The ROI Of Charities | Outsourced solicitations raise questions
Last month, the office of state Attorney General Martha Coakley released its 2010 annual report on nonprofits that outsource their fundraising to external companies. The report’s findings were similar to those of previous years — only 45 percent of the money raised by professional solicitors went to the nonprofit groups.
These kinds of numbers often raise the ire of people who have responded to dinner-time phone calls with donations. But they also highlight the complications involved in judging the return a nonprofit gets on its fundraising investments.
“All types of fundraising have different types of expenses to them,” said David Greenwood, a spokesman for Marlborough-based Special Olympics Massachusetts.
The report lists Special Olympics as using two external firms to raise money in 2010. A campaign by Heritage Co. Inc., which Greenwood said was a phone solicitation effort, raised $1.2 million, with 60 percent going to the nonprofit. Another by DialAmerica Marketing Inc., which Greenwood identified as a magazine subscription drive, raised nearly $600,000 and sent 14 percent of it to the group.
The difference between the two campaigns highlights one difficulty in judging fundraising’s ROI: the subscription drive involved the sale of an actual product and all the costs associated with it.
Greenwood said his organization uses a wide variety of fundraising methods. Altogether, he said, it brought in $6.8 million in 2010, which means the money raised through outside firms was only a little more than a quarter of the total.
Differences In Fundraising
Different fundraising efforts have different costs and rewards. Ann T. Lisi, president and CEO of the Greater Worcester Community Foundation, which supports small, local nonprofits, said community organizations generally avoid working with outside fundraisers, choosing instead to pay a staff member to handle the task.
But Lisi said that doesn’t mean raising money is necessarily cheap. Getting a large donation from a wealthy individual, for example, looks like a zero-cost proposition, but it’s generally the result of a long effort to demonstrate the organization’s impact and build relationships with potential donors.
“Generating support and revenue from community members is a long-term, arduous process,” Lisi said.
But when it comes to telephone and mail solicitations, Lisi said small nonprofits can find less expensive methods than using external organizations. Typically, they gather a list of potential donors, then have a staff member send a simple letter or have volunteers spend an evening at the office making calls.
The nonprofits Coakley’s report lists as using external fundraisers are generally not community organizations like the ones Lisi works with. Instead, they’re mainly large, national groups or extremely small organizations like local police unions with no full-time staff.
Special Olympics of Massachusetts isn’t as large as the big names like the American Lung Association or Habitat for Humanity International, which dominate the report, but Greenwood said that, with a $7 million budget, it’s too big to use the in-house methods that might work for a local food pantry.
Greenwood said the phone solicitation operation Special Olympics outsources involves calling 180,000 people, too many for a manageable group of volunteers to handle. And he said phone banking is important for fundraising , spreading the group’s message and seeking new volunteers.
Police Union’s Approach
Meanwhile, Ron Knoll, president of the Lancaster Police union, Local 203 of the Massachusetts Coalition of Police, said his nine-member department doesn’t have the time or resources to raise money by itself. He said it’s also generally considered bad form for police officers to ask for donations themselves. Local 203 works with All-Pro Productions of Marlborough. According to the report, in 2010 the fundraising firm raised $39,000 in the union’s fundraisers, 33 percent of which actually went to the union.
Knoll said that’s not a bad percentage considering everything All-Pro does. It organizes an event like a comedy show, calls local residents who might want to buy tickets or just donate to the union, and assembles a “safety book” for the community featuring ads from local businesses. “They do all the work,” Knoll said. “Basically they just use our name.”
Knoll said the union uses the proceeds to support local causes like Little League and a school robotics team.
Many police and firefighters’ unions use external solicitors, but some have decided not to. John Perodeau, president of Sudbury’s police union, chose not to set up a fundraiser like one that ran in 2010 through another organization. That campaign raised $20,347, with 35 percent going to the union. Perodeau said he finds the small part of the money that went to the union off-putting.
Lisi said it’s not uncommon for nonprofits to run their own events that return only a small percentage to the group’s coffers after expenses, but they’re typically less controversial than campaigns by outside fundraisers. She said attendees get a receipt telling them which part of the ticket price counts as a charitable donation, so there’s no cynicism about the events.
But Lisi said some organizations have decided that events aren’t worth the effort. Sometimes, she said, they’ll even send potential donors a letter saying something like “we’re asking you to stay home on September 15 and send us a check.”
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