The mission of any charity is to strengthen its purpose further and try to gain as much as a donation to achieve its objectives.
Like all organizations, charity entities also need money for their daily operations. Nonprofits invest their revenues into their service offerings and other key programs.
The donations for fundraising events cannot be ascertained. However, it can be fairly estimated based on past similar events and the ability of the planner to get in top donors to the events.
A greater number of invitations would mean more fundraising for the events.
The fundraising expenses should be carefully planned for each event. Apart from the expenses especially related to fundraising expenses, various expenditures related to program and administrative expenses also need to be incurred.
A proforma for fundraising costs are as follows:
Fundraising costs:
| Fundraising expenses | Amount ($) |
| Promotion of the events | XX |
| Sponsorship emails | XX |
| Printing and stationery | XX |
| Banquet Charges | XX |
| Program expenses | XX |
| Scholarship costs | XX |
| Basic facility expenses | XX |
| Shelter and health care expenses | XX |
| Administrative/management expenses | XX |
| Legal charges | XX |
| Salaries and wages | XX |
| Office management expenses | XX |
| Total Fundraising costs | XXX |
How Does Fundraising Work?
Fundraising starts with the preparation of the program. The program can be related to providing education to underprivileged children, providing basic healthcare services to the needy, or even organizing an event or program based on the needs of society.
When the program is approved, the invitations need to be sent out to the people with connections to charity and who are regular donors.
The pamphlets and invitation cards need to be printed out, and these people need to be invited.
The banquet needs to be booked in advance, and all the appropriate services for fundraising need to be provided there. The banners and the process for donation need to be clearly stated in the events.
If the charity donation attracts any deduction, it shall be emphasized to the prospective donors. Various costs cannot be allocated to a single overhead.
Hence, these need to apply to more than one overhead or area. These expenses include the cost of using the telephone or renting. The organization should devise a reasonable method to allocate such a common expenditure.
While allocating such expenditure, the organization should use a rational method and keep the method in line with the nature and size of the organization. The method used must be documented in the organization’s records.
Types of fundraising costs:
Here, the types of fundraising costs that were shown in the proforma will be explained in detail:
1) Fundraising expenses
Fundraising expenses are related to persuading others to contribute money or any form of contribution, such as using facilities or property from which the donor would not receive direct benefits.
The costs related to fundraising would include personnel, consultants, rent, postage, direct contact solicitations, etc. A few examples are mentioned below:
- Promotion costs related to fundraising events.
- Sponsorship costs related to preparing for workshops and other activities for perfecting fundraising techniques.
- Direct fundraising costs such as facility rental, printing, marketing, catering, etc
2) Program expenses
These are the costs related to carrying out a predefined mission of charity. These expenses help to strengthen the cause of the organization.
This may include the distribution of food, shelter, healthcare medicines, basic care services, teaching, providing scholarships, and so on.
For large charity organizations, program expenses form the major part of overall expenditure, requiring delicate care to gain traction in fundraising events.
Donors usually go through brochures and sneak into where the charity organizations’ major expenditures would incur, and they see if they match their objectives.
3) Administrative/Management costs/General expenditure
These expenses are incurred as part of the daily expenditure of the organization. These are indirect expenses of the organization important for running the organization.
The expenses include amounts for carrying out functions related to accounting, office management, auditing, legal services, and maintenance.
The fundraising and administrative expenses are likely to form the majority of operating costs for any charity entity.
Other expenses include a portion of the executive director’s salary and benefits and other management and general expenses. Some of the examples would include:
- Expenses related to general recordkeeping
- Executive direction and corporate planning
- Corporate legal services
- Liability insurance
- Office management expenses that include negotiating lease agreements for office space, office equipment, and other assets
- Personnel administration expenses like the hiring of security guards.