Chapter 13: Nonprofit fundraising

Chapter 13: Nonprofit fundraising

Dr Ted Flack

Nonprofit fundraising: An introduction

The earliest examples of efforts to offer a theoretical basis for charitable fundraising are provided by economist Rose-Ackerman (1982) and Weisbrod and Dominguez (1986) who demonstrated that the ‘market’ for charitable donations is more efficient when donations are actively solicited. These findings are supported by more recent studies, such as that by Marudas and Jacobs (2010) who found that the use of professional fundraising services by United States (US) NPOs increases the effectiveness of fundraising efforts. More recent support for their findings has emerged which suggests that formal fundraising practice may be more effective in some industries than in others (Medina-Borja and Triantis 2014; Yi 2010).

Fundraising has both common or ‘street’ meanings, as well as specialised or professional meanings. There is no agreed definition of fundraising used as a reference point for research or discussion among the fundraising profession. However, the International Encyclopaedia of Civil Society provides the following description:

‘The language of fundraising has some counterpoint with sales, marketing, law, and even religion, politics and finance. The word itself in the corporate realm denotes sourcing investment to run or grow a business. Similarly in nonprofits, fundraising is about locating the resources an organisation needs to achieve its aims on behalf of those it serves. Common definitions focus on raising money for a nominated cause or program. “Resource mobilization” is a frequently used term in some countries, again borrowing from the rubric of finance but emphasizing as well the idea that an NPO needs more than just funds and will seek people, their time and in-kind resources too.’

The term ‘development’ is often used interchangeably with fundraising, in essence referring to the whole process of garnering resources (Scaife 2010, 742). This is in line with the definition proposed by Bruce Hopkins, taking a broad US legal perspective, in which he suggested that ‘fundraising’ be defined as ‘The generation of revenue for charitable purposes’ (Hopkins 2000).

An examination of the dictionaries and glossaries published by the professional fundraising associations in comparable jurisdictions finds that there is no agreed definition of the term ‘fundraising’. The American Association of Fundraising Professionals’ dictionary defines fundraising as ‘raising of assets and resources from various sources for the support of an organisation or a specific project.’ While the term ‘fundraise’ is listed as ‘to seek donations from various sources for the support of an organisation or a specific project’ (Association of Fundraising Professionals 2003, 55).

Fundraising as an emerging profession

In Australia, the United Kingdom (UK) and the US, the First World War saw the emergence of professionally-organised fundraising campaigns in support of the war effort (Sargeant and Jay 2014). In the US the first moves towards creating a fundraising professional body came to a head in 1935 with the formation of the American Association of Fundraising Counsel (Sargeant and Shang 2010, 32), and in the UK the Institute of Fundraising was established in 1983.

In Australia, The Australasian Society of Fundraisers was formed in 1968 at a meeting of a group of fundraisers in Melbourne. Later to become The Australasian Institute of Fundraising (TAIF) in 1972, TAIF changed its name to the Fundraising Institute Australia in 1999 (Fundraising Institute Australia 2015).

In keeping with the characteristics of an emerging profession (Dean 1995; Flack 1996; Sargeant 2009), each of these professional fundraising bodies developed codes of ethics and standards of practice and began to enforce compliance among their members. Education and training services provided by these bodies was at first based on experience; however, more recently the growing body of rigorous research on fundraising questions is informing fundraising education and practice (Anonymous 2015; Sargeant and Shang 2015; Science of Philanthropy Initiative 2014).

Despite this lack of a common approach to definitions of fundraising, fundraising practice in Australia has been greatly influenced by fundraising practice in the US and the UK. Sargeant and Shang (2010) identified the types of activities that tend to be regarded alike as ‘fundraising’ in Australia, the US and the UK:

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  direct response fundraising
  
• 
  fundraising online
  
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  donor retention and development
  
• 
  major gift fundraising, including:
  

• 
  capital gift fundraising
  
• 
  grants from philanthropic trusts or foundations, and
  
• 
  bequest, in memoriam and tribute gifts
  

• 
  planned giving (a planned gift created now for the future benefit of an NPO, generally after the death of the donor), and
  
• 
  corporate fundraising, including:
  

• 
  donation of goods and services such as stock or publicity
  
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  gift of staff time and expertise
  
• 
  corporate sponsorship
  
• 
  workplace giving
  
• 
  workplace events
  
• 
  workplace fundraising and collections, and
  
• 
  cause-related marketing.
  

Some activities are likely to be understood in Australia as ‘fundraising’, but may not be understood this way in other jurisdictions (McGregor-Lowndes, Flack, Poole, et al. 2014), including:

• 
  charitable gambling products like raffles, lotteries, bingo and ‘lucky envelopes’
  
• 
  street stalls, fetes, fairs, second-hand book sales and jumble sales
  
• 
  second-hand clothing shops, and
  
• 
  charitable merchandising, such as Christmas cards, t-shirts, etc.
  

Fundraising campaigns make use of a wide range of communication means to solicit support, and typically offer a full range of response mechanisms through which to contribute. Fundraising campaigns are increasingly using a wider mix of e-commerce technologies including the use of the email (Valverde, Lefevre and Hoehling 2013) and social media such as Twitter (Pitman 2014) and Facebook (Woolley et al. 2014) to add to the traditional channels such as street collections, mail, telephone and mass media advertising (Saxton and Wang 2014).

Increasingly, donors and supporters of NPOs are using electronic means to transmit their cash contributions. The use of cheques and money orders has been slowing rapidly and the use of credit cards, online banking facilities and direct debit authorities are increasingly common (National Australia Bank 2015).

How to classify revenues generated by fundraising activities creates some difficulties in the accounting processes (McGregor-Lowndes, Flack, Poole, et al. 2014) in that Australian Accounting Standards classify revenues by the nature of the transactions and not by the type of activity that generated the transaction. For example donations are likely to be classified as ‘transfers’, while special event sales, charity auctions and raffle sales are likely to be treated as ‘sales’ and aggregated with other transactions not readily classified as fundraising. This means that the data from multiple charity accounts are unlikely to produce an accurate dataset on fundraising (Flack et al. 2014).

How responsibilities are allocated and attitudes towards fundraising in NPOs varies depending on several factors. The dominant activity of the NPO is important in that there are many organisations whose primary activity is the delivery of charitable or community services. In these organisations fundraising may be understood as a support function rather than a prime function; in others fundraising is the dominant activity. These differences tend to be reflected in the attitude and involvement of the board in fundraising activities (Australian Institute for Company Directors 2014; Green and Griesinger 1996; Scaife, Williamson and McDonald 2013).

The recent US study UnderDeveloped: A National Study of Challenges Facing Nonprofit Fundraising (Bell and Cornelius 2013) found, inter alia:

• 
  high turnover rates among development directors (DDs)
  
• 
  50% or more of DDs in organisations with operational budgets under US$5 million anticipate leaving the organisation within two years and 46% anticipate leaving the field of development within two years
  
• 
  there is an undersupply of qualified DDs
  
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  there is a high level of dissatisfaction with the performance of DDs among other executives, and
  
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  smaller NPOs struggle to compete with larger organisations for experienced DDs.
  

This study (Bell and Cornelius 2013) concluded that these problems were partially due to a lack of sound strategies and the lack of an internal culture that supports the development function. There is some evidence in Australia that there are similar fundraising staff-turnover rates and a lack of organisation-wide support for fundraising in some subsectors (Nicholson, Newton and Sheldrake 2008).

In 2013, using a survey and focus groups, Scaife et al. found that ‘CEOs of NPOs were overwhelmingly seen as their organisation’s fundraising champions; and that the most significant benefit of having fundraising expertise at CEO and board levels was strategic direction/oversight (as opposed to additional people “asking” for support)’(page iii). This finding is somewhat at odds with the traditional view, where the direct involvement of board members in fundraising is expected but not always achieved (Hager, Rooney and Pollak 2002; Scott 2014a; Walker 2002), but supported by recent research in Australia, the UK and the US (Bennett 2012; Esparza and Jeon 2011; Saj 2013).

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