An Introduction to Fundraising Basics

Today there are more not-for-profit groups than ever.  On one hand, this is a great development - it means that as a society we are becoming more aware of a need to give to others and are even taking the necessary steps to ensure that we help others.  On the other hand, the presence of so many not-for-profits creates a unique problem - “Generosity Burnout.” 

Generosity burnout happens when individuals get so many appeals for help from large cancer societies, small animal shelters, school groups, and every possible not-for-profit group in-between, that they feel overwhelmed and are less apt to contribute anything to anyone.  Even those individuals who do want to contribute have had to cut back on who they contribute to - there are simply too many groups requesting money and only so much disposable income any one person has. 

If you are a not-for-profit, this means you must work harder to get funding.  Whereas in the past groups often did well just by asking for money or organising one big event to fundraise each year, now fundraising is big business. 

Most not-for-profit groups will find that they need to take a more organised and varied approach to fundraising in order to raise the money they need.  Most groups will need to rely on a number of efforts and money sources to meet their financial needs.

The increased competitiveness of fundraising has created a whole fundraising business.  There are consulting firms and public relations firms that will help you fundraise more effectively - for a price, of course.  There are also many companies that will help you fundraise by selling their products in exchange for a share in the profits. 

There are software apps and programs and even paid workshops available to help you learn how to fundraise.  If you are a small not-for-profit group, however, all of these services and products can quickly add up, and if you are looking for effective fundraising ideas, chances are you are looking to make money rather than looking to spend it. 

The good news is that if your not-for-profit group has:

• Determination
• The willingness to work hard
• A real desire to succeed at fundraising, and
• Perseverance

You already have the basic groundwork for fundraising success.  All you need now are some basic tools and ideas that can help you become more effective at raising money, such as: 

• Where to turn for money
• How to tell great fundraising ideas from a poor one that will not make you money
• How to stay organised
• How to ensure that your group works together and follows through for fundraising success
• How to organise a fundraising team that will get real results
• How to use technology to make more money for your not-for-profit
• How to use the secrets of fundraising to raise more money with less hassle - each time
• How to communicate in a way that ensures more fundraising money for your organisation

Before you dive in and start learning the secrets of fundraising success, you need to make sure that you understand a few basic concepts:

What is a not-for-profit?

Many people who first begin fundraising do not always know what a not-for-profit is, and many groups assume that it does not matter whether their organisation is a not-for-profit or not. 

However, how much money you make and how you are able to use that money is determined largely by your organisational structure.  A not-for-profit group is simply a group that is designed for a charitable purpose; no money that the group makes is used for the gain of individuals. 

Rather, a not-for-profit uses its earnings to further its goals.  Groups such as the Salvation Army, as well as groups such as the Scouts, hospitals, and most universities are not-for-profit groups.  There are also many smaller not-for-profits such as animal shelters, human rights organisations, and women’s shelters.  In most cases, these groups try to make the world a better place in some way.

In Australia, the different types of not-for-profit legal structures include:

• Unincorporated association
• Incorporated association
• Company
• Cooperative
• Indigenous corporation
• Trust

 If you’re based outside of Australia, you’ll need to research the types of legal structures most suitable for your cause.

 When setting up a not-for-profit, it is important to choose an appropriate legal structure, as it will affect: 

• The way you hold meetings
• The minimum number of members
• Reporting requirements
• Tax obligations
• Cost and other considerations

 There are responsibilities that go with each structure. The legal structure will affect many things, such as legal identity (whether it can be sued), it’s governance structure (who makes what type of decisions), where it operates, who is liable for debts, and specific responsibilities such as reporting and compliance obligations.

Many groups such as sports clubs start as unincorporated associations. This is a group of people who agree to act together as an organisation and form an association. This group can remain informal, and members make rules, known as a constitution, on how the group is managed. An unincorporated association is an entity under tax law, and treated as a company for income tax purposes.

An incorporated association is a separate legal entity from its members, and is incorporated under the state or territory legislation in which they operate. An incorporated association can continue regardless of membership changes, and provides financial protection by limiting personal liability to outstanding membership or subscription fees. As legislation varies from state to state, you should visit the relevant website of your state or territory authority to learn more about the requirements.

Companies registered under the Corporations Act 2001 (administered by ASIC) are excluded from some reporting obligations if the charity is registered with the Australian Charities and Not-for-profits Commission (ACNC).

Cooperative entities exist only for the benefit of its members. This is only a suitable not-for-profit legal structure if it has rules to prevent surpluses or profits being distributed to members.

Aboriginal and Torres Strait Islander organisations can apply to be registered as a separate legal entity with the Office of the Registrar of Indigenous Corporations (ORIC). Similar to a cooperative, this is only suitable as a not-for-profit legal structure if they have rules to prevent surpluses or profits being distributed to members.

A Trust is an obligation imposed on a person or other entity to hold property for the benefit of beneficiaries or for a particular purpose. In legal terms, a trust is a relationship, not a legal entity. Trusts are widely used for investment and business purposes, as well as the advancement of a charitable purpose. They should only be considered with legal advice.

Before making a decision on which structure is most suitable, you may want to seek professional advice. It is important that you don’t advertise or claim to be a not-for-profit unless you are officially registered. To advertise or promote your organisation as a charity, you must be registered as a charitable organisation with the ACNC.

It is hard to overstate how important this step is.  If you have not yet officially registered as a not-for-profit group, you should start the procedure of doing so.  

Even if your group is new, small or has modest plans for improving society, you may wish to consider registering, as this can affect how you raise money.  Groups which are officially not-for-profit groups are eligible for additional funds that other groups simply do not have access to.  That is why you need to register your group before you begin fundraising in earnest.

In our next blog, we'll talk about what fundraising is, and why it's important.