Study: Donors Want Better Impact Reporting and It's Making Fundraising Harder

Fundraising is hard—and it's only getting harder.

That's according to the latest "Nonprofit Pulse," a survey from accounting firm Marks Paneth. The study, which includes responses from 114 CEOs, executive directors and other high-ranking officers at nonprofits with annual budgets between $10 million and $200 million, examined how donor demand for better impact reporting—or social return on investment (SROI)—is affecting the nonprofit sector.

The findings?

Almost half of respondents (47 percent) said greater emphasis on SROI has made it "challenging" or "extremely challenging" to raise funds. And while the majority of leaders surveyed (53 percent) said accurate SROI reporting is possible, 68 percent said they plan within the next three years to change the way they measure SROI to better meet donors' reporting needs.

It's an issue we've explored before, most recently in our "80 Nonprofit Trends for 2016" roundup, where the top issue listed in the "Big Ideas" section examined SROI. Said Timothy Phillips, general counsel for American Cancer Society (emphasis ours):

[Mark] Zuckerberg’s latest foray into philanthropy should not be surprising. There are 
already tens of billions of dollars held by the nation’s donor-advised funds, “invested” by the nation’s wealthy. In fact, an analysis of the top charities by size demonstrates the incredible growth in these entities’ assets since 2006. This trend for the sector is a challenge and an opportunity. The donor investing community is attracted to what the funds offer: current charitable contribution tax treatment coupled with the ability to “invest” the charitable distribution over time. However, the ultimate end-user—the mission-based organization creating the desired impact—may not receive the funding for an extended period of time.

The challenge and the opportunity, as I see it, is to bridge the divide between the donor-investor and the mission he or she wants to fund. And in 2016, charitable organizations will have to sharpen their focus on the social return on investment their organizations deliver, so they can provide donor-investors with meaningful impact statements that will accelerate charitable investments in their missions.

Phillips was talking specifically about donor-advised funds from big-time philanthropists, but it's clear that the trend is spilling over into the donor community at large. "Nonprofits are realizing that it’s no longer enough to say, 'We do a good job; trust us,'" Pamela Barden, fundraising consultant and regular NonProfit PRO contributor, told us for that story. "... Fundraisers will need to use almost everything they get to tell the story and show impact, realizing impact isn’t something you demonstrate once in a while—instead it must be continual."

The good news? Nonprofit leaders indicated in the survey that 19 percent of their donor-bases allow a portion of their gifts to be allocated toward outcome measurement. And just 4 percent of respondents said that donor expectations for SROI reporting were unreasonable.

It's encouraging that nonprofits have recognized the shift and are working to address it—and perhaps more encouraging that nearly a fifth of donors recognize that impact reporting requires some give on their part. Meeting the demand for better, more comprehensive SROI reporting will require further commitment from both sides, but it's a start.

“While the call by donors for more insight into the impact of their giving raises new expectations, nonprofit leaders sit on the same side of the table as their donors and are eager to supply the metrics they are requesting,” Michael McNee, CPA, partner-in-charge of the Nonprofit and Government Group at Marks Paneth, said in a press release. “In fact, nonprofit leaders exhibit a ‘can-do’ approach to the increasing importance of providing impact results."