Make your fundraising efforts pay off in 2024

Strategic fundraising expert Catherine Brooks says canny not-for-profits can position their organisations to boost their share of the $13 billion donated each year to the community sector by focusing on where the money is.

Ms Brooks, who sits on the Community Directors Council – an expert group advising ICDA on its mission and strategies – said that as individual donations softened, not-for-profit leaders should increase their understanding of growing giving segments such as trusts, foundations, major donors and bequests to broaden their funding base.

Now providing expert advice to NFPs through Wendy Brooks & Partners, she urged organisations to “focus their time and energy on the market segments where you’re going to get the best return on investment”.

Slump hits mass market donations

Ms Brooks noted that data from multiple sources showed that while giving had largely recovered from the covid-19 slump, the continued drop in “mass market” donations – individuals giving less than $1000 – reflected rising cost-of-living pressures on average households.

That drop shows up in philanthropic analysis carried out by JB Were in 2023, as well as donation data compiled by Social Ventures Australia and the Our Community donations platform GiveNow.

“There are far fewer people within our community that can give at the moment, and that’s obviously because of the rising cost of living,” Ms Brooks said.

Yet many potential donors were largely immune from the effects of rising interest rates, she said: wealthy donors, corporate and government givers, and some older Australians.

Data suggested that:

• the next two decades would witness the growth of “structured giving” (such as donations funnelled through family foundations), bequests, big philanthropy, and corporate donations
• mass market giving and volunteering could drop from 50 per cent of giving to as little as one-third in the next 12 years
• while the number of donors on Our Community’s giving platform, GiveNow, had returned to pre-covid levels, inflation had caused the real value of donations to dip.

Ms Brooks said US data revealed that total charitable giving had slumped by $170 billion in that country in 2022, a fall which has happened just three other times in the past 40 years, usually coinciding with financial crashes.

The biggest drop-off had occurred with individuals (down 6.4 per cent), while giving from foundations, bequests and companies had grown by between 2.3 and 3.4 per cent.

She said similar trends – including the “substantial” decline in individual giving – were evident in Australia.

And this appears to be a long-term trend, prompting Ms Brooks to encourage NFPs to consider fundraising strategies that don’t rely solely on fundraising from the general community.

The Australian Centre for Philanthropy and Nonprofit Studies (ACPNS) last year revealed that while there had been a rise in tax-deductible donations in the 2021 financial year to $4.39 billion, most of that was driven by the top end of town. Just 28 per cent of taxpayers were givers, according to the ACPNS’s report, representing the lowest proportion on record.

Professor Myles McGregor-Lowndes, one of the report’s authors and also a Community Directors Council member, noted at the time that the low rate marked the third successive year in which fewer than 30 per cent of taxpayers claimed tax-deductible donations.

DGR boost could increase tax-time donations

The Albanese Government hopes that its push to “double” philanthropy by 2030 will arrest the decline in donations by the majority of Australians.

The main early recommendation of an interim report by the Productivity Commission, released in December, was to massively increase the number of charitable organisations able to claim DGR (deductible gift recipient) status.

The Commission wants to boost the number of DGR-status charities by 15,000 to 40,000. This would enable those charities to attract more donations from taxpayers, by providing a tax bonus for giving. The government hopes this will go a long way to boosting that flagging area of support.

Professor McGregor-Lowndes has previously argued that the federal government could do much better in this area, and has said that the whole DGR framework is needlessly complicated and needs a huge amount of reform.

“It is a national disgrace that politicians have dodged root-and-branch reform of the [DGR] tax concessions,” he said.

Other measures proposed by the Productivity Commission to boost donations include a new foundation aimed at First Nations people, moves to slash red tape, and better data on all kinds of giving. Read more recommendations here.

Charities regulator promises to tackle fundraising red tape

The head of the Australian Charities and Not-for-profits Commission (ACNC) says she will continue to champion red tape reduction for the sector’s fundraisers in 2024.

Commissioner Sue Woodward said, “Public facing fundraising is vital to the survival of most charities and not-for-profit organisations.”

“It’s competitive out there, and I acknowledge the hard work that goes into doing it well. For me, this makes it even more important that government red tape doesn’t get in the way.

“Thankfully, there are moves to make it easier to fundraise across Australia which will see significant savings (time and money) for the sector. Having helped champion this law reform over many years before I became ACNC commissioner, I am honestly relieved and excited for the implementation of this reform in 2024.”

She said the national fundraising principles agreed to by federal, state and territory governments this time last year would help create “a clear understanding of appropriate and ethical conduct”.

She said regulators in some states were already “well advanced” in consultations and drafting changes to their regulations, and the regulator would keep pushing to reduce the administrative burden on the sector.

But despite the ACNC’s support, advocates believe the reforms are happening too slowly.

Despite having agreed at a meeting in Canberra a year ago to a reform timetable, most states have missed deadlines to share their plans.

Each jurisdiction agreed to release an implementation plan by July last year explaining how it would introduce regulatory changes or new laws, but a recent analysis by the Coalition for Fundraising Reform revealed that only Tasmania, Queensland and South Australia have released their implementation plans.

Justice Connect is among the coalition’s members. The head of not-for-profit law at the organisation, Geraldine Menere, said, “The lack of action is concerning and casts a shadow over the prospects of successful harmonisation and genuine red tape reduction for charities anytime in the near future.”

Top charity warns NFPs to brace for fundraising shortfall

Tom Duggan, the head of fundraising at Médecins Sans Frontières (MSF) – also known as Doctors without Borders – agreed that the cost of living could hit fundraising income in 2024.

“All the current signs suggest the cost-of-living crisis will stay with us well into 2024 [and] one of its key impacts on Australian non-profits has been on fundraising: people are less likely to give, and when they do, they are giving less.”

But he stressed that the downturn should not be a reason for panic.

“This has not been catastrophic; in 2023 many organisations reported a 1–5 per cent downturn in giving from donors they already had on their books, but in a time where other costs continue to rise, this can have a big impact on the bottom line.”

He said not-for-profit leaders should think carefully before abandoning fundraising campaigns.

“Boards should monitor fundraising results carefully. There will be a strong temptation to pull back on donor acquisition activities that have poor initial cash flow. However, the organisations who bounce back strongly from challenging economic environments are the ones that keep a 5–10-year view of the fundraising. As with commercial organisations those who invest in brand and building the customer base during a downturn will reap greater benefits on the other side.”

Aussie donors to favour domestic causes

Another fundraising trend in 2024 will be a shift by Australian donors to more local causes, Mr Duggan believes.

“Since the outbreak of covid-19, many organisations have noted the Australian public turning more inward.

“Financially, organisations focused on supporting Australians doing it tough have flourished, with an outpouring of generosity. At the same time organisations dealing with traditionally progressive focuses – refugees or the environment – have struggled.

“While large-scale emergencies such as the wars in Ukraine and Gaza captured headlines, devastating earthquakes in Afghanistan and Türkiye/Syria left the news cycle days after they happened.”

And he said that public sentiment about the climate crisis seemed to have calmed under the current federal government, despite climate-focused organisations calling for more action, more quickly.

He said that the shifts could be “cyclical”, but in the meantime, “boards should understand the position their mission puts them in”.

He said that many charities providing international aid “may not have as much media coverage as they have had in the past”, with commercial newsrooms employing fewer reporters overseas and giving international news reduced priority, or using wire or partner services to provide coverage.

For domestic charities, “they should be making hay while the sun shines, investing in growth when it is cheapest”.

And he said for organisations whose causes are “less media friendly, they should be challenging their teams to find ways beyond traditional media to ensure their voice is heard.”

Your biggest supporters at the smaller end of town are still valuable

GiveNow executive director Cathy Truong said that organisations should shore up their existing support base even if they pursued new funding streams. She stressed that even though donations had fallen as much as 5 per cent in recent years, the vast majority of donors were still active.

“Organisations also need to focus on what they have, as well as seeking to counter any losses.”

She said that anecdotally, some organisations appeared to have over-reacted to the slump, and were unwilling to ask long-time donors for support.

“Continue to ask is my advice. Sure, organisations should keep things simple, given the smaller donor market is not a growth area in 2024, but I’ve seen many organisations ask effectively from that mass support base, winning great rewards for that effort.

She said when it came to reaching smaller donors, the most successful organisations shared some common traits.

“Those organisations that are well connected to their community and that can demonstrate meaningful results continue to receive well-deserved donations,” Ms Truong said.

She added that while financial support from donors supplied precious funds, donations also strengthened an organisation’s connections to its community.

Maintaining community engagement with past and potential donors was important as part of a long-term strategy that would pay dividends for an organisation as cost-of-living pressures subsided, she said.

Keep your supporters close

Ms Brooks agreed that organisations pursuing emerging funding avenues should continue to cultivate community support and maintain effective campaigns, especially anything with a local focus.

She said UK studies had found that many charities were reluctant to ask supporters for help, and in that region more than one-third of residents couldn’t remember being recently asked for help. There was every reason to expect the trends were occurring here too, she said.

She echoed Ms Truong’s message: “Don’t assume there’s giving fatigue. Ask.”

“We always tell our clients that people will be very grateful to be told about the good work that you are doing, and if they can give, they will give. And, if they can’t give now, they will remember you if you keep communicating with them at the point that they are able to give.”

Ms Brooks said that telling stakeholders about the good work an organisation was doing meant explaining the impact of a program, which might be told through a case study showing a significant difference to someone’s life.

It was worth considering “to what end?” in all NFP communications with supporters, she said. What donations did an organisation hope to encourage through contact with supporters?

She supported the strategy, often promoted by GiveNow, of seeking small, regular donations from supporters to generate strong regular income.

“We know from data that once you get someone to commit a regular monthly donation, you have very low attrition rates. Once you make a regular gift that you can afford, it’s budgeted for. Regular givers can also become potential candidates for your gifts in wills program.”

She said it was vital to continue to thank donors, including encouraging board members to reach out to supporters with direct thank-you phone calls as part of a donor stewardship program.

These messages were also an opportunity to seek greater support from those within that community who might have a greater capacity to give larger amounts, or to commit to a bequest, she said.

She said high net worth Australians (with more than $1.5 million in liquid assets) gave more than $1,000 with every donation.

Ms Brooks said the latest trends in giving and philanthropy showed organisations must adapt existing tactics and strategies to maximise giving, and must understand that each “market segment” of donors required a different approach.

Pressure on professional fundraisers to counter cyberthreats and address staffing shortfall

Fundraising Institute Australia, which represents the not-for-profit sector’s fundraising agencies, has highlighted the fact that organisations wanting to ramp up their fundraising activities face challenges, nominating staffing shortages, data privacy and security challenges and the influence of artificial intelligence as significant trends.

FIA chief executive Katherine Raskob said her organisation had observed a “concerning trend around staff shortages” in the fundraising industry. She said every missing staffer “means a lost opportunity for securing resources required to meet the demands for services during a period of economic uncertainty”.

She said fundraisers would need to focus on improved privacy and security after last year’s mass data privacy breach by third-party telemarketer Pareto Phone, which affected more than 70 Australian charities.

“FIA is working with members to remind them of their obligations under the FIA Code to protect the privacy of donors and the security of data,” she said.

The advent of artificial intelligence would create “efficiencies and opportunities” for fundraisers, she said, but the sector would continue to “grapple with the best ways to use the tools in authentic, transparent and ethical ways”.

“While tools can be used to automate laborious manual tasks and repetitive processes, it is important fundraisers remain closely involved. After all, fundraising is the art of asking with heart.”

Big trusts have cash to splash, if you get on their good side

Ms Brooks said for NFPs seeking new avenues of fundraising, the Australian philanthropic sector featured a large number of generous philanthropic trusts, with the top 50 now distributing more than $1 billion in largesse, a figure that has doubled since 2017.

While trusts and foundations generated a high return on investment by the charities and NFPs courting them, they also required a great deal of relationship building and maintenance.

In short, good connections can pay off, she said.

A “cold” or unsolicited application for funding had less than a 10 per cent likelihood of success, while a “warm” invitation to apply by that same funder had a 60 per cent win rate, according to her company’s intelligence.

Board members, the CEO and other leaders should be encouraged to spend more time researching and developing those relationships, and understanding which trusts and foundations operated in their regions, she said, since many funders distributed funds close to home.

Emphasising the relationship part of the equation, she said that the “ask” or “solicitation” part of the fundraising cycle accounted for just 5 per cent of the fundraising effort. By comparison, cultivation and stewardship of donors should take up 75 per cent of the effort of fundraising, with identifying potential donors the next largest investment at 20 per cent of the effort.

Corporate giving on the rise

Ms Brooks said higher income givers – including trusts – expected more information about the rationale for giving than other donors, and this meant that NFPs courting bigger givers must focus on data, statistics, research and impact analysis, rather than on the emotive case studies that appeal to individuals.

Our Community recently highlighted examples of charities that had done an excellent job of communicating both data and stories about their work.

Ms Brooks said leading philanthropic analysts JB Were considered that corporate giving – worth about $5 billion annually – was “widely misunderstood”.

As a result, not-for-profits must become more sophisticated in developing their understanding of and relationships with major donors and corporate givers.

Initially, this might mean identifying existing corporate connections on your board or through other relationships. Knowing a board member is one of the top reasons why funders choose a particular organisation to fund.

If a corporation has already set up a giving fund, “they’ve already made a decision to distribute money,” Ms Brooks said.

She said funders were quick to assess key issues such as board membership, previous funding offers, social impact and solid financial management.

Crucially, any organisation should consider such a relationship only if there is a good “alignment” with an NFP’s mission, Ms Brooks said. Even if it is challenging for the NFP to attract funding for its particular mission, the pay-off can be very good for NFPs and charities with a “strong brand”.

An animal welfare organisation could connect with a pet food supplier, for example, or an organisation helping women and children might find a natural fit with a corporate sponsor wanting to demonstrate their goodwill to the community, she said.