street fundraisiers

How fundraising became cost free

By Cecilie Hestbaek 7 February 2014

We all like to hear that when we give our hard-earned cash to charity it goes directly to the people we want to help—and not towards paying for things like charity ‘phoners’ (persistent individuals who call at inconvenient times and pretend not to know the meaning of ‘no’ or ‘goodbye’). I was once one of them, so I’m no stranger to pushy fundraising tricks—but I was a good investment for the charity, signing up around five new supporters per day and bringing in more money than I cost.

However little it appeals to you and me, it’s necessary that we continue to fund charities’ efforts to increase their voluntary income, because at £38 billion each year it certainly doesn’t come for free. As a sector we need to acknowledge that it costs money to make money, and we shouldn’t be ashamed of it.

‘Every pound goes to making grants’

Some large charities claim that they spend all their voluntary income on projects. For example, Comic Relief—a large, well-known and respected grant-makerstates on its website that ‘none’ of its fundraising costs are paid for by money donated directly by the public. This is possible, former Chair Peter Bennett Jones explains, because these costs are covered by the return from its investments. This is obviously great news for Comic Relief: it has lots of money in the bank and investment managers who produce returns greater than its costs.

However, it doesn’t help less well-off parts of the sector if we start talking about public donations as a separate pot of money and suggesting that the quality of a charity can be judged by its ability to keep this money almost sacred. In effect, the organisation is therefore assessed on its capacity to generate investment returns, an approach that will only make losers of charities with low cash reserves and no investment income, or in unpopular sectors where fundraising is tough. These are often forced to spend a good part of their voluntary income on fundraising in order to survive and achieve their objectives.

Focus on what matters

The third sector has suffered negative news coverage lately, particularly over the issue of ‘fat cat’ CEO pay. It’s easy to follow what seems to be general public opinion: that charities should spend close to nothing on admin costs, fundraising and anything else that ‘surrounds’ actual help offered to people. But buying into this story is misleading and doesn’t serve our purpose: it means agreeing to be measured on how cheaply we run our activities rather than the quality of those activities.

Instead, we need to take a step back and look at what really matters: whether charities makes a significant, positive difference to the lives of their beneficiaries by focusing  funds on maximising their impact. It is the responsibility of large charities such as Comic Relief that have the privilege of broad media access to keep the conversation about costs and spending at an intelligent level and remind us all that the ‘admin cost’ discussion is a deceptive one.

In a recent analysis of 15 charities’ fundraising ratio—the multiple with which money invested in fundraising activities are returned through voluntary income—we found that several charities we previously analysed, and regarded as being good or excellent on several of our ‘little blue book’ criteria, now have fundraising ratios as low as 2. This isn’t great, but sending fundraisers packing won’t help. Next week, I will discuss further why a poor ratio doesn’t make an all- bad charity and what fundraising ratios can be understood and used for.