Cord Ministries International is a not-for-profit organization that handles the “back office” tasks for about 100 people and projects. These people and projects are located Czech Republic, Honduras, Israel, Africa, USA, and mostly in Thailand. One of our main jobs is to maximize the donation throughput to the people and projects we serve.
One of our main concerns is balancing the trade-offs between the many small donations and the few large donations that we process as we consider how to charge our administrative fee.
If we charge a fixed cost against each donation, say simply the total expenses of providing our services divided by the total number of donations, then a huge percentage of each of these small gifts gets eaten by the administrative charges and the large gifts have only a tiny percent going for the administrative expenses. Small gifts subsidize large gifts – that doesn’t seem right.
If we charge a fixed percentage against each donation, say the total expenses of providing our services divided by total donations, then there is a huge amount of money eaten by the administrative charges for the large gifts and the small gifts hardly contribute at all towards administrative expenses. Large gifts subsidize small gifts – that doesn’t seem right either.
Our method has evolved to be a bit of a real-world mix where we recognize that there are three primary ways donations are given:
- Electronic Fund Transfer
- Credit Card
Each method has an associated fixed cost. EFTs are the least expensive as most communication is electronic and the transaction fee is small. Checks have almost no transaction fees but human processing and postage so they come out in the middle range. Credit Cards can be very expensive and the charges are out of our control.
There are also three different donation destination categories:
Tradition has it that people are involved in non-profit and ministry work for the long term. Therefore, all wise receipting organizations focus on serving people and design their administrative funding plan focusing on people. Projects come and go and are the tools that people use to accomplish their goals. Projects are fluid and wise receipting organizations should not focus their administrative funding plan on projects. This may, or may not, be true in today’s world but the tradition is still felt in all our stake holders.
As a “Social Engineering” goal, we would like all our donors to be EFT givers as that reduces a huge portion of the administrative costs involved in the work.
So, our method is as follows:
- Take out a fixed percentage of each Credit Card donation but subsidize EFT and check donation expenses.
- Take out a fixed percentage on donations to people.
- Take out a fixed percentage on donations to projects – capped to some dollar amount.
The trick is to get the percentages and caps right.
The future is clear, one consolidated percentage for both people and projects. Each year we specifically look into what that percentage should be.