Fundraising

Fundraising is collecting money for a nonprofit organization such as a charity, a school, a nonprofit institution, or a political organization. Fundraising can legally be performed through the solicitation of funds or the sale of items.

A fundraising event is any activity for soliciting money or material for charitable, civic, educational, or political organizations. Commercial activities involving conducting business to make a profit are not considered fundraising.

Many laws apply to fundraising, the most basic of which is that donors must actually give away their funds without receiving items in return. Donors cannot receive goods and services in return for their gifts, and they may not receive dividends on their investments. It is permissible to give donors small tokens of appreciation along with recognition.

Donations to nonprofit organizations are tax exempt, but if a nonprofit organization gives money in return for donors’ donations, the organization can lose its tax-exempt status.

Background

Large-scale organized philanthropy that was supported by systematic fundraising became popular in the twentieth century. Before then, philanthropy was performed on a small scale, in that individuals approached wealthy donors for assistance. Individual giving was directed toward poor people and religious institutions.

Between 1900 and 1930, fundraisers developed the techniques that continue to be used in modern times. Two fundraisers for the YMCA, Charles Sumner Ward and Frank L. Pierce, are widely credited with first developing the methods for raising large sums of money. In 1905, Pierce and Ward invented a fundraising practice to raise eighty thousand dollars for a new building. They hired a publicist, found a corporate donor to pay for advertising, and set the clock on a campaign that would last only twenty-seven days. Those practices have all stood the test of time.

World War I also changed the face of charity. At the request of Secretary of State Newton D. Baker, charities merged to help the war effort. Charities found that working together and pooling all the needs of various charity cases was a successful system. Many continued to work together after the war ended, when they began to appeal to the lower and middle classes, rather than turning only to wealthy donors.

A 1929 law also contributed to the rise of professional fundraising. For the first time, corporations were permitted to deduct charitable contributions from their income taxes. Tax-free contributions benefited both the businesses and the charities to which they gave.

Also, many national nonprofits were founded during World War I, necessitating major fundraising. By 1930, large foundations were common, and sending checks to various charities had become a common practice. The professional fundraiser became a recognized component of the philanthropic world.

In 1960, three fundraisers founded the National Society of Fund Raisers (NSFR). In 1981, NSFR established certification standards. In 2001, its name was changed to the Association of Fundraising Professionals (AFP).

The US government has established legal guidelines for fundraising. Fundraising is a regulated activity, and the majority of states require registration before an organization engages in fundraising or solicitation. There are also a slew of laws about tax-exempt status, online fundraising, and donor relations.

Overview

Fundraising, which is also known as development, refers to the way in which nonprofit organizations complement their earned income. Fundraising is directed toward soliciting grants, sponsorships, donations, and gifts-in-kind. Many nonprofits have a fundraising staff that conducts campaigns and similar activities. According to The Giving USA Foundation’s annual report on charitable giving, Americans give about $350 billion to nonprofits each year. That money comes from individuals, corporations, and foundations.

Organizations raise funds through a variety of established methods. They aim to match the chosen method with the characteristics of the targeted donors and with the mission of the campaign.

One form of fundraising is seeking grants. Organizations apply to foundations for existing grants that match the interests of the program they want supported. Only a small portion of grant requests are accepted, so this form of fundraising requires assiduous attention to the process.

Another form of fundraising is special events. These types of events, such as golf tournaments, dinners, auctions, and galas, usually depend partially on the efforts of volunteers. Some fundraisers seek significant backing from sponsors for key events.

Fundraising can also be performed by requesting major gifts, which means approaching wealthy people who can afford to donate sizeable funds. Some organizations that rely heavily on major gifts invest in researching prospective donors to zero in on those whose interests match the focus of the organization. These fundraisers also spend time maintaining contact with donors when not making requests.

Offering memberships is another type of fundraising. In exchange for an annual membership fee, organizations might offer their members discounts on admissions, access to special activities, or subscriptions to the organization’s magazine.

Annual appeals are also a mode of fundraising. Many nonprofits use their lists of regular supporters to send a once-yearly letter or email that encourages those supporters to renew their assistance. Also known as direct-mail campaigns, these letters are often sent to people whose names are on purchased mailing lists, in addition to regular supporters.

Telemarketing is often undertaken in conjunction with mail appeals. Organizations either set up phone banks or hire outsourced telemarketers to call individuals and personally request support. These calls can generate support from untapped sources.

Canvassing, either by going door-to-door or standing on a street corner and stopping people to tell them about an organization, is a widespread fundraising practice. When there is a large group of canvassers, this can be a successful method of increasing financial support for an organization.

Fundraiser is a term that also refers to activities or sales campaigns that are organized by volunteers to raise money for a club or community project. (This use of the term is in addition to the usage describing an individual who works to raise funds.) The volunteers personally approach prospective customers for the fundraiser. Selling Girl Scout cookies is an example of a wide-ranging fundraising campaign.

Social media, the latest addition to the fundraising stew, is used in some iteration by most nonprofit organizations. Most have a presence on Facebook, Twitter, or other social media platforms, but turning people’s interest on social media into cash donations is challenging.

A well-thought-out fundraising strategy guides nonprofit organizations in developing the most effective fundraising methodology for each organization.

Political Fundraising

One of the best-known and most controversial forms of fundraising relates to political organizations. Financing a political campaign is expensive and almost always relies on some form of fundraising. Fundraising is used to promote political parties or candidates in elections, as well as policies presented in referendums. PACs (Political Action Committees) and SuperPACs are organizations designated for raising money for political purposes.

Since the 1800s, many have expressed concerns about the possible influences financial donations can have on political campaigns. Money can affect politics through vote buying, bribery, and the creation and adjustment of laws to serve major donors. To counter this problem, reforms first went into effect in the 1970s, and laws have continued to be created to reduce the influence of financial donations to political organizations. Campaign finance reform is a matter of ongoing concern to the public.

Bibliography

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"Giving USA: Americans Donated an Estimated $358.38 Billion to Charity in 2014; Highest Total in Report’s 60-year History." Giving USA, 29 June 2015. Web. 29 Dec. 2015.

Lindley, Daniel. "Tips for Getting Your Foot in the Door." Successful Fundraising, Dec. 2015. Web. 29 Dec. 2015.

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Quick, Elaine, Toni Ann Kruse, and Adam Pickering. Rules to Give By: A Global Philanthropy Legal Environment Index. Nexus, 2015. Web. 29 Dec. 2015.

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