Philip Desbrow Memorial Lecture March 1, 2005

1
Philip Desbrow Memorial LectureMarch 1, 2005

• Nonprofits and Accountability
• Why Counting Gifts Is Not Enough
• James M. Greenfield, ACFRE, FAHP
• Newport Beach, California, USA
• Centre of Philanthropy and Nonprofit Studies
• Queensland University of Technology
• Brisbane, Australia

2
Accountability is

• Subject to the obligation to report or justify
  something responsible answerable.
• Liable to be called to account.
• Capable of being explained.

3
Fundraising Methods

• Annual Giving
• Direct mail (acquisition)
• Direct mail (renewal)
• Membership association
• Donor/Giving Clubs
• Telephone Internet
• Benefits special events
• Support Groups/Guilds
• Volunteer-led solicitations

• Major Giving
• Corporations
• Foundations
• Individuals
• Special projects
• Capital campaigns
• Planned giving and estate planning
• Endowment campaigns

4
Reasonable Fundraising Cost Parameters

• Direct Mail (acquisition) 1.25 to 1.50
  per 1.00 raised
• Direct Mail (renewal) 0.20 to 0.25 per
  1.00 raised
• Membership programs 0.20 to 0.30 per
  1.00 raised
• Benefit events 0.50 per 1.00 raised
  
• Donor clubs/support groups 0.20 to 0.30 per
  1.00 raised
• Volunteer-led solicitations 0.10 to 0.20
  per 1.00 raised
• Corporate solicitations 0.20 per 1.00
  raised
• Foundation solicitations 0.20 per 1.00
  raised
• Capital campaigns 0.10 to 0.20 per 1.00
  raised
• Planned giving programs 0.20 to 0.30 per
  1.00 raised
• Source J.M. Greenfield, Fund
  Raising Fundamentals. 2nd ed. Wiley, 2002, p.
  499.

5
What Can Experience Teach us?Lessons From Hoag
Hospital Foundation Surveys

• Staff Time-Analysis Survey
• In 1989, 55 of staff time was spent on benefit
  events reduced to 43 by 1999
• Volunteers were asked to do more - staff do less
  and
• Revenue increased from 3.1M in 1989 to 5.0M in
  1993.
• Market Research Survey
• Likelihood to definitely contribution again
  increased from 75 to 87 between 1989-1999
• Preferred contact by mail declined from 73 in
  1996 to 8 in 1999 and
• Preferred contact by someone you know increased
  from 8 in 1996 to 76 in 1999.

6
The Complete Fundraising Budget

• Direct Costs Actual expenses to carry out each
  solicitation method, e.g. printing, postage,
  meetings, space equipment rentals, food
  beverages, entertainer fees, travel expenses,
  telephone, etc.
• Indirect Costs Staff salaries and benefits,
  overtime, meeting support, computer usage fees,
  computer equipment and software, data processing,
  donor recognition and communications, gift
  processing and gift reports, Internet access and
  usage fees, newsletters and brochures, office
  supplies, telephone, travel, education and
  training, consultants, purchased services, etc..
• Overhead Costs Electricity, heat, insurance,
  rent, water, depreciation assessments, etc.

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Budget and Cost-Benefit Analysis

• Gift Approved Actual
  Cost per
• Income Budget Expenses
  Raised
• Annual Giving Programs
• Direct mail acquisition 28,030 25,500
  25,855 0.92
• Direct mail renewal 48,010 10,750
  10,890 0.22
• Benefit events (net) 52,850 20,800
  25,350 0.48
• Volunteer solicitations 85,020 8,500
  8,485 0.16
• Sub-Total 213,910 65,550
  70,580 0.33
• Major Giving Programs
• Corporations 28,500 20,215
  18,250 0.64
• Foundations 48,800 14,525
  13,655 0.28
• Individuals 268,525 29,710
  28,685 0.11
• Bequests Received 11,500 500
  680 0.06
• Sub-Total 357,325 64,950
  61,270 0.17
• Grand Total 571,235 130,500
  131,850 0.23

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Fundraising Ratio Analysis

• 2 yrs Last
  This
• Ago Year Year
• Annual Giving Programs 173,567 189,650
  213,910
• Major Giving Programs 275,198 318,205
  357,325
• Gross Revenue 448,765
  507,855 571,235
• Less Budget - 116,550 - 123,540
  - 131,850
• Net Revenue 332,215 384,315
  439,385
• Fundraising Cost 0.26 0.24
  0.23
• Return on Expense 285
  311 333

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Some US Internet Watchdogs Who Rate
Nonprofits

• American Institute of Philanthropy Percent
  spent on charitable purpose, cost to raise 100,
  years of available assets. (Grades A to F)
• Better Business Bureau Public accountability,
  use of funds, solicitation materials, 35
  fundraising ratio, governance standards.
  (Meets/Missed Standards)
• Charity Navigator Fundraising cost and
  efficiency, program and administrative expenses
  and growth, primary revenue growth, working
  capital ratio. (Four-Star Rating)
• ECFA Program expenses, fundraising expense.
  (Pass/Fail)
• GuideStar Accountable payable aging indicator,
  contributions and grants ratio, debt ratio,
  fundraising ratio. (No grade or score financial
  and other data)

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Growth in Giving Analysis

• Annual Annual Cum.
• 2 Yrs Last Rate This Rate
  Rate Ago Year Year
  
• Participation 1,355 1,605 18 1,799
  12 31
• Income 448,765 507,855
  13 571,235 12 26
• Expenses 116,550
  123,540 6 131,850 7 13
• Percent participation 39 44 13
  52 18 31
• Average gift size 331 316 - 4
  318 -0.4 - 4
• Net income 332,215 384,315
  16 439,385 14 30
• Average cost per gift 86 77 11
  73 - 5 -15
• Fund-raising cost 0.26
  0.24 - 6 0.23 - 5 -11
• Return on expense 285 311 9
  333 7 16
• Source J.M. Greenfield,
  Fund-Raising Cost Effectiveness. Wiley, 1996,
  p. 272.

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Donor Giving Preferences

• 94.23 of all gifts received were restricted in
  their use.
• Predominant donor restrictions on uses of funds
  were in three areas and represented
• 86 of all gifts received
• (a) Equipment 2,159,331 48.82
• (b) Education 1,298,142 29.35
• (c) Patient assistance 346,303
  7.83
• Sub-Total 3,803,776 86.00

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Forecasting Reliable Results

• 2 yrs Last This Est.
  Next
• Ago Year Year
  Year
• Gross Revenue 448,765 507,855
  571,235 650,000
• Direct costs 77,015 82,100
  89,778 95,000
• Indirect costs 39,535 41,440
  42,072 45,000
• Sub-Total 116,550 123,540
  131,850 140,000
• Net Income 332,215 384,315
  439,385 510,000
• Fundraising costs 0.26 0.24
  0.23 0.21
• Return on expense 285 311
  333 364

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Accounting Language Barrier

• For-Profits
• Net profits and gt
• dividends
• Fixed assets gt
• Accounts receivable gt
• Accrual accounting gt

• Nonprofits
• Excess of revenue
• over expenses
• Depreciation
• Pledges
• Cash accounting for
• - unrestricted gifts
• - temporarily restricted gifts
• - endowment gifts
• - non-cash gifts

14
Community Needs Assessment(results of a public
health survey)

• Access to preventive/primary care for
  vulnerable populations
• AIDS/HIV
• Asthma
• Breast cancer mortality
• Cardiovascular disease
• Childrens immunization
• Infant and child health issues
• Senior health issues
• Teen pregnancy
• Tuberculosis

15
Nonprofit Message Managers

• Marketing Message Objectives
• Identify target markets establish an image
  create clients elicit a positive response
  stimulate the public to act.
• Communications Message Objectives
• Inform and educate tell a story and report it
  often report results and deeds as outcomes (not
  outputs) build confidence and trust build
  community consensus.
• Fundraising Message Objectives
• Develop gifts to meet priority needs facilitate
  friend raising build relationships develop a
  willingness to give and to volunteer keep
  continuous contact with donors.

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Outcomes and Public Benefit Reports as Stories

• Benefits may relate to knowledge, skills,
  attitudes, values, behavior, condition, or
  status.
• Examples of outcomes include greater knowledge of
  nutritional needs, improved reading skills, more
  effective responses to conflict, getting a job,
  or having greater financial stability.
• Outcomes are benefits or changes for individuals
  or populations during or after participating in
  program activities.
• Outcomes are influenced by a programs outputs.
  They are what participants know, think, or can
  do or how they behave or what their condition
  is, that is different following the program.
• Source Measuring Program
  Outcomes A Practical Approach. Alexandria, VA
  United Way of America, 1996, pp.
  xv, 2.

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Media Options for Outcomes Reporting

• Newsletters
• Magazines
• Annual Reports
• News Releases
• Web Site/Home Page
• All Fundraising Appeals
• Radio/Television PSAs
• Videos/CDs/DVDs
• CEO/ED Letters
• Program Director Letters

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Cycle of Accountability

• Community Benefits
• Delivered
• Outcomes Community Needs
• Measurement Assessment
• Programs Audits and
• And Services Strategic Plans
• Delivered
• Stewardship Marketing and
• Of All Funds Communications
• Strategies/Stories
• Fundraising
• Activities

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Philip Desbrow Memorial LectureMarch 1,
2005Nonprofits and Accountability Why
Counting Gifts Is Not Enough

• Thank you