In 2014/15, voluntary organisations spent £5.9bn on generating funds
- Voluntary organisations spent £5.9bn on generating funds in 2014/15, £3.9bn of which was spent on generating earned income, £1.5bn on generating voluntary income and £0.5bn on investment management costs.
Overall, the costs of generating funds amounted to 14% of total spending in 2014/15
- Over the whole period since 2000/01, the costs of generating funds have increased both in terms of total amount and as a proportion of total spending.
- However, these costs have increased more slowly in recent years: in 2012/13 they rose by £498m, £358m in 2013/14 and £168m in 2014/15.
- Super-major organisations spent the most on generating funds as a proportion of their total spending (17%).
- While larger organisations spent more on generating voluntary income as a proportion of the total costs of generating funds, smaller organisations spent more on generating earned income.
- Organisations that spent the most on generating funds as a proportion of their total spending are those operating in the following sub-sectors: research (24%), culture and recreation (19%), health (19%) and the environment (18%).
Interpreting the costs of generating funds
There are different ways of considering the effectiveness of fundraising. While the cost of generating funds as a proportion of an organisation’s total spending is often used as an indicator of efficiency, it doesn’t measure return on investment. There are a number of ratios relating to income that can help understand an organisation’s fundraising performance, namely:
- General ratio = all income/cost of generating funds
This ratio takes into account all income, irrespective of the source, over the total amount spent on generating funds.
- Voluntary income ratio = voluntary income/cost of generating voluntary income
This ratio takes into account all voluntary income (e.g. donations, legacies), over the total amount spent on generating voluntary income.
- Earned income ratio = earned income from activities for generating funds/cost of generating earned income
This ratio takes into account all income earned from activities for generating funds, over the total amount spent on these activities. This generally gives a lower yield, as the income generated can often get classified as voluntary income in charities’ accounts.
- Almanac fundraising ratio = (voluntary income + earned income from activities for generating funds)/(cost of generating funds – cost of managing investments)
This ratio takes into account all voluntary income and the earned income from activities generating funds, over the total amount spent on generating funds less the amount spent on managing investments. We judge that this provides a good overall indication of fundraising performance by capturing the full range of fundraising income and costs.
- Our data shows that, although spending on generating funds has increased since 2010/11, it can yield significant results. In 2014/15, for each pound spent on generating funds (excluding investment management), £4.16 was raised, the same amount as in 2013/14. However, the yield has decreased since 2010/11, and in 2014/15 it is still lower than in 2008/09.
- Charities with an income of under £1m (micro, small and medium sized organisations) have a higher ratio of income generated per pound spent than the larger charities, according to our fundraising ratio definition.
- However, these differences are the result of different fundraising models across different sizes of organisations. Smaller organisations spend much less on fundraising, so the relative returns are higher. But in absolute terms the fundraising activity of larger organisations yield substantial returns; organisations with more than £1m income generate 80% of the sector’s total voluntary and earned income from activities for generating funds.