Lisa Wells, Presbyterian Support Otago's communication and fundraising director, examines issues about the costs of charity fundraising.
There are two things we know for sure about fundraising.
The first is that donors want to be assured their money is used for the charitable purpose for which it is given and that it "makes a difference".
The second is that the vast majority of New Zealand's 40,000 not-for-profit organisations are dedicated to their cause: whether it be helping the poor and vulnerable, protecting animals from cruelty, finding a cure for disease, helping young people into employment or mending the church roof.
It is estimated that $1.4 billion was donated to charities last year. This is a considerable amount of money, so it should not be surprising that there is a significant degree of interest in how it is all used.
Charities have few alternatives to fundraising.
User fees seldom cover the cost of services, so the only alternative to fundraising is to become entirely government funded.
This might seem like a good idea, but the role of a not-for-profit organisation is to complement government, not be one of its arms.
So, if an organisation has to raise funds to carry out its mission, then it will appeal to people who share the same values and concerns as the organisation.
It will invite them to share in the work of resolving a need, or redressing an injustice, or simply caring for others.
I have been a fundraiser for more than two decades.
I've seen good organisations and bad, and some that have forgotten why they exist.
The trouble with fundraising is that there are many simple questions and few simple answers.
If we ask the obvious question "how much should it cost to raise a dollar?" then, realistically, the answer will be "it all depends".
Whether it costs 10c or 50c to raise a dollar is pretty much immaterial.
There is no simple linear answer. Organisational efficiency cannot be measured by fundraising income to cost ratios.
If an organisation is run by volunteers, then there will be few costs and these will be apparent to anyone who looks at the organisation's financial statements.
However, as organisations get larger and employ staff to carry out their charitable purposes, they get more complex.
Management and administration cost money, goods and services are generally purchased at market rates, and fundraising itself costs money.
Just as a company has to invest in advertising and promotion to sell its goods, a charity has to attract supporters for the first time, keep them informed about the work their donations make possible and present them with new giving opportunities.
There is a cost to being accountable to your community.
The cost of fundraising varies from one not-for-profit organisation to another, based on a host of variables - the age of the organisation, the size of the budget, the popularity of the cause, the fundraising methods used, the skills of the fundraising staff, the strength of the organisation's leadership, and many more.
Internationally, there is much debate about appropriate measures, standards and benchmarks for fundraising, so the cost of fundraising is not only a New Zealand question. Furthermore, there are no agreed guidelines as to what should be "counted".
Are newsletters and brochures educational, advocacy or are they fundraising resources?
How do you apportion staff time? Should you "value" volunteer time and show it as a cost of fundraising?
Is my organisation less efficient than another organisation that doesn't show sponsorship on both sides of the ledger?
Enlightened donors realise that charities reporting no fundraising costs "are more likely to be advertising the poor quality of their financial reporting than their fundraising efficiency".
So how do we make sense of this?
Many of the fundraising horror stories that hit the headlines are ones involving third-party fundraisers.
Telemarketing companies, events organisers, street canvassers . . . they are businesses and are set up to make a profit.
There is nothing fundamentally wrong with that.
However, the problem is two-fold: the individuals and companies who cannot say how much of the "donation" is going to the organisation they are soliciting on behalf of, and the donors who do not ask for that information.
Donors have a right to inquire about the bona fides of the organisation; its programmes, outcomes, costs, Charities Commission registration number, the number of people it serves.
If you like the sound of the organisation, but want to make sure that all your donation ends up in its pocket, ask for its website to check it out further; or if you are ready to make a gift, ask for a postal address so you can send your money directly to the charity.
Feel free to look them up on the Charities Register (www.charities.govt.nz) and view their profile and financials. Peruse their website.
Ring them up and ask questions! No credible not-for-profit organisation will object to a conversation with a prospective donor.
Presbyterian Support has always fundraised, and the early history of the organisation is a saga of community philanthropy.
Superintendents (today's equivalent of the chief executive) spent days covering the country on horseback and directly asking for support for Otago's poor and destitute.
This fundraising was very effective - millions of dollars in today's money gathered just for the cost of the superintendent's time and feed for his horse.
Times change, but the principles of fundraising do not.
The truth of the matter is that to raise money you have to ask for gifts.
How you ask can cost varying amounts: one-to-one would be the most cost effective, events and advertising are more expensive. Add a third-party company into the mix and the costs will be even greater.
If donors really want organisations to have reduced fundraising costs, then they should consider making regular gifts, directly to the charity of their choice, without having to be asked.
Only then would the cost of fundraising be negligible.
PSO chooses fundraising methods that provide the best return for the community we serve.
We have a donor rights policy which assures donors that their money goes where we say it will.
Our fundraising costs are modest.
Each year, we have to raise more than $1 million for our programmes and we do this through a combination of fundraising, seeking bequests and our OpShops.
• Lisa Wells is a fellow and past president of the Fundraising Institute of New Zealand.
