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Professional Fundraisers and Joint Cost Allocations: Form 990 versus Survey Data Mark Hager Center on Nonprofits and Ph PowerPoint Presentation
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Professional Fundraisers and Joint Cost Allocations: Form 990 versus Survey Data Mark Hager Center on Nonprofits and Philanthropy The Urban Institute. The Issue. Financial expenditure reporting focuses on three functional categories: programs, fundraising, and administration.

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Professional Fundraisers and Joint Cost Allocations: Form 990 versus Survey DataMark HagerCenter on Nonprofits and PhilanthropyThe Urban Institute

the issue
The Issue
  • Financial expenditure reporting focuses on three functional categories: programs, fundraising, and administration.
  • Accurate reporting is important because the public is increasingly relying on publicly available financial documents.
  • Quality of reporting by a large segment of sector is poor, and nonprofits are not motivated to improve.
purpose of paper
Purpose of Paper
  • To articulate arguments for the value of accurate financial reporting by nonprofit organizations.
  • To present empirical evidence of shortcomings in the current state of financial reporting.
indicators from other work
Indicators From Other Work

Factoid: Of nonprofit organizations that report at least $5 million in annual contributions, about 1 in 4 report no fundraising costs.

Factoid: Of nonprofit organizations that report at least $10 million in annual expenses, about 1 in 25 report no administrative costs.

topics of the current work
Topics of the Current Work
  • Reported expenses for hiring work from external, professional fundraising firms.
  • Reported expenses for events, publications, and appeals that have joint fundraising and programmatic (or administrative) content.
data sources
Data Sources
  • IRS Form 990

- Required of all registered charities with $25,000 in annual gross receipts.

- The only public document required of charities.

  • “Overhead Costs Study” Survey

- 1540 organizations in Spring of 2002.

- Matched with Form 990 for comparison.

professional fundraisers form 990
Professional Fundraisers: Form 990
  • Report professional fundraising and counsel on Part II line 30.
  • 180,000 charities in 2000: 34% report fundraising costs.
  • 5% (~9000 orgs) report professional fundraising fees.
  • 1 in 4 do not report fees as fundraising expense.
professional fundraisers survey how the 7 of charities report professional fundraiser expenses
Professional Fundraisers: SurveyHow the 7% of Charities Report Professional Fundraiser Expenses
joint costs form 990
Joint Costs: Form 990
  • Part II: “Did you report [in program service expenses] any joint costs from a combined educational campaign and fundraising solicitation.”
  • Less than 1% of Form 990 filers in 2000 answered yes to this question, ~1000 orgs.
joint costs survey
Joint Costs: Survey
  • “Many organizations combine educational campaigns (or other program activities) with fundraising appeals. Does your organization combine program and fundraising activities?”
  • Over 1 in 4 organizations say that they do.
joint costs survey11
Joint Costs, Survey
  • (If yes) “For these ‘joint cost’ activities, does your organization allocate portions of the costs to both programs and fundraising?”
  • 1 in 10 are unsure.

4 in 10 say they do not allocate joint costs.

5 in 10 say they allocate joint costs.

implications
Implications
  • A substantial number of nonprofits report financials that do not accurately reflect their spending.
  • Managers have bad information for planning.
  • Researchers have bad information for policy analysis.
  • Donors have bad information for assessment of worthy recipients of their money.