What about calculating fund raising ratios?

Summary:

These calculations are more difficult to interpret than they might appear.

Answer:

In Susan Rose-Ackerman's anthology The Economics of Nonprofit Institutions published by Oxford University Press in 1986 (and now -- 2001 -- out of print), there is an
article by Rich Steinberg of Indiana University which explores the value and effect of measuring and publicizing the ratio between the amount raised and the expenses involved in the campaign. His conclusion: the donor who cares about the cause should in general welcome additional resources applied to that cause, regardless of the expense of securing those resources (unless of course the costs exceed over a long span of time the amount raised).

Since many donors care deeply about "administrative" and "fund-raising" costs, this conclusion has been the subject of much subsequent discussion. A sample of the character of the discussion is contained in an extended discussion involving Rich Steinberg, Cliff Landesmann and others which is outlined and quoted below with participants' permission. The original discussion took place in 1995 on the listserv of the Association for Research on Nonprofit Organizations and Voluntary Action (ARNOVA -- see http://www.arnova.org).

-- Putnam Barber, March 17, 1995

• The first part of the discussion focuses on whether there is any substitute that donors could rely upon -- See http://www.nonprofits.org/npofaq/11/25.html
  
  
• The second concerns other possible alternatives -- see http://www.nonprofits.org/npofaq/11/26.html
  
  
• The third looks at those cases where fund-raising ratios might be useful -- see http://www.nonprofits.org/npofaq/11/27.html
  
  
• The discussion ends with the observation that measures of effectiveness would allow more meaningful comparisons among programs and organizations -- see http://www.nonprofits.org/npofaq/11/30.html
  
  
• As a part of the discussion, a participant from Australia forwarded his testimony to a government inquiry on this topic there -- see http://www.nonprofits.org/npofaq/11/28.html
  
  

In addition to this extended discussion, there is an essay on related themes by Putnam Barber (editor of the Internet Nonprofit Center) at http://www.nonprofits.org/npofaq/11/14.html

Bill Levis has thought carefully and written extensively on the issue of the cost of fundraising and the productivity of fundraising efforts. There are links to some of his work (collected on the Urban Institute website) at http://www.idealist.org/npofaq/0/1508.html.

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This page was substantially revised and reformatted 7/3/01; link to Bill Levis materials updated 9/24/06 -- PB