Fund-Raising and Financial Sustainability
This chapter provides conceptual frameworks and approaches to organize fund-raising activities that can generate alternative funding for financial sustainability. The chapter includes an overview of various types of fund-raising strategies, existing sources of funding for nonprofit organizations, and the planning of fund-raising activities.
The term "fund-raising" can be used for any activity whose primary purpose is to raise money to support the activity of a nonprofit organization. The meaning of the term "fund-raising" can change based on approaches used by a particular nonprofit organization. For example, an organization might use telemarketing as its main source of fund-raising, whereas another organization may rely solely on board members, staff, and volunteers to operate its fund-raising activities. For some other organizations, grant seeking might be a facet of fund-raising strategy. Investment and social enterprise might be considered as fund-raising strategies for another organization. Organizations in arts and culture-related activities may build their fund-raising approach around performances and sale of artistic merchandise. There is no right or wrong approach if the strategy is to raise money in a lawful manner to further the vision and mission of an organization.
Increased competition and declining funding sources in the nonprofit sector have put the pressure for efficiency and effectiveness on nonprofit organizations in the United States, and made fund-raising an important alternative to generate additional and flexible revenue. According to the 2013 Charitable Giving Report, nonprofit organizations received donations representing $12.5 billion in fund-raising from government, corporate, foundation, and individual sources (MacLaughlin, 2014).
WHY DO PEOPLE DONATE TO NONPROFIT ORGANIZATIONS?
People donate to nonprofit organizations for a variety of reasons. I do not intend to list all of them. However, based on the literature, I select the following reasons as an illustration to argue that motivation for charitable giving is diverse. The literature suggests that people donate to nonprofit organizations based on compassion, altruism, values, tax deductibility, corporate social responsibility, stewardship, and solicitation.
The word "compassion" means a feeling of pity or great concern toward the suffering of others. On January 12, 2010, a devastating earthquake hit the country of Haiti. The stories that were reported through international media were heartbreaking. Very little persuasion was required to convince people that there was a need. Out of that evidence of a need, people donated with compassion. They wanted to help. They wanted to make a difference. They wanted to contribute by alleviating the human suffering that they were witnessing. The same is true for what happened after Hurricane Katrina in New Orleans, after the tsunami in Southeast Asia, after the recent earthquake in Japan, after the tornado in Joplin, Missouri, and after Hurricane Sandy in New York and New Jersey. The list is too long to cite all the examples of natural disasters that awoke compassion in the hearts of individuals, organizations, and institutions, and influenced them to donate. Cheung and Chan (2000) found that the awareness of a need has a positive effect on donations to international relief organizations. Similarly, Lee and Farrell (2003) conducted a study on donations to panhandlers, and found a positive correlation between perceived need and donations. Weerts and Ronca (2007) conducted a study on alumni contributions to academic institutions, which revealed that perceived need influenced alumni contributions to their alma matter. It is fair to infer that the ability of a nonprofit organization to increase the awareness of potential donors of a need may contribute to an increase in donations.