Put My Money Where Your Cause Is: A Study of the Effect of Nonprofit Organizational Funding Models on Donor Preferences

Abstract

Within the nonprofit sector, donation-reliant nonprofit organizations (NPOs) must continually search for ways to increase the revenues that not only fund their programs, but also their organizational infrastructures. This poses a significant challenge as donors are becoming more sophisticated and selective regarding where they place their donations. Therefore, in an attempt to attract funds, certain NPOs have begun to use a 100% to program donation model where 100% of donations from the public (i.e., non-governmental and non-institutional donations) are funneled to programs affecting the organization’s cause, and operating expenses are covered by non-public donations. This thesis aims to fill a gap in the literature by addressing the effect that a 100% to program model has on donor perceptions in terms of likeliness to donate, hypothetical donation amount, and perceived management competence. Both high- and low-efficiency environments are examined in order to take into account the impact of administrative efficiency on donor perceptions. Two-sample t-tests and a linear regression model were used to assess the effect that a 100% to program model has on donor perceptions. The results of this study suggest that, broadly speaking, a 100% to program model is largely ineffective in enhancing donor perceptions of a NPO, especially when used by a low-efficiency NPO. There may, however, be some advantage of having a 100% to program model in a high-efficiency NPO. The results of this study are applicable to any of the one-quarter to one-half million donation-reliant NPOs in the United States who might consider implementing a 100% to program model.