To get a handle on how many charities might walk away from the CFC if a flat fee is introduced, we need to look at the financial figures from theirperspective.
If the government asks a group to pay, say, $9,000 to participate in the CFC (see Losing 1,000 Charities), the staff at that charity will properly ask: Are we raising at least that amount? If not, the answer is obvious: Decline the generous offer, and skip the paperwork.
But what if a group most recently raised $10,000? Now the answer should be yes. The charity will get some exposure and will net $1,000.
The problem is that charity pledge results vary widely from year to year. Until we gathered pledge results from across the nation (and we now have them as far back as 2003), no one realized quite how stunningly these results do vary. Individual charities know their own results (if they can decipher CFC pledge reports), but they might reasonably assume the variations were particular to them. Turns out, the syndrome is widespread.
We looked at the pledge results for national charities in the 2009, 2010 and 2011 CFCs. What we discovered is that almost half of the participating charities saw their results rise or fall by 25 percent or more each year. Almost a quarter saw their results rise or fall by 50 percent each year. Here are specific numbers (click table to enlarge):
We will talk about why these swings happen in another post, but let’s return to that charity that is thinking about participating in the CFC.
As noted above, our hypothetical charity received $10,000 in the most recent CFC. Our first calculation was that the charity would net $1,000. But, what if the group saw a decline of 25 percent in the upcoming CFC? Now, the group would be asked to pay $9,000 in advance and would ultimately recover $7,500 ($10,000 X .75). The group would be out $1,500, and would be none too happy.
Of course, our charity could just as easily see its CFC donations rise 25 percent. In this more optimistic case, the group would raise $12,500 ($10,000 X 1.25) and would net $3,500. Getting better.
But charity staff are not usually in the business of placing bets. So, the volatility of the CFC will mean that groups experiencing donations a bit above the flat fee will hesitate to pay. If we ignore the many charities that see swings of 50 percent, and just stick to the more modest 25 percent figure, we can reasonably project that many groups receiving as much as $11,000 in the CFC will decline to pay a flat fee of $9,000.
The number of charities in the program just dropped some more. And to compensate for this smaller community of charities, the fee just rose again.
But what if a group most recently raised $10,000? Now the answer should be yes. The charity will get some exposure and will net $1,000.
The problem is that charity pledge results vary widely from year to year. Until we gathered pledge results from across the nation (and we now have them as far back as 2003), no one realized quite how stunningly these results do vary. Individual charities know their own results (if they can decipher CFC pledge reports), but they might reasonably assume the variations were particular to them. Turns out, the syndrome is widespread.
We looked at the pledge results for national charities in the 2009, 2010 and 2011 CFCs. What we discovered is that almost half of the participating charities saw their results rise or fall by 25 percent or more each year. Almost a quarter saw their results rise or fall by 50 percent each year. Here are specific numbers (click table to enlarge):
We will talk about why these swings happen in another post, but let’s return to that charity that is thinking about participating in the CFC.
As noted above, our hypothetical charity received $10,000 in the most recent CFC. Our first calculation was that the charity would net $1,000. But, what if the group saw a decline of 25 percent in the upcoming CFC? Now, the group would be asked to pay $9,000 in advance and would ultimately recover $7,500 ($10,000 X .75). The group would be out $1,500, and would be none too happy.
Of course, our charity could just as easily see its CFC donations rise 25 percent. In this more optimistic case, the group would raise $12,500 ($10,000 X 1.25) and would net $3,500. Getting better.
But charity staff are not usually in the business of placing bets. So, the volatility of the CFC will mean that groups experiencing donations a bit above the flat fee will hesitate to pay. If we ignore the many charities that see swings of 50 percent, and just stick to the more modest 25 percent figure, we can reasonably project that many groups receiving as much as $11,000 in the CFC will decline to pay a flat fee of $9,000.
The number of charities in the program just dropped some more. And to compensate for this smaller community of charities, the fee just rose again.
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