Program Spending Ratio vs. Fundraising Investment: What Drives Donations in the Humanitarian Sector
Humanitarian organizations (HOs) typically consider fundraising activities as the predominant solution to increase public donations. Yet, fundraising diverts funds from core programs, generating a negative impact on program spending ratio, which is a widely-used measure of a nonprofit organization’s efficiency, and thereby potentially reducing donations. This trade-off can be avoided if management knows how much weight to place on fundraising versus program spending. To address this question, we use panel data from over 100 US-based HOs between 2000 and 2014 to examine the impact of program spending ratio and fundraising investment on public donations while controlling for program diversity and allowing for the moderating effects of transparency and media exposure. Our results suggest that maintaining a high program spending ratio likely increases the donation income of all HOs, but fundraising investment seems to be more beneficial for larger HOs. Furthermore, transparency accelerates the impact of an HO’s program spending ratio only if its spending ratio is above a certain threshold, but the moderating effect of media exposure on fundraising investment is mixed and limited.