Questions Raised by Report That Nonprofits Claim Zero Fundraising Expenses

Questions Raised by Report That Nonprofits Claim Zero Fundraising Expenses

More than 40 percent of the almost 38,000 charities and nonprofits that declared at least $1 million in donations in their most recent reports to the Internal Revenue Service claimed they spent nothing on fundraising, Scripps Howard News Service reports.

According to a study of federal tax records by Scripps Howard, more than 15,000 tax-exempt organizations reported in their most recent filing with the IRS that they had spent zero to solicit donations and fundraise. Yet those same groups managed to raise a total of $116.7 billion in the most recent year of record. The same study found that more than 22,000 organizations reported fundraising expenses that totaled $14.3 billion, or roughly seven cents for every dollar raised.

Officials at some of the charities in question defended the way they reported their fundraising expenses by noting that the bulk of their revenue came through government contracts and that efforts to secure those contracts qualified as a business development cost rather than a fundraising expense. Others argued that they used unpaid volunteers to raise funds. And still others admitted that they may have understated their fundraising expenses in an effort to minimize their overall administrative costs so as to appear to be "efficient."

The latter goes to the heart of an ongoing debate in the sector, with a growing number of experts arguing that the emphasis on keeping administrative costs low is compromising the ability of many organizations to do their work, while others argue that transparency and accurate reporting trump all. When informed that forty-eight of 127 major Goodwill affiliates reported raising $387 million at no cost, for example, Goodwill Industries International president and CEO Jim Gibbons said the charity will rethink how it calculates its overhead costs. "We are going to have a dialogue within the Goodwill network so that each Goodwill and the boards of directors can become very aware of this issue," said Gibbons. "It is important to be clear and transparent. If this is even perceived as misleading, well, that's not what the Goodwill brand stands for."

Waqas Naeem. "Groups Nationwide Report Zero Cost for Fundraising." Scripps Howard News Service 05/20/2012.