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Fundraising Efficiency Ratio

Source: R/get-fundraising-efficiency-ratio.R
get_fundraising_efficiency_ratio.Rd

Cost of raising one dollar of contributions; measures how efficiently fundraising expenses generate donated revenue.

Formula:

fer = fundraising_expenses / total_contributions

Definitional Range

Bounded below at zero; values above 1.0 (spending more than a dollar to raise a dollar) are possible, particularly for young organizations building donor bases or those in difficult fundraising environments. The typical range is approximately [0, 0.50] for most operating nonprofits.

Benchmarks and rules of thumb

  • <= 10 cents per dollar (ratio <= 0.10): Charity Navigator threshold for a full fundraising efficiency score.

  • <= 35 cents per dollar: BBB Wise Giving Alliance standard.

  • Above 50 cents: Commonly flagged as inefficient.

Calculated For: 990 filers only.

Usage

get_fundraising_efficiency_ratio( df,
  fundraising_expenses = "F9_09_EXP_TOT_FUNDR",
  total_contributions  = "F9_08_REV_CONTR_TOT",
  winsorize = 0.98 ,
  range     = "zp",
  sanitize  = TRUE,
  summarize = FALSE )

Arguments

df

A data.frame containing the fields required for computing the metric.

fundraising_expenses

Fundraising expenses.

total_contributions

Total contributions received.

winsorize

The winsorization value (between 0 and 1), defaults to 0.98, which winsorizes at the 1st and 99th percentiles.

range

Character string specifying the theoretical range of the ratio, used to set winsorization bounds. Default "zp". Options: "np" (negative to positive), "zp" (zero to positive), "zo" (zero to one), "nz" (negative to zero), or a custom "lo;hi" pair (e.g. "0;10").

sanitize

Logical (default TRUE). If TRUE, NA values in the financial input columns are imputed to zero before the ratio is computed, respecting form scope: Part X and VIII/IX fields (990 only) are imputed only for 990 filers; Part I summary fields (990 + 990EZ) are imputed for all filers. The returned dataframe always contains the original unmodified input columns.

summarize

Logical. If TRUE, prints a summary() of the results and plots density curves for all four output columns (raw, winsorized, z-score, percentile). Defaults to FALSE.

Value

Object of class data.frame: the original dataframe appended with four new columns:

- `fundr_eff`   - fundraising efficiency ratio (raw)
- `fundr_eff_w` - winsorized version
- `fundr_eff_z` - standardized z-score (based on winsorized values)
- `fundr_eff_p` - percentile rank (1-100)

Details

Primary uses and key insights

The fundraising efficiency ratio measures the cost of raising one dollar of contributions. A ratio of 0.20 means the organization spends 20 cents to raise each dollar - a common benchmark in the charity watchdog literature. Lower values indicate more efficient fundraising; higher values indicate more costly fundraising relative to the contributions raised.

This metric should be interpreted alongside the fundraising strategy: organizations investing in major gift programs or capital campaigns may show temporarily high ratios that reflect future revenue not yet received. Mature direct mail programs with large donor databases tend to show very low ratios.

Formula variations and their sources

Fundraising expenses (Part IX line 25D) / total contributions (Part VIII line 1h). An alternative uses total revenue rather than contributions in the denominator, which produces a lower ratio but conflates earned and contributed income. The contributions-only denominator is the most direct measure of fundraising productivity.

Note: contributions (Part VIII 1h) include grants and federated campaign revenue alongside individual gifts, which may inflate the denominator for organizations receiving large government or foundation grants with minimal fundraising cost.

Canonical citations

  • Greenlee, J.S. & Trussel, J.M. (2000). Predicting the financial vulnerability of charitable organizations. Nonprofit Management and Leadership, 11(2), 199-210.

  • Charity Navigator. Financial Health Methodology. charitynavigator.org.

    • Uses fundraising efficiency as a rating factor (target: 10 cents per dollar or less).

  • Hager, M.A. (2001). Financial vulnerability among arts organizations. Nonprofit and Voluntary Sector Quarterly, 30(2), 376-392.

Variables used:

  • F9_09_EXP_TOT_FUNDR: Total fundraising expenses (fundraising_expenses)

  • F9_08_REV_CONTR_TOT: Total contributions received (total_contributions)

Examples

library( fiscal )
data( dat10k )

d <- get_fundraising_efficiency_ratio( df = dat10k )
#>    :: Total contributions equal to zero :: 975 case(s) replaced with NaN
head( d[ , c( "fundr_eff", "fundr_eff_w", "fundr_eff_z", "fundr_eff_p" ) ] )
#>     fundr_eff fundr_eff_w fundr_eff_z fundr_eff_p
#>         <num>       <num>       <num>       <int>
#> 1:         NA          NA          NA          NA
#> 2: 0.02809876  0.02809876 -0.42421465          75
#> 3: 0.05460828  0.05460828  0.04068968          81
#> 4:         NA          NA          NA          NA
#> 5:        NaN         NaN         NaN          NA
#> 6:         NA          NA          NA          NA