Fundraising expenses, also known as fundraising costs, refer to the costs incurred by a non-profit organization in the process of seeking and collecting funds from donors. These costs can include a wide range of activities, from running campaigns to hosting events, and from hiring fundraising staff to investing in donor management software.
Common types of fundraising expenses include:
- Direct mail and telemarketing costs: This includes the cost of producing and distributing fundraising materials, as well as the cost of staff or call centers used to reach out to potential donors.
- Event costs: Many non-profit organizations hold events, such as charity auctions, dinners, or runs/walks, to raise funds. The costs of hosting these events, including venue rental, catering, and promotional materials, are considered fundraising expenses.
- Salaries and benefits: The salaries and benefits of fundraising staff, including those who plan and execute fundraising campaigns, maintain donor databases, and communicate with donors, are part of fundraising expenses.
- Consultant fees: Some organizations hire fundraising consultants or firms to help with their fundraising efforts. The fees for these services would be considered fundraising expenses.
- Technology and software costs: The costs associated with maintaining a website, managing online donations, or using donor management software are also fundraising expenses.
These expenses are considered necessary for non-profit organizations to fulfill their mission, as they help to generate the resources needed for program delivery. However, potential donors and grant-making organizations often look at fundraising expenses as a proportion of total expenses or in relation to the amount of funds raised to assess an organization’s efficiency and effectiveness. This ratio, known as the fundraising efficiency ratio, can impact the willingness of individuals or institutions to donate to the organization.
Example of Fundraising Expenses
Let’s consider a hypothetical non-profit organization, “Health & Hope Foundation”, which is dedicated to supporting healthcare research and providing care to patients in need.
Health & Hope Foundation plans a major fundraising campaign with the goal to raise $1 million in donations. Here’s a simplified breakdown of their fundraising expenses for this campaign:
- Direct Mail Costs: The Foundation spends $20,000 on designing, printing, and mailing brochures to potential donors.
- Event Costs: The Foundation organizes a charity dinner with a guest speaker. The costs for the venue, food and drink, decorations, and the speaker fees total $30,000.
- Salaries and Benefits: The Foundation has two full-time fundraising staff members who spend half their time over a period of three months planning and executing the campaign. Their combined salaries and benefits for this period amount to $25,000.
- Consultant Fees: The Foundation hires a fundraising consultant to help strategize for the campaign. The consultant’s fees are $10,000.
- Technology and Software Costs: The Foundation invests in an online donation platform to make it easier for donors to give. The costs associated with setting up and maintaining this platform for the campaign period are $5,000.
In total, Health & Hope Foundation’s fundraising expenses for this campaign amount to $90,000. If the Foundation achieves its goal of raising $1 million, then its fundraising efficiency for this campaign would be $90,000/$1,000,000, or 9%. This means it spent 9 cents to raise each dollar, which is generally viewed as a good fundraising efficiency ratio. Donors and grantors evaluating the organization would likely view this as a positive indicator of the organization’s efficiency in fundraising.
Remember, this is a simplified example, and real-life scenarios would likely involve more complexity. Also, fundraising efficiency can vary widely depending on the type of non-profit and the nature of the fundraising efforts.