Charity costs

Factors impacting on fundraising costs


A number of different factors impact on the fundraising ratios a charity is able to achieve:

  1. The sources of fundraised income. It costs much less to solicit grants from companies, trusts, government agencies and the National Lottery than it does to raise funds from the general public, but these fundraising routes are not available to every charity. Applications for funding do require large amounts of staff time to prepare, but these costs pale into insignificance alongside the costs of buying advertising space, sending out a mailing and creating and managing a fundraising database. Those charities that offer the sort of services that mean they can secure most of their income from grants will therefore report far better ratios than those working with the general public. Legacy income is also important here, as charities sometimes receive high amounts of legacy income that skews the figures.
  2. The types of individual fundraising undertaken. Even when one considers just fundraising from the general public it is important to recognise that the returns achieved will be a function of the media and/or methods employed. Direct mail (addressed mailings) generates very different returns from street fundraising, gala dinners or the sale of raffle tickets etc. The fundraising ratio will therefore reflect the balance of activities undertaken and not every fundraising method will be available to every organisation so it is not always possible for every charity to access the most profitable techniques.
  3. The size of the organisation. There are economies of scale in fundraising activities that make it cheaper for larger organisations to raise funds than smaller ones. Comparing the fundraising performance of the Devon Wildlife Trust with the NSPCC would therefore be unfair.
  4. The nature of the cause. The British public have their favourite causes like children and animal welfare. There are many difficult social causes that the public does not find so attractive. That is not to say that these are any the less worthy, merely that they are not so imprinted on the national psyche. Some categories of cause therefore find it more difficult to raise funds than others. It would be unfair to compare the performance of say a charity working with asylum seekers with that of a children’s hospital. The former would tend to find it more difficult to raise funds than the latter.
  5. Age/Experience. Those charities that are new to fundraising, or new to the use of certain techniques will find that it takes times to establish a reasonable pattern of performance. Many techniques require investment over a period of many years before an adequate return on investment can be reported. Thus the move by a charity into the use of a new media or method of fundraising may adversely affect fundraising ratios in the short to medium term.
  6. Volunteers. Some charities have a well-established and hard working base of volunteers prepared to undertake fundraising activity at no staff cost to the organisation. These are typically large national charities with regional groups and branches, or very small organisations where the community gets together to work to its mutual advantage. It isn’t possible for every charity to involve volunteers in fundraising and the number of volunteers fully trained in fundraising is actually very small.
  7. The way the accounts are prepared. Some charities will argue that when they engage in fundraising, they are at the same time educating the public about their cause. As a consequence between 10 and 20% of the costs of fundraising can be taken out of the equation before ratios are calculated. These costs are then approportioned to programme costs, or direct charitable expenditure.

    To complicate matters still further, some charities operate accounting practice that does the converse. Some charities believe that their fundraising function benefits from the brand building and education work the organisation undertakes. These organisations therefore charge fundraising a percentage of the costs of this activity, making fundraising appear between 5 and 15% more expensive than it actually is.

    Without getting detailed information from each charity on the practice it follows, it can be difficult to know which charities have adopted these practices, making direct comparisons between organisations impossible.