Blog: Fundraising for Nonprofits

This posting by: Hank Lewis

I received the following email:
I am involved in an education foundation which is a 501(c)(3). We do some really neat things that help to educate kids in our community, and we have a few big fundraisers each year. On our website and in the marketing info for the events, we’ve been using language like…” Funds raised are used for mini-grants for creative and innovative class programs, scholarships, specialized educational equipment and staff training in our schools “.

The fact is that we do use a portion of the funds for necessary overhead – and we recently hired an executive director with the goal of moving the organization forward. Does this “paying of our overhead” need to be mentioned in statements of what we do with income from the fundraisers? Is it illegal or unethical (or misleading) not to mention that a portion of the funds raised will be used to cover overhead, or is this a “given”?

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I responded:

I can’t speak to what the laws in your state might require regarding disclosure/transparency; but, I have no hesitation in pointing out the ethical question.

You raised the issue, and there will likely be others outside of your organization who will do the same – “Is all the money contributed to the foundation being used to fund programs and activities to (directly) benefit the students?”

If the answer is, “No,” then you can’t use any wording that would say, or even suggest, that that is the case. At the least, it would be unethical. At the worst it could be construed as fraud.

Use a statement such as: “Over 90% of all funds raised go directly to support programs and activities to benefit our kids.” Or: “All contributions, directly or indirectly, are used to support programs and activities to benefit our kids.”

On another subject, I’m not sure how to interpret your reference to “a few big fundraisers.” I would hope that you are not relying on events to provide all/most of your funding. That, for the long-term survival/effectiveness of your foundation, can be disastrous.

If you’re not securing major gifts from individuals, you’re missing out on the biggest source of funding for nonprofits — 60% of all contributed dollars to nonprofits come from such support.

In addition, I hope that your new Executive Director is well versed in “real development/fundraising,” and will spend a significant percentage of his/her time working with and training volunteers to make it happen.

I’ll add this closing thought, that so much of the fundraising potential of (so called) Local Education Foundations (LEFs) is never realized because the organizers/leaders/board members never get past the PTA and/or Bake Sale mentality.

No matter the state of the economy, there will always be corporations, foundations and individuals that can/would provide significant support … if the approach was based on the development process and not just focused on “fundraisers.” Gad, I hate that word !!
(See: ‘Development’ and ‘Fundraising’ are Not Synonymous)
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Have a comment or a question about starting, evaluating or expanding your fundraising program? With over 30 years of counseling in major gifts, capital campaigns, bequest programs and the planning studies to precede these three, I’ll be pleased to answer your questions. Contact me at AskHank@Major-Capital-Giving.com
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