Fundraising

The Confessions of a Nonprofit Director, Part 5

I don’t think that “fundraising” is a dirty word. Rather, fundraising is biblical. You can find examples of it in both Old and New Testaments.

The Teaching Ministry of David Servant

Paul, for example, was quite a fundraiser. He devoted two chapters of his second letter to the Corinthians to communicate the needs of poor saints in an attempt to persuade his readers to give sacrificially to meet those needs. That is fundraising. When people sometimes tell me that I shouldn’t communicate needs or attempt to motivate people to meet those needs—but instead just pray about them—I point them to 2 Corinthians 8-9.

Fundraising involves telling a story (one that should be true, of course). People don’t give to causes about which they know nothing. So good fundraisers work at communicating their stories in an honest, compelling way.

Some stories are epic, and so they spread virally, needing little push from fundraisers. A prime example would be the ministry of Jesus. When the lame are walking and the blind are seeing, there is no need to send out newsletters asking for ministry support. The marketing was built into the miracles. And Jesus’ ministry was supported, at least in part, from the private donations of women whom He healed (Luke 8:1-3). Jesus also used donations He received to help the poor (John 13:29).

Another example of an epic story would be any large-scale natural disaster. All international relief agencies know that when the devastation of an earthquake is widely broadcast through the media, fundraising suddenly becomes much easier. And the reason is because the story is being told to millions of people, and a percentage of them will want to make some sacrifice to provide relief. Capitalizing on this free advertising, well-known relief organizations enjoy financial windfalls that require relatively little investment on their part.

Most stories, however, aren’t so epic. So we fundraisers work hard to find people who will listen to our little stories. We know that if we can communicate with excellence through our words, photos and videos, people will respond, and we will be able to help those whom we desire to serve.

All of this is to say that honest fundraisers have no reason to be ashamed.

Fundraising Dreams

All fundraisers wish that money would fall from heaven just by praying! But it doesn’t work that way. Fundraising requires work. And once funds are raised, more work is required to administrate what donors have given in order to serve the target beneficiaries.

And that brings me to my second point: There is always a cost to both fundraising and administration of funds raised. Consider even Paul’s fundraising appeal for the poor saints in Jerusalem, found in 2 Corinthians 8-9, and the subsequent administration of the funds he raised. Paul had to write the letter, which took time. It was part of what he did in a day full of ministry, ministry for which he was financially supported by churches he’d planted. So even the writing of 2 Corinthians 8-9 cost a little bit of money. Paul may well have used the services of a scribe, which may have also cost money.

Paul had to have his letter transported from Philippi or Thessalonica, from where he wrote it, to Corinth, a distance of 350 to 450 miles, journeys that would have required many days of travel. It could not have been done for free.

The funds had to be collected, not only from the Corinthian church, but other churches as well. That could not have been done without some expense.

And finally, the large sum of collected funds had to be safely transported to Jerusalem, something that also could not have been done without expense, and then distributed conscientiously to the Jerusalem saints in need, a task that would have involved the time of numerous people. Even if they were all volunteers, there were still the basic costs which the volunteers paid themselves. Again, there is always a cost to both fundraising and administration of funds raised.

So nonprofit leaders have to wrestle with what percentage of their income should be used for fundraising and administration, just like business leaders have to think about how to allocate their company’s resources. But because donors are generally convinced that the best nonprofits are those that spend the least on fundraising and administration, nonprofit leaders are inclined to budget as little as possible for them. The end result is that they are often less effective at serving their target beneficiaries. Let me explain with a few examples, moving from the ridiculous to the sublime:

Example A: Rural Kenyans are starving from a local drought that is not big enough to make world headlines. A small U.S. nonprofit has a representative presence in that region of Kenya. But not wanting to “waste” money on advertising (via staff wages, mailing letters, or buying ad space), the nonprofit leaders make no effort to communicate to those inside or outside their constituency about the starving Kenyans. So they raise no money to help the starving Kenyans. Consequently, their nonprofit does not help a single starving Kenyan. But at least they can make the donor-attractive claim, “We don’t waste money on advertising like those big organizations do!”

Example B: A similar nonprofit does invest some effort to raise money for those starving Kenyans. It cost them $5,000 in staff wages, printing, postage, and internet ad space to raise $100,000, which is a little bit of a concern to them. Because they want to “keep overhead low” so that “the maximum percentage of our donors’ money reaches the end beneficiaries,” they decide to not send a trusted U.S. staff member to Kenya to administrate the distribution of $95,000 worth of food. Such an effort would cost several thousand dollars in airfare, food and lodging for that staff member. Rather, they know a Kenyan pastor whom they trust who lives 200 miles from the drought region.

So the nonprofit sends that Kenyan pastor $95,000, instructing him to use it to serve his fellow starving Kenyans, but to spend as little as possible on administrating the relief. That pastor buys relief supplies in his home town from friends who appreciate his business, rents a big truck from another friend, hauls the supplies 200 miles, and dumps them in one location, the same place scores of other “efficient” nonprofits are dumping relief supplies. He makes sure he gets a few photos of thin people smiling for the camera while holding bags of flour. Then he hurries back home to return the truck as quickly as possible to save money on the cost of the rental.

The end result is that those who are suffering the most from the drought receive no relief, because they live too far from the relief dump site. Worse, once the Kenyan pastor has left town, unscrupulous “local administrators” who have been “entrusted with distribution” sell all the relief supplies at whatever price they can get and pocket their 100% profit. So the hard-earned $95,000 sacrificially given by the donors only benefits those who can afford to buy the relief supplies and the “local administrators.”

Moreover, there is a good chance that the glut of low-priced relief supplies has shut down long-standing businesses in the town near the relief dump site, as those business can’t compete with the low prices offered by the “local administrators” whose wholesale cost was zero.

Finally, there is also a good chance that the trusted Kenyan pastor who delivered the supplies pocketed $9,500 of the $95,000, a biblical tithe, as a customary payment for his services that somehow never makes it into the accounting that he sends back to the U.S. nonprofit.

But at least that “efficient nonprofit” can boast to its donors about “how little we spend on overhead” when they publish their Kenyan relief report with staged photos! (And aren’t you glad now that you helped with your donation to feed starving Kenyans?)

Example C: A Christian nonprofit is committed to spending no more than 10% of its income on administration, a commitment that is plastered everywhere on its website in order to impress and attract donors. And it works. That commitment is made possible, in part, by (1) all of the staff living on low wages (“for the glory of Christ”) and (2) by some of them working 60-80 hour weeks (“for the glory of Christ”) in order to manage the total work load.

One consequence is that some of that Christian nonprofit’s best employees leave to work for other Christian nonprofits that don’t require quite as much financial sacrifice. It isn’t because they’re greedy. Rather, it is because they love their families, and want to have enough money to send their children to a Christian school.

And that Christian nonprofit discovers that it can’t attract the highly-skilled employees—people who have worked very hard and spent a lot of money to acquire their skills and knowledge—that modern nonprofits must have. Not having qualified human resources hinders them from accomplishing their mission.

Another consequence is that some children of staff members rarely see their overworked dads, and as the years roll by, they begin to resent the faith that stole their fathers from them. Seeking affirmation, they gravitate towards the wrong crowd.

In addition, some wives grow jealous of their husbands’ mistress named “ministry.” Their marriages struggle to survive. Some don’t.

These are things you will never read in any ministry’s annual report to donors, a publication where you might read, “We only spend 10% of our income on administration!”

The truth is, that nonprofit is paying much more than 10%, but the cost is being transferred to the staff, their spouses and their children, not to mention the targeted beneficiaries.

The Other Side

I am, of course, very much aware—as most of the giving public is, thanks to occasional media revelations, that many nonprofits are on the opposite side of the extremes I’ve just described in the above three examples. They spend enormous sums of money to raise slightly-more enormous sums, or they spend enormous sums of money to administrate the funds they’ve raised (usually through exorbitant salaries), so that in the end, the targeted beneficiaries receive very little benefit from the money that was raised on their behalf.

Some of the worst offenders are nonprofits that hire third-party telephone solicitors, such as Kids Wish Network, which in 2014 paid telephone solicitors $115.9 million to raise for them $137.9 million. When someone donates $50 to KWN via a telephone solicitor who simply follows a script, $42 of it goes to the company that is paying the telephone solicitor. $8 goes to KWN. After KWN takes its cut for administrating that $8, only $1.25 is used to directly help kids with life-threatening medical conditions. Yet on KWN’s website’s home page is this bold declaration:

100% of contributions directed to Kids Wish Network’s Guardian Angel Fund will go directly to supporting our kids through our services and programs.

For a list of 48 similar lopsided nonprofits, see http://www.tampabay.com/americas-worst-charities/.

A Google Gag

The fundraising world is awash with deception. If there was ever a group of people who are tempted to believe that “the ends justifies the means,” it is fundraisers. Let me tell you of a recent example I uncovered that you would likely never suspect. To understand this example, I need to first explain to you how Google’s advertising services work.

When you use Google’s search engine to find a product you might want to purchase, the search results pages will always show some “Sponsored Ads” at the top and side column. Those top-of-the-page-and-side-column results are not there because they are the most popular or the most relevant to your search, but because advertisers have paid for those positions. In fact, advertisers have competed with each other for the top-most rankings through a bidding process.

So when you search for “tennis racquet,” for example, the topmost item on the first page of your search results is there because that advertiser was willing to pay more than the advertiser in the second slot whenever someone searches for “tennis racquet.”

Advertisers can also set advertising budgets using Google. Say, for example, Wilson Tennis Racquets Company gains the top slot by agreeing to pay Google $5 for the top slot when anyone searches for “tennis racquets.” But Wilson can also set a daily limit of how much it is willing to spend. So once their daily limit has been met, their ad won’t appear at all when someone searches for “tennis racquets.” And the advertiser whose ad previously appeared in the #2 slot then automatically bumps up to the #1 spot.

Advertisers have two options for what they buy from Google. They can “pay per view” or “pay per click.” With “pay per view,” advertisers pay whenever their ad appears on someone’s computer screen in response to a search inquiry. With “pay per click,” advertisers only pay when someone is interested enough in their ad to click on it to learn more. Paying for clicks is always more expensive than paying for views, as clickers are much more likely to purchase than viewers.

This is how Google (and Facebook) make their money. (And this is why Facebook loves to know everything it can about you and your interests, because advertisers pay Facebook for very targetted advertising.)

Spending $28 to Gain $25

You may be surprised to learn that Heaven’s Family has been given a $10,000-per-month grant by Google, but unfortunately, it is not $10,000 per month in cash. Rather, it is $10,000 per month in free advertising credit. (We’ve used it primarily to find people who are searching for daily devotionals, but have occasionally used it to fundraise.)

Heaven’s Family’s monthly grant from Google prohibits us from bidding higher than $2 to attain the topmost slot on any search results page. So for example, when Nepal experienced an earthquake this past April, we used our $2-per-search limit on words and phrases that people might use as they searched for ways they could help the people of Nepal. I don’t recall all the words and phrases that we chose, but they would have been phrases like “Nepal earthquake” and “Help the people of Nepal.”

Nepal’s earthquake hit late Saturday morning in Nepal, which was very early Saturday morning in the eastern U.S. So we knew that we had two days—Saturday and Sunday—to use our Google grant with a $2 limit until most other nonprofits got back to work on Monday. After that, we knew many of them would be willing to pay more than $2 (of actual money…not Google grant money) to gain top-most ranking in search results in order to gain donations. And we were correct. By late Monday, there were top-ranking ads that cost the sponsoring nonprofits $28 for every time someone clicked on their ad! Clearly, the competition for donations was fierce among relief agencies.

Now imagine you are someone who wants to help earthquake victims in Nepal. You do a search on Google with the words, “How can I help Nepal’s earthquake victims?,” and your search results show you ads from a number of nonprofits to which you can donate. You see one at the top of the right-hand column that says, “Give $25 Now to Help Nepal’s Earthquake Survivors,” and since $25 is within your means, you click on that ad and donate $25 using your credit card. Meanwhile, acquiring your donation just cost that nonprofit $28! So you effectively gave nothing to help earthquake survivors in Nepal.

And why would a nonprofit ever pay $28 to gain a $25 donation? Because now they have your name and address, and that could be worth hundreds or even thousands of dollars in future donations from you. The “cost to acquire a customer” was only $3, a bargain.

But in this series of my confessions, what is my confession-of-the-month, and how does it fit into the topic of fundraising?

My Confession

We began Heaven’s Family in 2003 with the purest of intentions. We truly wanted to serve the poor and suffering members of our spiritual family. We initially focused on training leaders and helping orphanages, and we started a child sponsorship program to raise money to help orphans. We promised to send 100% of every $20-per-month sponsorship gift to the orphanage where each sponsor’s child lived. We paid for all the administration (and boy, was there a lot of administration, we soon discovered) from gifts to our General Fund. We didn’t want to appear, to any degree, that we were exploiting orphans.

That is the pattern we followed as we added additional Focused Ministries. 100% of what people contributed to any Focused Ministry was sent overseas. All administrative costs were paid from our General Fund.

That well-intentioned policy has strained us, however, and particularly me, as I’ve had to persuade people to give to the General Fund to cover all our administrative costs. That has proven to be a tough sell, because given the choice, people would much rather give to provide food for orphans and widows than pay for bank fees, phone bills, staff salaries, and annual financial audits.

Worse, because of our 100% policy, we’ve had to skimp on important administrative needs, resulting in failed projects at times (see Example B above). Also, because of lack of finances to pay for administration, we’ve not been able to afford to hire much-needed staff. Moreover, some of our staff (including me) have been working too many hours, and our families have been paying the price (see Example C above).

In addition, some of our most popular ministries (among the 21) have been well-funded. But because all of the funds to those ministries are restricted for overseas, and because we haven’t had enough money for the human resources necessary to administrate those funds, we found ourselves with money that was bottlenecked in our bank account.

Finally, it has bothered me more and more that we are asking a few people to pay for all our fundraising and administrative costs so that everyone else could have the blessing of knowing that 100% of what they gave directly benefitted the “least of these.” That is fundamentally unfair, and also something against which the Bible is philosophically opposed. “There is no free lunch!” Those who benefit from services rendered should pay for them.

So we’ve faced up to the fact that it is not wise to continue our 100% policy, and it was probably a mistake to have ever started with it. And that is this month’s confession. So as a result, starting in December, our new policy will be to use a portion of every contribution to Heaven’s Family to pay for our essential general and management expenses.

Looking back, I’m particularly ashamed of my pride concerning our 100% policy, something I perceived made Heaven’s Family superior to other ministries, but which I now perceive as a revelation of my inexperience and foolishness. I’m also embarrassed that I’ve promoted the idea that it is OK to expect someone else to pay for services from which you benefit. Remember, both fundraising and administration are essential to every nonprofit, and someone has to pay for them. Clearly, the folks who should pay for those essential services are those who benefit from them!

What a percentage will be used from every contribution for Heaven’s Family’s fundraising and administrative expenses? It will be as small as possible of course, but not at the expense of our quality of ministry, our program effectiveness, or the basic well-being of our staff and their families. And I think that will all please God. I hope it pleases you too!

Of course, that is not all that big of a change for Heaven’s Family. All we’re doing is spreading the burden of our fundraising and administrative expenses from a few to everyone who benefits from the the hard work of our devoted staff members (as well as all the other supportive services, like printing, postal, banking and so on.) Heaven’s Family is going to keep right on doing what we’ve always been doing, building God’s kingdom around the world. — David