finish locations among many others.— MS Society of Canada

A model of communication

The society’s up-front explanation opens a window to the expenses, volunteer management and administrative work related to events — a scene that is rarely noticed or understood by people outside an organization. It helps people understand that its portfolio of sources and campaigns reflect a business strategy of revenue stability through diversification that is common in the corporate world. And it convinces visitors that the society’s strategy is a prudent one given the constraints it faces. In short, it’s frank, clear, and free of self-pity. And it does a great job of educating donors. Janet Gadeski is Editor, Hilborn Charity eNE WS and President of Hilborn, a company dedicated to independent Canadian news and analysis for charities.