Competition for donations and the sustainability of not-for-profit organisations

Abstract

Purpose – The purpose of this paper is to understand the nature of competition for private donations that occurs between not-for-profit organisations (NPOs). This competition occurs because NPOs do not produce commercially viable outputs and therefore rely on donations. The financial sustainability of NPOs is problematic, both individually and in economy-wide terms, as they do not produce commercial saleable outputs. Instead they raise funds by either relying on government grants or competing for private donations. Sustainability of NPOs becomes an even greater issue when governments reduce their grant-giving in times of stress – precisely the time when calls on NPOs’ resources increase. Design/methodology/approach – The research asks the question, do donation-raising expenditures by NPOs increase donations or do they damagingly divert donations from other NPOs? Using Australian data, competition between NPOs for donations is analysed using a modified oligopoly market model. NPO fundraising expenditures are central to this model, but other factors, including unpaid-volunteers, organisational size and age, are also explanatory variables in determining success in fundraising. NPOs concerned with human welfare, other than specialised aged care, are the primary focus of this paper, although other NPOs such as those concerned with animal welfare, science and the arts are also modelled. Findings – Crucially an NPO’s fundraising expenditure has a direct and positive impact on its level of donations. A major influence on level of donations is the presence of volunteers within an NPO. There seems to be an interesting reciprocal relationship between the effect of size and age of organisations on their donations and the effect on fundraising. Critically for sustainability, NPOs competing for funds are established as having a negative effect on the level of donations to other NPOs with similar functions. Originality/value – It is believed that the material used here represents one of the first studies of financial sustainability of NPOs and highlights the value of both accounting and economic analysis of organisations’ operations. Financial sustainability issues are compounded by the existence of competition for funds among charities operating in the same areas (Parsons, 2003; Trussel and Greenlee, 2004; Trussel and Parsons, 2008); it has been argued that competition for funds diminishes sustainability (Lyons, 2001; Weerawandena et al., 2010).

The Effects of Capital Campaigns on Other Nonprofits’ Fundraising

“…The biggest takeaway from this study is that capital campaigns at project‐pursuing nonprofits may improve fundraising conditions at community nonprofits. Therefore, this study offers additional support to the existing literature on fundraising effects by demonstrating that contributions to nonprofits are positively associated with fundraising performance (Twu ), and that fundraising activities at one nonprofit can affect the overall distribution of resources among neighboring nonprofits (Lyons ; Omura and Forster ). Further, this study is one of two studies that examines the effects of bricks‐and‐mortar construction projects on nonprofit financial performance (Woronkowicz ).…”

“…Woronkowicz () examines the effects of nonprofit facilities projects on financial vulnerability and finds that, for organizations that build new facilities, capital financing can potentially have adverse impacts on overall financial vulnerability, though it is unclear whether these effects are long term. To date, however, no study has examined the impact of large capital campaigns on the fundraising success of other nonprofit organizations, and studies of how (and whether) the fundraising activity of one nonprofit affects the success of another nonprofit in the same market (Lyons ; Omura and Forster ; Twu ) have produced mixed results.…”

Impact Of Corporate Governance, Csr With Philanthropy Moderating Role On Firm’s Performance

“…Saiia et al, (2003) made public the refined association between the normal plan of unselfishness and therefore the developing thought of basic philanthropy standards. Omura and Forster (2014) valid the reasoning that company ventures, execution introduction goes concerning as a propelled power and has positive relationship with CSR and philanthropy (Barnett & Salomon, 2006) by their exploration structure founded that generosity rehearses do not head of association's edges rather elevate companies to require half in company mingling. Omura and Forster (2014) delineate that company execution of centred undertakings and effective power of CSR has positive reference to charity by underlining more and more solid relationship.…”

“…Omura and Forster (2014) valid the reasoning that company ventures, execution introduction goes concerning as a propelled power and has positive relationship with CSR and philanthropy (Barnett & Salomon, 2006) by their exploration structure founded that generosity rehearses do not head of association's edges rather elevate companies to require half in company mingling. Omura and Forster (2014) delineate that company execution of centred undertakings and effective power of CSR has positive reference to charity by underlining more and more solid relationship. Barnett et al (2006) found that unselfishness practices should be levelled consistent with extent of social welfare of the Organization.…”

Rich man, poor man, beggar man, thief: Accounting and the stigma of poverty

“…We argue that accounting has long been a tool suited to modes of governance that prioritize the accumulation of wealth and the individualization of the poor, which characterize present-day neoliberal policies that are often enacted through non-governmental organizations. This historical study therefore has implications for research on the roles of accounting within non-governmental organizations today, which operate in competitive markets not only for service delivery, where the poor are seen as individual clients, but also for fundraising, where the wealthy are aggressively cultivated as donors (Alexander, 2000;Froelich, 1999;Omura & Forster, 2014).…”