Does Mandatory Disclosure Matter? The Case of Nonprofit Fundraising

Do donors seek out potentially adverse information about organizations making fundraising appeals? Do they react when it is readily available? Do they draw negative inferences when critical information is not available? To answer these questions, we consider previously unexamined large-scale natural experiments involving U.S. charitable organizations—tax-exempt organizations that file Internal Revenue Service (IRS) Form 990. Using standard difference-in-differences designs, we find that donors penalize organizations with high fundraising costs when there is mandatory disclosure or involuntary disclosure by a third-party reporter. Organizations with lower fundraising costs fundraise more successfully in the presence of these disclosures. The contrast with donors’ behavior when such information is not available suggests that donors do not draw correct inferences when potentially consequential information is not disclosed. Disclose-on-request requirements, in contrast, apparently do not have any significant impact on donors’ or organizations’ behavior. We then sketch implications for the regulation of donations to charities and their modern cousins, such as crowdfunding and social enterprise organizations.

Managing Members, Donors, and Member-Donors for Effective Nonprofit Fundraising

Nonprofit organizations (NPOs) play a central role in many economies in the form of private entities serving a public purpose. Strengthening the fundraising capabilities of NPOs can have a large impact on their survival and effective functioning. NPOs typically elicit financial contributions through multiple forms of giving, such as donation and membership. These options enable individuals to express their altruism by giving in one or multiple forms. The authors develop a utility-based multiple discrete-continuous model that provides insights into potentially large differences in individuals’ giving behaviors. Through Bayesian Gaussian processes, the model also incorporates changes in givers’ preferences for forms of giving. The authors apply their model to five years of individual giving data. They find that the effects of lifetime, recency, seasonality, and appeals on donation and membership options change nonmonotonically over time and in distinctive ways. The authors demonstrate that the model estimates help predict who will give in more than one form in the future as well as build appeal targeting strategies. The model also shows that fundraising attempts should emphasize participation rather than amount, and that long-lapsed members are still worth pursuing for renewal, whereas long-lapsed donors are less productive for repeat giving.

In Prosperity Prepare for Adversity

When a disaster strikes, nonprofit organizations face the need to mobilize resources as quickly as possible in a limited time frame. Given its characteristics to instantly spread information to masses of people, social media is considered one of the most effective ways for nonprofits to publicize opportunities to take voluntary actions. Despite the envisioned use, little has been examined about the effectiveness of social media in encouraging people to give. This chapter takes the case of earthquake, tsunami, and nuclear threat that struck Japan in 2011 to examine whether the use of social media was effective in nonprofit fundraising. Analyzing data collected in an original online survey, the authors find that the use of social media both before and after the disaster has a positive impact on the amount of donations that nonprofits raise. Use of social media during non-disaster times is the key for successful fundraising in times of disaster.

Nonprofit Fundraising Transformation through Analytics

The authors present the experiences of a professor and a team of students who found that social media and predictive analytics go hand-in-hand when designing effective marketing campaigns (in this case, fundraising for a community of nonprofit organizations). The students of a medium-sized southwestern private university assisted a large southwestern city with the social media marketing efforts for the city's first Big Give fundraising. The organizers then told the students that the internal goal for the 24-hour event was $1.5 million USD. The campaign resulted in 21,361 gifts made for a grand total of $2,095,606.50 USD (approximately 40% greater than was forecasted). It was estimated by the organizers that the most significant contributing factor to the greater performance of the campaign was the social media efforts of the students. The average number of donations raised by the 467 organizations that participated was 45.52 for an overall average of $3,527.09 USD.