The success of fundraising runs

by Jennifer MacKinnon | May 1, 2013
Fundraising

Sudbury Rocks is one of a number of fundraising runs and walks held in the Greater Sudbury area. FILE PHOTO

Spring, otherwise known as the start of the marathon of walk-a-thons and runs, brings out thousands of people to support many important charities. Most events have many volunteers helping; some are completely volunteer-run.

If you are someone who signs up for charity walk-a-thons because you want to financially support the cause, you should be aware of the workings behind these popular events.

Over the past few years, a number of charities have been in the news for their high costs to run special events. The cost of fundraising (COFR) is one of the most common ways to look at the success of special events.

Why do you need to know this? Because not all walk-a-thons are made the same when it comes to fundraising.

Let’s say that a walk-a-thon raises $100,000. If we take away the costs for the event of $50,000 (food, rentals, etc.) then the event raised $50,000. What charities don’t like to report is the amount of staff wages spent on organizing this special event. So for our example, the cost of having a staff member organize the event over the course of a year costs the charity $30,000. Subtract this from the amount raised and now the event made $20,000.

Total money raised $100,000
Costs to put on the event $50,000
Staff wages $30,000
Amount raised (Net) $20,000

The COFR makes this number seem even bleaker. COFR is the total expenses from an event divided by the amount raised (net). The event raised $20,000 and had $80,000 in expenses. COFR for this event is 4.00. This means that for every $1.00 the charity raises in fundraising, the charity must spend $4.00 to raise it.

Net Expenses ÷ Net Revenue = COFR
$80,000 ÷ $20,000 = 4.00

If we use the same example with an event that is entirely volunteer-organized, we see that the numbers are considerably better. COFR is now 1.00, or for every $1.00 that the charity raises, the charity spends $1.00 to raise it.

Total money raised $100,000
Costs to put on the event $50,000
Staff wages $0
Amount raised (Net) $50,000

Net Expenses ÷ Net Revenue = COFR
$50,000 ÷ $50,000 = 1.00

To confuse things even more, what happens when a walk-a-thon has both registration fees and pledges? Do the funds go to the charity or to pay for running the event?

The short answer is a bit of both. A walk-a-thon with registration fees plus pledges normally means registration fees are being used to pay for the expenses of the event. Pledges raised on the side, which are eligible to receive charitable tax receipts, go directly to the charity.

Under Canada Revenue Agency’s charitable taxation rules, 80 per cent of charitable receipted donations must be used to support the mission of the charity. Registration fees are not eligible for a charitable tax receipt because you are getting something for your money, in this case, admittance to the walk-a-thon. Registration fees are not considered donations, however, any money left over from paying off the direct expenses of the event do go to the charity.

If you are someone who cares about the money, here are a few questions you can ask before lacing up your shoes this year:

  • Is the money reported from last year’s event before or after (net) the expenses came off? If it is total money raised, why aren’t they taking off the costs? Is it because their expenses and COFR are too high?
  • What were the expenses in the event? Did the organization spend money on things that could have been avoided?
  • Do you receive a tax receipt for your entry fee? If so, have the charity explain how 80 per cent is going to the charity’s mission statement. Only 20 per cent of a charitable tax receipted donations can be used to pay for direct expenses of an event.

Walk-a-thons and other special events are expensive but popular ways for charities to raise money. They are fun, get the community active and allow us to support the great work of many charities. If you decide you like a cause, get involved — raise or pledge a donation, or volunteer with one of the events to help get the charity’s COFR down. Whether you walk or volunteer, you’ll have a lot of fun.

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