AFP eWire August 28, 2012: Print Version
This Week's Free AFP Information Exchange Paper for Members:
Intellectual Capital in the Nonprofit Organization - Harvest Development Group, LLC/Sondra Lintelmann-Dellaripa
The growing power of ideas - as manifested in innovative programs, policies and processes – is the key differentiator for a successful nonprofit organization. This means that the most important resource in your nonprofit is not your donor database, or your special event - it’s the heads that walk through your door every day. These heads make up the differentiator known as Intellectual Capital.
• Read the paper! - http://www.afpnet.org/files/secure/index.cfm?FileID=78919
Good News, Bad News on Donor Perceptions of Fundraising Costs
The average American believes that it’s reasonable for charities to spend 23 cents out of every dollar raised on fundraising and administrative costs. Unfortunately, the average American also believes that charities actually spend 37 cents out of every dollar raised on such costs.
That 14-cent difference is just one of the curious results from a new study, Where’d My Money Go, conducted by Grey Matter Research about how Americans perceive the amount of money spent by charities on overhead costs versus programs and services. The study asked participants to answer two questions: what do you think is reasonable for charities to spend on overhead costs, and what do you think they actually spend on overhead costs.
Some of the results from the study are quite positive. The 23-cent figure is a higher number that is often given in media stories and is realistically comparable with some charities’ actual costs. “Often, we read about donors and others expecting overhead costs of five percent or lower,” said Andrew Watt, FInstF, president and CEO of AFP. “While many still believe that, it’s clear that overall expectations about fundraising costs are much more varied than is often portrayed.”
According to the survey, while 18 percent of donors believe that overhead costs of more than nine cents on the dollar is too much , an equal percentage believe that overhead costs of 40 cents on the dollar is reasonable as well.
The National Center for Charitable Statistics and the Center on Philanthropy at Indiana University, as part of the Nonprofit Overhead Cost Project, found that average fundraising and administrative costs for most organizations, grouped into subsectors, tend to fall in the 20 – 28 percent range.
Reasonable vs. Expectations
On the other hand, while respondents seem to have diverse opinions on what is reasonable in terms of overhead costs, their perceptions on what charities actually spends is much more pessimistic.
More than a third of respondents believe that charities spend more than half of their funds raised on fundraising and administrative costs. In addition, when comparing respondents’ two questions, the survey found that 62 believe that what charities spend on fundraising and administrative costs is unreasonable.
In comparison, 25 percent feel that the average charity spends what is reasonable, and 13 percent believe that charities actually spend less than what is reasonable.
“Many donors still believe that charities don’t do a good job at containing costs, and this study is a reminder that we have much work to do in terms of educating the public about costs and what fundraising and administrative expenses help us do,” said Watt.
What do the Figures Mean?
While the figures show a varied and complex picture of donor attitudes towards charity overhead costs, it’s not clear if the results indicate any trends in donor behavior. Ironically, those respondents who gave more to charities were more likely to believe charities spend more than what they think is reasonable on overhead expenses.
Ron Sellers, president of Grey Matter Research, likens this finding to the feeling that some people have about politicians. “Consumer behavior is rarely straightforward,” Sellers said in a press release about the findings. “It’s entirely possible that someone could have concerns about overspending by non-profits, but find a few organizations about which they don’t have that concern. It would be much like someone who thinks most politicians are crooks finding a candidate they feel is honest – the contrast could make their support of that candidate especially enthusiastic.”
That type of behavior—and general negative perception of the sector and how it handles costs—doesn’t bode well for the charitable sector overall, and Watt stresses the importance charities need to place on educating donors and the public about fundraising and administrative costs. “Donors are becoming more sophisticated about costs, and there is growing research that investments in technology, resources and what we typically refer to as ‘overhead’ help charities in the long run and make them more effective and efficient. We can’t be afraid to address these issues head-on, and I believe donors will appreciate understanding more clearly what part of their money goes to fund.”
About the Study
The study was conducted by Grey Matter Research, a research and consumer insights company located in Phoenix, Ariz. The sample of 1,011 adults is accurate to within ±3.1 percentage points at the 95 percent confidence level with a 50 percent response distribution.
The study was conducted in all 50 states. Respondents’ age, education, household income, geography, racial/ethnic background, and gender were carefully tracked and weighted to ensure appropriate representation and accuracy.
The full report examines these comparisons by a variety of demographic, religious, and political groups, as well as comparing the findings to the 2008 study. Where’d My Money Go? is available by request from Grey Matter Research by emailing firstname.lastname@example.org.
New Donor Retention Study!
Donor retention is critical to success, of course, but what are the benchmarks and how are charities doing in comparison to each other. AFP, through the Nonprofit Research Collaborative is taking the first-ever systematic look at the connection between donor retention and fundraising results through a new survey. Please participate, and you'll receive a copy of the resulting report before it's released to the public. Visit here to begin the survey: http://nonprofitfundraisingsurvey.org/?s=afpThe survey is open through Sept. 7 and takes about 15 minutes to complete. To make things easy, the questions do not ask for specific amounts or values.
Fundraising News and Tips
Why Social Media Matters: Networking and Engagement
Networking is the new professional currency in our increasingly connected world, says Beth Kanter, and successful charities are changing their mindset to emphasize social media, openness, engagement and authenticity.
Rich Enclaves Are Not as Generous as the Wealthy Living Elsewhere
The nation’s most-generous ZIP codes aren’t its richest. And when large numbers of rich people live in one neighborhood, their giving is even more likely to drop to well below average rates. (Chronicle of Philanthropy)
IRS Tax-Compliance Workshops
The Internal Revenue Service is offering a series of one-day workshops for small and medium-sized 501(c)(3) organizations. Each workshop will explain what 501(c)(3) organizations must do to keep their tax-exempt status and comply with tax obligations. This popular introductory workshop is especially designed for administrators or volunteers who are responsible for an organization's tax compliance. Registration is now available: http://www.irs.gov/charities/article/0,,id=234956,00.html
The Faces of the Next Generation of Fundraising Leaders
The AFP Next Generation Committee is requesting your help in obtaining photos to use on the Young Professionals website page. If you are a young fundraising professional (age 30 or under) or if you know people who could be the face of the new generation of AFP’s leaders, we would like to use your photo. We are looking for individual photos, group pictures and action shots that show young professionals engaged in their work and making an impact. Photos can be sent electronically in .jpg or .eps format. For more information or to submit photos, please contact Pat Bjorhovde at email@example.com.
AFP Kaleidoscope: Change in Definition, Change in Focus
It’s not enough to focus only on recognizing differences. We have to welcome and include those differences if we are going to best reflect and represent fundraising, philanthropy and all of society. That’s why, according to Wayne Steer, director of fund development for Fresh Start Recovery Centre in Calgary, Alberta, and a member of the Diversity and Inclusion Committee, AFP has moved to change its definition of diversity in fundraising.
And check out the latest Kaleidoscope newsletter:
Sign Up to Serve on AFP’s Committees
Know someone who would make a great candidate for committee service and help steer the direction of your community? Would you like to serve on one of AFP's committees? Now is your chance to do so! To sign up today, click here.
Canada Globe and Mail to Publish NPD Supplement on Nov. 16
The Globe and Mail, which reaches nearly one million readers across Canada, will be publishing in partnership with AFP a special supplement about National Philanthropy Day®. The supplement will highlight donors, volunteers, corporations and foundations across Canada involved in philanthropy, and AFP members can receive special rates on advertising. To learn more, click here.