Academic journal article Australian Journal of Social Issues

Factors Associated with Fundraising Dependency among Nonprofit Organisations in Australia

Academic journal article Australian Journal of Social Issues

Factors Associated with Fundraising Dependency among Nonprofit Organisations in Australia

Article excerpt

Introduction

A feature that distinguishes nonprofit organisations from for-profit and government organisations is that they obtain their revenue from a wide range of sources (Lyons 2001). Such sources of revenue include income from the people who consume and pay for the services of a particular organisation, membership fees from those who may choose to join a particular organisation, fundraising, government contracts and grants, interest or rents received from investments and other business activities.

While nonprofits are increasingly diversifying their revenue streams from sources such as the sale of goods and services, membership fees, commercial ventures, government contracts and partnerships with business, revenue from fundraising remains a distinctive core feature and form of support for many if not most nonprofit organisations (Flack 2004; Lyons 1995). Definitions of what activities comprise fundraising not only vary across countries (e.g. in the U.S. fundraising activities such as fetes, fairs, recycling of donated goods, and charitable gambling are more likely to be classed as commercial income rather than fundraising and thus subject to income tax) but within countries (e.g. the different State and Territory based fundraising regulations in Australia vary considerably as to what is included and excluded in their respective definitions and lists of fundraising) (Flack 2004).

Fundraising revenue can come from the public via a great variety of appeals, from bequests, from business as donations, sponsorships or grants as well as from trusts and foundations. Some large charities, for instance, utilise a wide range of sophisticated fundraising techniques such as telemarketing. In contrast, many small local nonprofit organisations survive on the proceeds from an annual fundraising event such as a fete, concert or fun-run. While fundraising techniques and activities are varied, there is general consensus that fundraising is a philanthropic or altruistic activity, carried out for the benefit of a particular cause or issue rather than for commercial profit or benefit.

Despite the importance of fundraising to the nonprofit sector there has been surprisingly little research on fundraising as a revenue source in Australia. Research that has been conducted has focused on the cost of fundraising--the proportion of fundraising expenses to total fundraising revenue (Lyons 1995; Flack 2004; Berman & Davidson 2003). This has also tended to be the focus of public policy (Consumer Affairs Victoria 2004; Industry Commission 1995). Similarly, international research has also focused on either the cost of fundraising and/or fundraising performance--the absolute or relative amount of money raised by nonprofit organisations via fundraising (Lindahl & Conley 2002; Paton 2003; Pink & Leatt 1991; Sargeant & Kahler 1999).

Another important dimension for nonprofit fundraising is the reliance on fundraising relative to other forms of revenue generation, such as commercial ventures, government grants and fees. While some large and long-established charities for example may raise significant amounts of fundraising dollars, that is, have a high public profile as a fundraising organisation, it may only comprise a small proportion of their overall revenue. In contrast, a small and recently established organisation may raise only a small dollar amount via fundraising although that amount comprises a large proportion of their overall revenue.

Having a better understanding of the factors that may be associated with reliance on one form of revenue, in this case, from fundraising, is important to understanding the long-term organisational health and sustainability of nonprofit organisations. Recent studies focusing on the diversity (or lack thereof) of nonprofit organisations' revenue sources have identified several indicators of financial vulnerability. The revenue concentration index, for instance, posits that the more an organisation relies on one or two sources for revenue, the greater the risk of financial failure (Buckmaster et al 1994; Greenlee & Trussel 2000, 2002; Tuchman & Chang 1991). …

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