TOM HARRISON ERIKA KLOEHN MODERATOR: SHIRA MITCHELL. Speaking of Fundraising

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1 TOM HARRISON ERIKA KLOEHN MODERATOR: SHIRA MITCHELL Speaking of Fundraising Costs

2 Agenda Let s Talk About Fundraising Costs What are they? Who cares? When will you start talking? What will you say?

3 Let s start with what YOU think.

4 Cost Ratios Percentage an organizations spends on management/fundraising costs Everything that isn t considered program Annual revenue and annual costs Try to balance acquisition costs with LTV

5 Our donors and prospects care. One in three: nonprofits have pretty seriously gotten off in the wrong direction 70% thought charities waste a great deal or a fair amount of money Only 25% said charitable organizations did very good helping people Source: 2008 Brookings Institute Study

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7 Actions Speak Louder Than Words (And fundraising costs) Use resources responsibly Message accurately Be transparent Nonprofits and the industry

8 You Have to Spend Money to Make Money But take the long view Costs are a normal part of business but need to accomplish the mission Efficiency measures are long- and shortterm One-year term for analysis

9 What am I doing? Diversified fundraising Multiple sources of funds Some are expensive Some pay off faster than others Every year is different but I should have an explanation

10 Wishin Don t Make it So Who are your audiences? Watchdogs News media Foundations Donors Even our own boards(!)

11 Responding to Your Audiences What would you say? Why not just raise money online? What happened to your fourth star? I think your overhead costs are too high. A disgruntled former employee claims How much of my money is really going to the program?

12 BBB Wise Giving Alliance To the Donors of America: We write to correct a misconception about what matters when deciding which charity to support. The percent of charity expenses that go to administrative and fundraising costs commonly referred to as overhead is a poor measure of a charity s performance. We ask you to pay attention to other factors of nonprofit performance: transparency, governance, leadership, and results. For years, each of our organizations has been working to increase the depth and breadth of the information we provide to donors in these areas so as to provide a much fuller picture of a charity s performance. That is not to say that overhead has no role in ensuring charity accountability. At the extremes the overhead ratio can offer insight: it can be a valid data point for rooting out fraud and poor financial management. In most cases, however, focusing on overhead without considering other critical dimensions of a charity s financial and organizational performance does more damage than good. In fact, many charities should spend more on overhead. Overhead costs include important investments charities make to improve their work: investments in training, planning, evaluation, and internal systems as well as their efforts to raise money so they can operate their programs. These expenses allow a charity to sustain itself (the way a family has to pay the electric bill) or to improve itself (the way a family might invest in college tuition). When we focus solely or predominantly on overhead, we can create what the Stanford Social Innovation Review has called The Nonprofit Starvation Cycle. We starve charities of the freedom they need to best serve the people and communities they are trying to serve. If you don t believe us America s three leading sources of information about charities, each used by millions of donors every year see the back of this letter for research from other experts including Indiana University, the Urban Institute, the Bridgespan Group, and others that proves the point. So when you are making your charitable giving decisions, please consider the whole picture. The people and communities served by charities don t need low overhead, they need high performance. Thank you, Art Taylor President & CEO, BBB Wise Giving Alliance overheadmyth.give.org Jacob Harold President & CEO, GuideStar overheadmyth.guidestar.org Ken Berger President & CEO, Charity Navigator thebestandworstwaytopickacharity

13 It s Time to Change the Conversation But first, three important caveats Unethical fundraisers cause damage Inexperienced, but ethical fundraisers Experienced fundraisers who push the envelope where do you fit?

14 Why do you waste so much money killing trees when you should just raise money online anyway? - Helpful Board Member

15 Your overhead costs are too high and it s obvious why you don t have enough puffs from a charity watchdog. - Inquisitive Local Foundation

16 I understand from one of your employees that you spent $50,000 on an outbound telemarketing campaign which only brought in $40,000. That means all the money went to telemarketers and nothing to help save puppies. Is this fraud or mismanagement? - Writer for the NY Times

17 Be Ready to Answer the Questions But don t take the bait Be enthusiastic Explain the realities of raising money Donor motivation is about impact not just money mechanics

18 What s Next? Align with an industry standard: DMANF Educates on ethical and effective fundraising Lobbies on your behalf Establishes and communicates principles and best practices Become a member and/or encourage others to join!

19 Communications Strategy DMANF Members Resist efforts by media Media Board Members Build public s trust Ethics Rules & Best Practices in Financial Mgmt Establish ethical cultures General Public Nonprofit Employees Project a responsible image Donors

20 Here s How I Would Answer Why are you using a telemarketing firm? First, let s start calling it telefunding Donors respond in different ways to different appeals We can t be everywhere at once to have personal conversations with our donors This is about long term growth and engagement

21 Here s How I Would Answer How much of my money is actually going to the organization? All of your money is going to the organization We take the stewardship of the donor dollar very seriously More than 85% of our revenue goes directly to programs

22 Here s How I Would Answer I looked online and saw how much money your CEO makes. I don t want my money to go to such high salaries! We follow the IRS 3-step process for determining compensation: We compensate our CEO based on comparable salaries Review and approval by independent persons Deliberation and decision

23 Questions?

24 Speaking of Fundraising Costs Tom Harrison Russ Reid Erika Kloehn USO Shira Mitchell Special Olympics, Inc. Thank You!