{"id":37245,"date":"2023-11-28T11:01:52","date_gmt":"2023-11-28T16:01:52","guid":{"rendered":"https:\/\/www.cccc.org\/news_blogs\/?p=37245"},"modified":"2023-11-28T11:01:55","modified_gmt":"2023-11-28T16:01:55","slug":"going-beyond-the-fundraising-ratio-broadening-the-view-on-charitable-impact","status":"publish","type":"post","link":"https:\/\/cccc.org\/news_blogs\/cccc\/2023\/11\/28\/going-beyond-the-fundraising-ratio-broadening-the-view-on-charitable-impact\/","title":{"rendered":"Going Beyond the Fundraising Ratio: Broadening the View on Charitable Impact"},"content":{"rendered":"\n<p>As charities ramp up their fundraising appeals, donors have many options for their end-of-year giving. It\u2019s easy to see why metrics like the fundraising ratio become a go-to aid for donors when deciding who receives their support. However, it\u2019s crucial to note that while the fundraising ratio can be helpful, it\u2019s just one aspect of a charity\u2019s broader assessment.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">Understanding the Fundraising Ratio<\/h2>\n\n\n\n<p>The fundraising ratio is calculated as the total expenses allocated to fundraising expenses (line 5020 in the T3010) divided by the sum of the total receipted donations (line 4500) and fundraising revenue not reported in line 4500 (line 4630). The ratio answers the question, \u201cWhat percentage of the donations and fundraising revenue were used to cover the cost of fundraising?\u201d CRA considers a ratio under 35% acceptable, and over 70% will <a href=\"https:\/\/www.canada.ca\/en\/revenue-agency\/services\/charities-giving\/charities\/policies-guidance\/fundraising-registered-charities-guidance.html\" target=\"_blank\" rel=\"noreferrer noopener\">certainly draw scrutiny<\/a> from the CRA.<\/p>\n\n\n\n<p>Another ratio some people also consider is management and administrative expenses (line 5010). Some donors think of this as the \u201coverhead ratio\u201d when they are interested in what percentage is spent on charitable activities (line 5000).<\/p>\n\n\n\n<p>This financial information is made publicly available for all registered charities by the Canada Revenue Agency (CRA) in the charity\u2019s <a href=\"https:\/\/apps.cra-arc.gc.ca\/ebci\/hacc\/srch\/pub\/dsplyBscSrch?request_locale=en\" target=\"_blank\" rel=\"noreferrer noopener\">T3010 information<\/a>.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">Why Donors Should Consider More<\/h2>\n\n\n\n<p>There is much more to define the charity\u2019s success than a single ratio. Charities can help donors understand what they should consider when evaluating the charity. Here are five limits of the fundraising ratio and suggestions that may help broaden your donor\u2019s perspectives when planning to give to your ministry.<\/p>\n\n\n\n<p><strong>1.  Reflects a Single Year of Activity<\/strong><br>The fundraising ratio is based on one year\u2019s financial results. To gain a deeper understanding of a charity\u2019s performance, it\u2019s essential to consider its historical context. Did the charity invest more in fundraising to fuel future growth, or did it incur additional management and administration expenses during a restructuring phase? Remember that the current ratios may not represent the charity\u2019s typical financial situation.<br><br>Consider providing a change in the ratio over time or a multi-year average alongside information about the activities\/projects that have been funded over the years.<\/p>\n\n\n\n<p><strong>2.  Doesn\u2019t Confirm Meaningful Impact<\/strong><br>A low expenditure on fundraising doesn\u2019t automatically indicate a charity\u2019s meaningful impact. An organization allocating 100% of its budget to charitable activities could still be ineffective in achieving its mission. Evaluating impact is complex, and no one-size-fits-all metric can confirm a charity\u2019s effectiveness.<br><br>Consider re-evaluating how you communicate to donors about the work and impact of your charity. Do your donors focus on expenses because much of the annual report emphasizes it?<\/p>\n\n\n\n<p><strong>3.<\/strong> <strong> Lacks Important Mission Context<\/strong><br>A uniform ratio does not account for the diverse contexts in which charities operate. Factors such as the charity\u2019s activities, geographic reach, funding sources, safety and security needs, volunteer workforce, and innovation efforts all play a significant role. Context is crucial when interpreting financial data.<br><br>Consider providing helpful context in your communications and demonstrating the alignment of your projects and programs to your long-term vision and mission.<\/p>\n\n\n\n<p><strong>4.  Reduces Clarity on Financial Management<\/strong><br>Spending more on fundraising or management and administration expenses does not necessarily imply poor financial management. In some cases, it can indicate prudent financial practices. Conversely, underinvestment in these areas might lead to poor financial management and concerns regarding sustainability. The intentionality and significance of these emphases internally may not be as clear to the donor.<\/p>\n\n\n\n<p>Consider sharing more about the \u2018why\u2019 behind resource allocation decisions.<\/p>\n\n\n\n<p><strong>5.  Focusing Too Much Can Lead to Undesirable Behaviour<br><\/strong>Placing excessive emphasis on a single metric like the fundraising ratio may inadvertently result in added pressure on the charity to reduce costs to the maximum extent possible, which is not always in the charity\u2019s (or donor\u2019s) best long-term interest. We can start viewing fundraising, expenses, such as management and administration, as bad expenses to avoid. While this ratio is trending today, another metric may be in the future. Charities that effectively communicate a comprehensive view of their impact will stand out to donors.<br><br>Consider equipping to share about impact using other metrics and indicators of performance.<br>While fundraising and other ratios can be valuable tools, they should not be viewed in isolation. Consider including other essential factors when sharing about your charity with donors. To further aid your donors in their decision-making process, read the recent blog post, \u201c<a href=\"https:\/\/www.cccc.org\/news_blogs\/cccc\/2023\/11\/22\/7-tips-for-choosing-a-charity-to-donate-to\/\" target=\"_blank\" rel=\"noreferrer noopener\">7 Tips for Choosing a Charity to Donate To<\/a>\u201d. <\/p>\n","protected":false},"excerpt":{"rendered":"<p>As charities ramp up their fundraising appeals, donors have many options for their end-of-year giving. It\u2019s easy to see why metrics like the fundraising ratio become a go-to aid for donors when deciding who receives their support. However, it\u2019s crucial to note that while the fundraising ratio can be helpful,&#8230; <a href=\"https:\/\/cccc.org\/news_blogs\/cccc\/2023\/11\/28\/going-beyond-the-fundraising-ratio-broadening-the-view-on-charitable-impact\/\" class=\"linkbutton\">More<\/a><\/p>\n","protected":false},"author":9,"featured_media":37244,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"ts_fic_featured_image_caption":"Man standing at front of room doing fundraising presentation","_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[137],"tags":[240,204,728],"series":[],"class_list":["post-37245","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-uncategorized","tag-charities","tag-charity","tag-donor"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v27.3 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>Going Beyond the Fundraising Ratio: Broadening the View on Charitable Impact - CCCC Blogs<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.cccc.org\/news_blogs\/cccc\/2023\/11\/28\/going-beyond-the-fundraising-ratio-broadening-the-view-on-charitable-impact\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Going Beyond the Fundraising Ratio: Broadening the View on Charitable Impact - CCCC Blogs\" \/>\n<meta property=\"og:description\" content=\"As charities ramp up their fundraising appeals, donors have many options for their end-of-year giving. 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