This document discusses philanthropic fundraising for nonprofit organizations. It covers the importance of donations, common sources and recipients, how generous Americans are in giving, and how contributions are used. Religious and educational organizations receive the most support. The document also outlines the fundraising process, including identifying donors, cultivating relationships, soliciting gifts, and stewarding donors. It notes challenges from the current economy and issues around managing fundraising programs and evaluating performance.

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Chapter 11: Philanthropic
Fund-Raising

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Importance of Gifts to Nonprofit
Organizations
• Charitable or philanthropic giving is an important source
of revenue for many nonprofits, though relative
importance varies among subsectors
• Health services organizations -- low reliance
• Educational institutions and civic, social, and fraternal
organizations -- medium reliance
• Religious organizations and human services
organizations -- high reliance
• Private giving can often be used to address
organizational priorities rather than support specific
programs or services
• Core operations or capacity building
• Building new facilities
• New initiatives that lack paying customers or grants

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Sources of Gifts

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Recipients of Gifts

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Sources of Gifts
• Religion (35%)
• Foundations (14%)
• Corporations (5%)
• Education (14%)
• Human Services (9%)
• Public and Society Benefit Orgs (8%)
• Health (8%)
• Bequests (8%)
• Arts, Culture, Environ (less that %5)

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How Generous We Are
As A Nation
$303.5 billion (2010 figures)
According to GIVING USA 2010
Individuals - $227.41 billion
(83%) +$ 23.80 billion in bequests
Foundations - $ 38.44 billion
(13%)
Corporations - $ 14.10 billion
(4%)

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How Contributions Are Used
Religion $100.63 billion 35%
Education 41.67 billion 14%
Human Services 26.49 billion 9%
Public/Society 24.24 billion 8%
Health 22.83 billion 8%
Arts/Culture 13.28 billion 5%
International 15.77 billion 5%
Environ./Wildlife 6.66 billion 2%
(Gifts to grantmaking foundations - $33 billion 11%
and other unallocated giving - $6.32 billion 3%)

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How Generous We Are
As A Nation
$298.42 billion (2011 figures)
According to GIVING USA 2010
Individuals - $217.79 billion
(81%) +$ 24.1 billion in bequests
Foundations - $ 41.67 billion
(14%)
Corporations - $ 14.55 billion
(5%)

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How Contributions Are Used
Religion $95.88 billion 32%
Education 38.87 billion 13%
Human Services 35.39 billion 12%
Public/Society 21.37 billion 7%
Health 24.75 billion 8%
Arts/Culture 13.12 billion 4%
International 22.68 billion 8%
Environ./Wildlife 7.81 billion 3%
(Gifts to grantmaking foundations - $25.83 billion 9%
and other unallocated giving - $11.56 billion 4%)

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The Financial Impact of the
Current Economic Climate
• Some individuals concerned about finances are belt-tightening
which is resulting in a reduction in charitable giving and special
event attendance
• Federal government funding through stimulus monies is more
restricted while state and local government funding is being cut

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The Financial Impact of the
Current Economic Climate
• Foundation investments reduced due to significant drop in stock
market; some limiting support to current grantees only
• Corporate giving levels continue to decline; some corporations
plan to be more strategic in their giving supporting local rather
than national organizations; doing fewer sponsorships, more
business-nonprofit marketing deals and partnership programs

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Definitions and Distinctions
• Charity and philanthropy
• Charity -- giving to meet immediate human needs
• Philanthropy -- giving to develop institutions that serve
human needs or enhance human development over the
long run
• Fund-raising, development, and institutional advancement
• Fund-raising -- an activity undertaken with the goal of
eliciting charitable or philanthropic giving
• Development – encompasses fund-raising, but involves a
more comprehensive approach to the long-term growth of
an organization or institution
• Institutional advancement -- encompasses fund-raising
and development, along with the related activities of
communications, marketing, and other programs for
constituent relations

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Motivations for Giving
• Corporate philanthropy
• Forms of giving
• Direct gifts versus corporate foundations
• Cash gifts versus gifts-in-kind
• Partnerships
• Enlightened self-interest
• Strategic philanthropy
• Foundation giving
• Tax-exempt status and minimum giving requirement
• Activities generally reflect the interests of the founders
• Corporations
• Individuals or families
• Independent foundations

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Motivations for Giving
• Individual donors
• Motivations are often more complex and less
calculated than those of corporations or foundations
• Altruistic and egotistic motivations for giving
• Motivated by individuals’ nature to help others and
improve the human condition
• Motivated by individuals’ desire to obtain some
benefit for themselves (e.g., recognition, social
position, or control)
• Motivational types (Prince and File, 1994)
• “Dispositions” or “inclinations” influencing giving by
wealthy individuals (Schervish and Havens, 2001)
• Controversy over tax incentives

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Fund-Raising Process
• Identifying priorities and developing the case
• Priorities as a product of strategic planning
• Case statements
• Why should I give to this organization?
• Why is this cause more important than others
that also ask for my support?
• Identifying and qualifying prospects
• Prospects offer a better-than-average chance of
giving
• Financial ability or capacity to give
• Linkage to and interest in the organization
• Prospect research

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Fund-Raising Process
• Cultivating prospects
• Developing a relationship before moving to solicit a
gift
• Scale of potential giving as a key factor in the
amount of time and attention spent on cultivation
• Moves management systems
• Soliciting the gift
• “Ladder of effectiveness” (Rosso & Associates, 2005)
• Considerations in choosing a method of solicitation
• Level and type of support that the organization
needs
• Costs and benefits of different methods
• Resources available to the organization

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Fund-Raising Process
• Acknowledging and recognizing donors
• Promptness
• Individual tailoring
• Stewarding the gift and the relationship
• Past donors are the best prospects for future
gifts
• Two meanings of stewardship
• The activities that the organization
undertakes to keep the donor informed and
engaged

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Individual Donor Life Cycles
• Fund-raising pyramid
• Dunlop's three types of gifts
• Regular gifts
• Special or stretch gifts
• Ultimate gift
• Criticism of the fund-raising pyramid
• Entrepreneurial donors
• Relevance to smaller nonprofit organizations
• Planned giving
• Bequests
• Charitable remainder trusts
• Charitable gift annuities

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Campaigns
• Campaign method developed by fund-raisers for the
YMCA in the early 20th century
• Later adopted by higher education institutions and
subsequently by most other nonprofit organizations
• Characteristics of campaigns
• High priority in the organization
• Announced dollar goal and deadline
• Defined purposes for which the funds are being
raised
• Sequential fund-raising process
• Gift solicitation in specific amounts

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Managing Fund-Raising Programs
• Advancement services
• Gift recording and acknowledgment
• Prospect research
• Information systems management
• Prospect management
• Planning, scheduling, and tracking contacts
• Developing strategies for major prospects

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Fund-Raising Efficiency and Effectiveness
• Debate about the costs of fund-raising
• Charity watchdog organizations
• U.S. Supreme Court
• Form 990 and public transparency
• Potential problems with putting strict limits on fund-
raising costs
• Unfair to organizations that are new or controversial
• Difficult to determine the true total costs of fund-
raising
• Attempts to measure efficiency and effectiveness
• Cost-per-dollar-raised
• Return-on-investment

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Staff Performance and Accountability
• Problems with evaluating performance solely based on the
amount of money each staff member raises
• Major gifts rarely result from the work of a single
individual
• Potential to create perverse incentives for fund-raisers
• Alternative methods of evaluating performance
• Measuring specific activities (e.g., donors visited or
proposals written)
• Formulas that factor in both activities and money raised
• Compensation as a topic of current discussion and debate
• Incentive-based compensation
• Compensation based on a percentage of gifts raised as
unethical behavior

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Ethical Concerns
• Fund-raiser behavior
• Misleading or dishonest representations
• Using donor relationships for personal benefit
• Donor behavior
• Donating funds that were illegally obtained
• Gifts from a company that makes products it knows to be harmful
• Gifts from individuals or companies with unsavory reputations
• Restricted gifts
• Gifts that require an organization to undertake new programs
• Donor requests for inappropriate controls or influence
• Protecting the privacy of donors and prospects
• Growing sophistication of prospect research
• Creation and distribution of donor profiles
• Reports with information from donor visits or second-hand sources