The Fundraising Audit
The Fundraising Audit
In this chapter we outlined the content of the first stage of a fundraising plan, namely; where are we now? The fundraising audit (the name we give to this section of the plan) is critical is an organization is to achieve a good fit with its environment and to maximize its fundraising opportunities as a consequence. We examined the key categories of information gathered in the audit and a number of the most commonly employed analytical tools.
In this chapter we outlined a process that may be employed by nonprofits in planning the fundraising activities that they will undertake. Whilst the format may differ from one organization to another, at its core a fundraising plan has three common dimensions.
1. Where Are We Now?
A complete review of the organization’s external/internal environment and the past performance of the fundraising function. Only when the development office has a detailed understanding of the organization’s current strategic position in each of the donor markets it serves can the organization hope to develop meaningful objectives for the future.
2. Where Do We Want To Be?
In this section of the plan the organization will map out what the development office is expected to achieve over the duration of the plan. Typically there will be income generation targets for the department as a whole and a series of ‘sub-objectives’ for each category of fundraising (e.g. individual, foundation and corporate.)
3. How Are We Going To Get There?
This stage of the plan contains the strategy and tactics that the organization will adopt to achieve its targets. The strategy specifies in general terms what the broad approach to fundraising will be, whilst the tactics supply the minutia of exactly how each form of fundraising will be undertaken.
The Fundraising Audit
As we noted above the fundraising planning process can be conceptualised as having three key components
- Where are we now?
- Where do we want to be?
- How will we get there?
The fundraising audit specifically addresses the first of these elements. As such it is arguably the most crucial stage of the whole planning process since without a thorough understanding of the organization’s current position it will be impossible for planners to develop any kind of sense of what they can expect to accomplish in the future. The fundraising audit is essentially a detailed review of any factors that are likely to impinge on the organization’s ability to raise funds, taking into account both those generated internally and those emanating from the external environment. The fundraising audit is thus a systematic attempt to gather as much information as possible about the fundraising function and its environment and, importantly, how these might both be expected to change and develop over the duration of the plan.
It is usual to begin the process by examining the wider or ‘macro’ environmental influences that might impact on the organization. Often these may be factors over which the organization itself has little control, but which will nevertheless affect the organization at some stage during the period of the plan. The framework utilized for this analysis is typically referred to as a PEST analysis and comprises the following elements:
Political factors impacting on fundraising might include government attitudes to the nonprofit sector and recent or forthcoming legislative or regulatory changes that might affect the fundraising environment or fundraising performance e.g. privacy legislation, changes in Estate Tax or additional fiscal incentives to increase giving. It may also include a consideration of the activities of government agencies, notably in the context of fundraising, the United States Postal Service.
Economic trends are relevant primarily as predictors of future donor behaviour. Trends in wealth, employment, tax, consumption and disposable income impact on all categories of funders from corporate givers and foundations through to individuals. The Center on Philanthropy website contains a number of briefings on the fundraising climate.
Key data here will include data on demographics and social attitudes, plus evidence of likely behavioral changes or significant shifts in societal values that might occur over the duration of the plan. For example, trends in levels of civic participation, changes in the formation of families, in levels of trust and confidence in the nonprofit sector and in patterns of working would be considered here.
Critical here will be factors such as the likely impact of developments in technology on the nonprofit sector and on fundraising techniques. Developments in web communications, mobile phone technology, automated bank payments and interactive TV would all, for example, fall under this category.
In each case the aim is to accumulate a list of all the pertinent factors and indicate how these might impact on fundraising.
Data for PEST analyses is typically gathered through secondary sources via secondary research, i.e. information is found through existing publications rather than being sourced through the commissioning of new (or primary) research.
Macro Factor Resources
Please bear with me as I build up the links in this section. It is my intention to post new pieces of news and research that might help a fundraiser in putting together the macro section of their audit. Watch this space!
In the UK a new ResPublica report, ‘Digital Giving – Modernising Gift Aid; Taking Civil Society into the Digital Age‘ unveils a series of measures designed to boost charitable giving and overhaul the current Gift Aid system to make it easier for charities to claim millions of pounds they and taxpayers who donate are currently missing out on – such as Gift Aid relief on Text donations
In the US there are moves afoot to pass a new Nonprofit Sector and Community Solutions Act (2010). The official press release explains that the legislation would “create a bipartisan United States Council on Nonprofit Organizations and Community Solutions, comprised of leaders from nonprofits, foundations, businesses, and all levels of government to identify high-priority issues and make formal recommendations to Congress and the Administration. Such a move could have important implications for fundraisers as it would connect government with the realities of modern fundraising and appraise politicians of many of the issues currently acting as barriers to giving.
Analysis of Competitors
Accurate and full information on the activities, size and market position of other organizations is of vital importance to any nonprofit putting together a fundraising plan. The nonprofit marketplace is complex and crowded, with many organizations competing for a limited pool of support. Gathering this information can therefore help an organization to respond to the activities of other organizations, but more frequently and particularly for smaller organizations its value lies in identifying what can be learned from the activities of others. Good ideas can always be borrowed!
Of course the starting point in conducting an analysis of the competition is to decide which competitors the organization should analyze. There are a number of options
1. Industry leaders:
The fundraising team will undoubtedly be aware of those competitor organizations that they regard as particularly outstanding in their fundraising activity. From these industry leaders it may be possible to learn a great deal about successful fundraising practice and to borrow exciting new and innovative ideas in respect of the best ways to solicit funds. These nonprofits may be working in the same field, but could equally be working elsewhere in the sector serving entirely different needs. They are thus selected purely on the basis of the quality/originality of the fundraising they undertake.
2. Other Nonprofits Serving The Same Cause:
Some nonprofits will assess the strategy and performance of those charities that they perceive to be in direct competition with themselves since they serve the same broad category of need (e.g. children, animal welfare, environmental defence). The goal here is to gather sufficient data to benchmark the activities of the focal nonprofit against those of similar organizations. The nature of the activities undertaken, the quality of the promotional materials produced and the estimated or actual cost effectiveness of the fundraising undertaken, will all be of interest.
3. Nonprofits of a Similar Size:
A further strategy employed by some nonprofits is to look at organizations of a similar size to themselves irrespective of the category of cause served. The problem with option (b) is that other organizations working in the same field might be a good deal larger or smaller than the focal organization leading to inappropriate comparisons. A better approach might be to examine what is being achieved by organizations of a similar size. Once again, the auditor will want to look at the forms of fundraising undertaken, the promotional materials produced and the performance achieved. This can all be used to assist in benchmarking the performance of the focal organization and in highlighting areas of weakness.
Irrespective of the approach adopted there are a number of common categories of information that are typically gathered.
- Financial Performance
- Competitor Objectives and Ambitions
- Past, Present and Future Strategies
Useful information sources include:
Guidestar – This site allows users to access Form 990 (financial) information in respect of U.S. nonprofits. Those users wishing to access a more detailed financial analysis of nonprofits may also obtain this service from Guidestar.
Guidestar UK – A free public website providing a source of high quality information on more than 167000 UK registered charities.
National Council for Voluntary Organizations – Provides (amongst many other things) a series of well researched briefings on all aspects of voluntary sector management
Of course there may be many instances where instead of viewing other nonprofits as competitors, it makes more sense to partner with them to the advantage of all concerned. Such partnerships may open up access to new sources of funds, new markets or simply allow the partner organizations to take advantage of economies of scale and thus lower their costs of fundraising. It may not be economic, for example, for smaller nonprofits to undertake corporate fundraising on their own. Forging an alliance with other ‘complementary’ or related nonprofits can create a pool of shared resource that would facilitate fundraising from this potential new audience.
Thus in conducting a fundraising audit it will be instructive to consider examples of where organizations have collaborated successfully in the past and the factors that led to that success. The nonprofit should look to see what it could learn from these collaborations and whether there might be any way in which it itself could work in partnership with others. If this is felt to be desirable it will be instructive to conduct background research into potential partners and to explore how such relationships might develop. An approach to one or more partners could then be included in the fundraising strategy/tactics.
The next stage of the audit concerns the gathering of data in respect of the various donor markets the organization is addressing. It may therefore be sensible to structure this section by considering each donor market (e.g. Individuals, Corporations, Foundations) in turn. Each of these sections should then be further subdivided into identifiable segments or groups of donors, with information presented on each.
Useful information sources to identify market trends include:
AFP is the body that represents the fundraising profession in the USA and many other countries worldwide. It provides training, a major annual conference, fundraising publications and sponsors research. Local chapters organize their own networking and training events. Recent activities have included the Fundraising Effectiveness Project (a benchmarking initiative accessible through their website) and the development of a formal academic qualification for professional fundraisers.
AHP is the professional body for fundraisers working in the domain of healthcare. It offers a wide range of conferences and events and a helpful set of reports including an annual look at trends in giving in the USA and Canada. It also provides an excellent benchmarking study allowing participants to compare the costs of their fundraising with others in the sector.
CASE as the name suggests is the professional body for fundraisers working in the field of education. It serves the needs of professionals all over the world with local chapters established in many countries. It provides training, conferences, news/information and a range of publications.
The professional association for individuals whose work includes developing, marketing and administering planned giving. This includes fundraisers, consultants and donor advisors working in a variety of nonprofit settings. The organization provides a range of services and publications, including research reports.
Giving USA Foundation and Giving Institute – The organization provides many excellent research publications scoping the non-profit sector and its activities. Giving USA, the leading study of giving in North America is produced by the Giving Institute, as is the Annual Yearbook of American Philanthropy.
Center on Philanthropy at Indiana University hosts the Lake Family Institute on Faith and Giving and the Women’s Philanthropy Institute. The Center offers a range of research data and publications, together with an annual conference allowing practitioners to access this material.
Social Welfare Research Institute at Boston College – The Institute publishes a range of research papers and reports of interest to the fundraising profession. It has tended to focus (although not exclusively) on wealth transfers and major gift fundraising. Many resources can be downloaded free of charge and the Director, Paul Schervish, produces a helpful e-mail newsletter to keep subscribers abreast of their work.
Chronicle of Philanthropy – Describes itself as the newspaper of the nonprofit world and provides information for nonprofit organizations on grant seeking, foundations, fund raising, managing nonprofit groups, technology, and nonprofit jobs. The site allows users to search for material in past editions of the chronicle. An excellent resource.
Nonprofit Times – Targeted at nonprofit managers the Nonprofit Times provides detailed analyses of topical management and governance issues. The Times generally carries a good deal of material that is relevant to fundraisers including new thinking, case studies and research.
Having now summarised the key external influences on the organization it is possible to move on to consider an audit of the organization’s own fundraising activity. The aim here is to scrutinize past fundraising performance and to carefully appraise what has worked well in the past and what has not. Current fundraising activities, trends in performance and the current structure and support systems that underpin fundraising activity will all be considered.
It is impossible to be prescriptive about the exact information requirements but it is likely that the auditor will wish to research
- The past performance of each form of fundraising undertaken, trends in this performance and whether this might vary by donor segment. The auditor will wish to examine the revenues that are generated, the costs incurred and the returns generated.
- This data should also be examined by the group or segment of donors addressed. What success has the organization had in addressing discrete donor segments? Have some segments proved more responsive than others? If so, why has this been the case? All this data can be valuable in selecting future donors for contact and suggest the optimal ways in which funds could be solicited.
- Organizational Processes: A review of the processes that support fundraising is also warranted. In particular the auditor will want to examine whether these processes are optimal and whether any problems have arisen in caring for donors over the period of the last plan. These processes will include donation processing and handling, mechanisms for dealing with donor communications and queries, internal co-ordination of strategy with departments such as press/public relations/campaigning and mechanisms for dealing with data/privacy issues. Where they exist the activities of these teams can all impact on the quality of donor relationships.
- Organizational Structure: The auditor will also want to look at the manner in which the fundraising function is organized and to explore whether this is optimal. Should the team be structured by the form of fundraising undertaken (e.g. direct marketing, events, corporate), by the key segments of donors addressed, by region/county/state or by some combination of these? The split between the use of paid staff and volunteers might also warrant investigation. So too might the roles undertaken by both categories of individual. Volunteers form the core of a lot of fundraising activity and providing them with the optimal levels of support and encouragement is essential.
Clearly at this stage the output from the fundraising audit may be regarded as little more than a collection of data, and in this format it is as yet of limited value for planning purposes. What is required is a form of analysis, which allows the fundraiser to examine the opportunities and threats presented by the environment in a relatively structured way. Indeed, it should at this point be recognized that opportunities and threats are seldom absolute. An opportunity may only be regarded as an opportunity, for example, if the organization has the necessary strengths to support its development. For this reason it is usual to conduct a SWOT analysis (Strengths, Weaknesses, Opportunities and Threats) on the data gathered during the fundraising audit. This is simply a matter of selecting key information from the audit, analysing its implications and presenting it under one of the four headings. The important word here is ‘key’. It is important that some filtering of the data gathered at this stage is undertaken so that the analysis is ultimately limited to the factors of most relevance for the subsequent development of strategy.
The SWOT addresses the following issues.
What are the strengths of the organization? What is the organization good at? Is it at the forefront of particular fundraising developments? Does it have access to a donor segment that is not reached by competitors? Does it have a strong database system/great support agencies/high local awareness?
What are its weaknesses? In what ways do competitors typically outperform the organization? Are there weaknesses in terms of internal support or structures? Are there barriers to future development in some areas?
What are the main opportunities facing the organization over the duration of the plan? Are there new fundraising techniques to test, new audiences to attract? Are new developments within the organization likely to present extra opportunities for fundraising?
What are the major threats facing the organization? Is a major competitor likely to launch a new capital appeal? Will economic changes impact on certain core funders and leave them with less to give? Are planned changes to legislation likely to curtail fundraising activity?
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