Do You Know Your Fundraising Efficiency Rating?

Michael McNeely
Michael McNeely

How does your non-profit rate in fundraising efficiency? As donors become more selective in their giving choices, they are checking out your financials. They want to know that you are spending their money on programs–not on administration, and certainly not on fundraising.

In our experience, every non-profit differs from every other, so it’s understandable that fundraising efficiency varies so much from organization to organization. Yet you do want to get a handle on your own fundraising efficiency so that you can expand programs that are working and phase out those that are not.

Here’s one way of looking at your fundraising efficiency. Charity Navigator was founded in 2001 to evaluate and publicize the fundraising efficiency of nonprofits. They developed an unbiased, objective rating system to assess the financial health of more than 5,000 of America’s best-known charities. Basically they look at how much of revenue a non-profit spends on program, administration, and fundraising to calculate the cost per dollar raised. If a charity spends less than 60 percent of its revenue on program, Charity Navigator gives it a failing grade.

For example, in 2006 a national nonprofit spent almost 80 percent of its revenue on program, 17 percent on administration, and a skimpy 3 percent on fundraising. That gave it a sterling fundraising efficiency rating of .07. In other words, it spent only seven cents that year to raise a dollar. In contrast, in that same year a similar national organization spent 40 percent on program, 22 percent on administration, and 38 percent on fundraising. Those numbers gave the organization an unfavorable fundraising efficiency rating of .52. Because the organization spent 52 cents to raise a buck, Charity Navigator gave it a failing score.

So how do you improve your fundraising efficiency? And how can you use your fundraising efficiency to attract and reassure donors? These are complex questions. The Abbey Group seeks to answer those questions on a case by case basis.

We also offer you the following fundraising guidelines for your various solicitation activities. Again, these are just guidelines and sometimes unattainable. Yet they are worth thinking about.  Before you look at them, let me mention that the guidelines come from the excellent study by James M. Greenfield, “Fundraising Cost Effectiveness,” 2005.

Reasonable Fundraising Cost Guidelines

Solicitation Activity
Reasonable Cost Guidelines
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 (gross revenue direct costs)
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

If you are not sure how to evaluate your own organization for fundraising efficiency, give us a call. We can analyze your efficiency and offer you development council to maximize charitable giving to your nonprofit.

Share

Leave a Reply