Why Such a Small Percentage??

7 Feb

I’m new to the non-profit sector, especially when it comes to fundraising. Our talks in class have made me think about the small percentage money from fundraisers that actually goes towards the cause. Like most people, I thought the entire amount was donated to what it was being raised for. I had no idea that such a small percentage (1% – maybe 10%) actually goes to charity. I can understand why people don’t trust fundraisers because they see that very little of their donation goes towards the cause. So my post this week is mostly me asking two questions and posing some solutions. Please feel free to add to it and correct me where I’ve misunderstood.

1. What I don’t understand, is where all the rest of the money goes? We have talked about how if a person was hired to raise the money then some of the funds go to that person. But if the fundraiser is put on by people already involved with the organization, then where does around 90% of all the money go? I understand if some of it goes towards paying for bills (electricity, water, rent/mortgage on a building, etc) or to pay for the things that went into the fundraiser (caterers, renting a building, buying food for a blood drive, etc) but if several thousand dollars are raised then I think that’s more than enough for bills. I can also understand if the money goes towards paying employees. But if the organization is small then I don’t understand. I’m an unpaid intern at the Manhattan Arts Center and the marketing/education director, secretary, and electrionics people are all part time. I also think the director is too. So if a lot of money is raised for a small non-profit then I would think more than a small percentage would go towards the cause because there are less people to pay.
What I would like to see, is non-profits posting exactly how much of the funds (dollar amount or the percentage) goes towards what. It could help donors feel better about how their money is being used. As of now, their money could be being used for anything. It could be going straight into someone’s pocket or to help the organization. Showing where the money goes could reveal money being used for bad things. I do understand that people could lie about where funds are going but I think it would be a good step forward.

2. My second question is: are there any organizations where 100% of what’s donated actually goes towards the cause? I’m going to assume that all the blood donated to the Red Cross goes to help people, even though it might not be used it’s still there for people who need it. I’m wondering about fund raisers that just raise money. In my point of view, I can’t see why every organization has at least one fundraiser a year has all of its funds (100%) go straight to the cause. If the organization is honest about where all the money goes on its other fundraisers then this one would help with donor relations. Donors might be more likely to donate to this fundraiser because they know their money will actually help the cause. I would be more likely to donate if I knew that all of my donation goes to where I intended it to go.

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8 Responses to “Why Such a Small Percentage??”

  1. retrofire February 8, 2008 at 7:27 am #

    Your numbers are incorrect. See the chart for administrative expenses here:
    http://www.charitynavigator.org/index.cfm?bay=content.view&cpid=48

    Here’s the main page – check around – there’s plenty of information:
    http://www.charitynavigator.org/

  2. Kate February 8, 2008 at 9:18 am #

    Caitlin –

    I understand your concern with net proceeds of large fundraisers but I think there are several things that you’ve overlooked.

    First of all, it appears as though you’re talking about special events when you use the term fundraiser so I’ll focus on that. You must understand that special events serve a duel purpose. Sure, money needs to be raised, but often times the more important goal of special events is publicity and exposure. The media exposure of the event before and after is important as is the word of mouth review of the fabulous and well-executed gala, walk-a-thon or picnic by YOUR organization. Every nonprofit wants to be at the forefront of people’s minds. So, when deciding where to make a year end gift, choosing where to take a class or where visit on a Saturday afternoon – it is your organization that comes to mind.

    Secondly, I think you dramatically underestimate how much money it takes to put on a successful event. You reference “thousands” but a party or gala event could cost tens of thousands. A lot of money needs to go into the event in order to ensure a smooth execution. There is nothing worse than a party or event where corners have been cut to save money. You want people walking away thinking about what a fabulous time they had – not about how they ran out of food in the first hour or how the tables weren’t bussed.

    That said, don’t get me wrong – I’m not a big fan of special events. I think they are a lot of work for not much money. The majority of the money raised from individuals in the organizations for which I’ve worked comes from annual appeals. There is also a popular push now to have the “un-fundraiser” where instead of attending a gala you pay NOT to attend, thereby all proceeds going directly to the organization.

    Anyway – those are just some of my thoughts. Good luck with your research.

    Kate

  3. Sean Stannard-Stockton February 8, 2008 at 9:26 am #

    These are all good questions to explore. I would caution you that the logic of “how much goes to the cause” can lead you in the wrong direction (although you’re asking it for the right reasons). For instance, many people do not like giving money to homeless people on the street. But they do give money to nonprofits that fight homelessness. Well what if they demanded that 100% of their donations to these nonprofits “went to the cause”? With no money to support the operations of the nonprofits, they would have to give the money… directly to the homeless person on the street.

    Nonprofits are not just middlemen between donors and “causes”, nonprofit organizations themselves are part of the equation.

    You might be interested in this discussion of the service Charity Navigator (which looks at the percentage of funds that go to various areas of nonprofits) and the flaws in a model that seeks the most money going to the “cause”:

    http://tacticalphilanthropy.com/2007/11/charity-navigator%e2%80%99s-vital-mission-hides-flawed-rankings

    Keep up the blogging!

  4. Dave February 8, 2008 at 9:35 am #

    A couple thoughts:

    While the idea of every dollar going directly to end users sounds good (and in general I think there is still a lot of abuse/inefficiencies with funds, particularly by inefficient government operations), the vast majority of those funds I believe go towards paying employees/consultants. And there is something to be said about paying these people well, if the nonprofit/citizen sector/social sector wants to recruit great talent, if we are really going to get society’s best minds on these issues you have to atleast be competitive with salaries, enough so that they can take care of the needs and support a family. There is also something to be said about using the money to create systems, networks, and distribution systems that are not easy to see the direct impact and connection with X amount of donated dollars producing X amount of output but these systems definitely add value and push the sector forward.

    re:question #2, two charities that I know about are LDS Charities (lds.org/humanitarian) run by the Mormon church which has the luxury of giving 100% of what is donated because of the huge base of volunteers that run the operations and a nonprofit called ASAP (asap2025.org). ASAP encourages people to sacrifice “one dollar a day for those who live on a dollar a day” and then they funnel 100% of the funds to organizations that are reaching out to the poorest of the poor, those that microcredit has left behind or been unable to reach, usually with savings-matches.

    My last thought involves what I am doing at work as an intern with Ashoka (ashoka.org) in their Citizen Base Initiative (citizenbase.org). They are trying to inspire a fundamental shift in the way nonprofits think about fundraising and utilizing resources. They have collected examples of organizations that have creatively reached sustainability but tapping into their community and garnering a wide base of support. It is somewhat difficult to explain but makes sense as you see all the examples on the site. I think these kind of strategies are ultimately a more efficient, more scalable, and more successful way of running nonprofits.

  5. Kelly Kleiman February 8, 2008 at 4:13 pm #

    While there are certainly dishonest fundraisers, it’s false to say that only “1%–maybe 10%” of money raised actually goes to charity. The percentage varies from agency to agency; best practices suggest that fundraising costs should be less than one-third of the amount raised. But to go to your second question: no, there are no agencies where 100% of money raised goes to clients, because every agency has to pay staff to serve clients, rent to house staff (and sometimes clients), the light bill, the cost of postage, etc., etc. It’s unrealistic and unreasonable to expect agencies to spend zero money to operate, just as it would be unrealistic to expect you to spend 100% of the money allocated to you for school on tuition and nothing on room and board or books.

  6. Caitlin February 14, 2008 at 11:56 pm #

    I wanted to comment on my own entry. Thank you everyone for helping clear some things up with me. In regards to what some of you said about how 100% donation is impossible, I disagree. I am in a sorority and 100% of the money raised through our philanthropy goes towards the women’s shelter in town. I know we are not a charity but it is possible for fundraisers to have 100% of the money raised go towards the cause. Yes, ours is paid for through money we have but all of the money raised goes towards our cause.

    Also, in chapter this week a man came in to talk about a fundraiser for a certain kind of heart disease. I was in the back and did not hear all of what he said, but I did catch that 100% of the money raised was going towards the research. So I think it is possible for some fundraisers to have all of the money raised go towards a cause. I’m not saying every fundraiser because charities have to spend money to maintain themselves, but it is possible for one fundraiser out of many to have 100% of its profits go towards the cause

  7. skkopp February 15, 2008 at 7:26 am #

    with so many organizations requesting “funds” schools,
    churches, alumni, etc….what is considered a resonable
    amount to donate, say to one of 3 or 4 school alumni?
    I know, it depends on your income, but if you are invited
    to a buffet dinner party in a home to meet the president of one of your universties (and it is for the purpose of fund raising)is $250.00…$500.00 a$1,000.00? Thanks for any
    suggestion…

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