Fundraising campaigns that bring in more money than needed create surpluses. These surpluses accumulate funding reserves. Charities need these reserves as a buffer against unexpected costs or market fluctuations. Yet today, donors need to look extra hard at the appropriate amount of these funding reserves.
Here is one recent example, one of many: a moderately-sized Calgary charity has enough cash to run its charity programs for seven years. It has enough money to operate at current levels for seven years without raising another penny. Yet now it is launching a new campaign to raise even more money.
I asked this charity’s management team, “How much is enough? Is there a threshold when it will stop fundraising since it does not need more money? Is 10 years of program coverage enough? Or 15 years?”
The answer was giggles. Perhaps nervous laughter. But going after scarce donations it does not need is not a joke.
It is also offside of regulatory guidelines. The Charities Directorate’s guidance against excessive fundraising states that “when a charity has sufficient income for its uses or needs, the need for new fundraising may be questionable.” Yet these are just guidelines without enforcement.
Many frontline charities are facing an unprecedented surge in demand with small reserves to sustain their operations. Are charities that fundraise while holding large surpluses considering these community-wide needs? Apparently not. Without checks and balances, donors must independently figure out if a charity actually needs the money it is asking for.
Charity Intelligence’s reports may help. Every report on a charity has a financial review section that shows three numbers for the recent years: 1) a charity’s funding reserves, 2) its spending on charity programs and, 3) the program coverage ratio (the per cent that funding reserves cover annual program spending). During COVID, Charity Intelligence recommends donors support charities with less than 150 per cent coverage — that’s 1.5 years of funding.
Typically, donors hyper-focus on a charity’s cents to the cause — how much of every donation goes to charity programs after fundraising costs and administrative overhead. In these dire times, donors need to pivot and also review a charity’s balance sheet. Donors need to ask how much money a charity already has in reserves to assess the real value of their donation.
The Link LonkSeptember 19, 2020 at 05:52PM
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Opinion: Excessive fundraising by charities is not a joke - Calgary Herald
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Joke
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