Accountability and reporting: “Should charity only propagate success stories?”
What effect has extended reporting of taken project risks by charity organizations on private donors in The Netherlands?
Henriette Schoonhoven 12015768
Thesis supervisor Helena Kloosterman 14 August 2021
23667 Words
MSc Accountancy & Control Control
EBEC code: 20201023111051
Faculty of Economics and Business, University of Amsterdam
Statement of Originality
This document is written by student Henriëtte Schoonhoven who declares to take full responsibility for the contents of this document.
I declare that the text and the work presented in this document is original and that no sources other than those mentioned in the text and its references have been used in creating it.
The Faculty of Economics and Business is responsible solely for the supervision of completion of the work, not for the contents.
___________________________________________________________________________
Abstract
During the last few years charity organizations in The Netherlands are suffering from a loss of donors, partly due to scandals (Marketingtribune.nl, 2018). Apart from having less budget available for projects or even being forced to cut down on projects, losing donors also forces organizations to minimize costs of overhead to conform to directives established by oversight
bodies such as CBF e.g. who require organizations, depending on their size, to spend a certain percentage of their overall budget to projects. (CBF, 2020).
Important characteristics with donors are trust, social commitment and loyalty. Trust built from the past could easily get lost and causes organizations to be careful with their communications (Prakash & Gugerty, 2010). Hyndman and McConville are suggesting (2018, p. 227) that non-governmental organizations, through ‘a wide range of mechanisms often highly tailored to particular stakeholders’ perceived information needs, can develop, maintain and restore trust.’
From thus we can conclude that being more transparent might improve trust and commitment amongst donors but however, could also be chastised by restraining funds to organizations who report failures.
This paper seeks to investigate whether charity organizations can improve their accountability reporting by informing donors on how their projects are performing from a financial point of view. Through an internet survey amongst existing donors and individuals who claimed to be non-givers, we measured how such performance reports would affect donations to charities.
Index
1 Introduction ... 1
2 Theory ... 4
2.1 Basics of donating ... 4
2.1.1 Funding of charity organizations in The Netherlands ... 4
2.1.2 Shifts in funding ... 5
2.2 Accountability, reporting and self-regulation ... 7
2.2.1 Legal Reporting Obligations ... 8
2.2.2 Self-regulation and accountability to stakeholders ... 8
2.2.3 Performance assessment and evaluation ... 10
2.3 Accountability to governments ... 12
2.4 Conclusion to accountability ... 13
2.5 Giving ... 14
2.5.1 Giving behaviour ... 14
2.5.2 Reputation ... 15
2.5.3 Donor characteristics ... 17
2.5.3.1 Who are the givers? ... 17
2.5.3.2 Objective demographic donor characteristics ... 18
2.5.3.3 Subjective donor characteristics ... 18
2.5.4 Tactics: ‘C’est le ton qui fait la musique’ ... 20
2.5.5 Mental accounting/tangibility of costs and impact/possessions ... 21
2.6 Limitations to giving ... 24
2.7 Donor responses on performances regarding efficiency ... 26
3 Research and hypothesis ... 29
3.1 Survey ... 29
3.1.1 Set up ... 29
3.1.2 Treatment groups ... 29
3.1.3 Additional questions ... 32
3.2 Testing Variables ... 33
3.2.1 Introduction ... 33
3.2.2 Donating ... 33
3.2.3 Number and amount of new donations ... 33
3.2.4 ‘No treatment’ and ‘treatment’ groups ... 35
3.2.5 Demographic data ... 35
3.2.6 Other data ... 36
3.2.7 No givers, non-regular givers and regular givers ... 36
3.3. Pretesting ... 37
3.4 Final test ... 38
3.5 Final sample ... 38
4. Results ... 41
4.1 Initial results for the overall sample and (no) donor groups ... 41
4.2. Hypothesis testing ... 47
4.3 Robustness checks ... 51
5 Conclusion ... 52
6 Appendices ... 62
Appendix 1: Comparison of Dutch Ngo’s by Year of Founding and Income in € ... 62
Appendix 2: 2017 Average Total Income and Spending by Income Group per annum ... 62
Appendix 3: 2010-2017 Source of Funding by Income Group in millions ... 63
Appendix 4: Change in Funding Source throughout the years 2010-2017 ... 63
Appendix 5: 2010-2017 Overall change in Funding ... 64
Appendix 6: 2010-2017 Income group per annum by Funding Source ... 64
Appendix 7: Top 25 of Dutch NGO’s ... 65
Table 1a Survey in Dutch (for English see table 1b) ... 66
Table 1b Survey in English ... 71
Table 2a Net income by gender and age ... 77
Table 2b Net income by age and gender for four treatment groups ... 78
Table 2c Net income by age and by no treatment and treatment ... 79
Table 3a1 Descriptive statistics Overall sample ... 80
Table 3a2 Descriptive statistics by donor group ... 80
Table 3a3 Descriptive statistics ... 80
Table 3b1 Normality test overall sample ... 80
Table 3b2 Normality test by type of donor ... 81
Table 4a Descriptive statistics n = 205 for variable TotalAmountNewDonations ... 81
Table 4b Normality test for TotalAmountNewDonationsqrt by donortype n = 205 ... 81
Table 4c Descriptive statistics n = 205 for variable TotalAmountNewDonationsqrt ... 81
Table 5 Descriptive statistics and Correlations (n = 205) ... 82
Table 6 T-test (n = 205) ... 83
Table 7 OLS regressions by type of donor ... 84
Table 8 Old vs. new donations by type of donor and group ... 85
1 Introduction
In most countries, not-for-profit organizations are often charity organizations which have been founded to help those who are in need or to render services to the community which are not provided by other organizations, because it is not interesting from a commercial point of view. These organizations often depend on governmental, business or public gifts and they must spend their resources to accomplish their founding purpose, preventing individuals or groups from taking advantage of funds.
Donating money involves risk for the donor, in that the charity organization is not attributing its resources to the desired goal or even worse, when resources go missing. Where private companies need to account for their profits to shareholders, ngo’s do not have
shareholders and they also lack profits. From this point of view, the ngo’s donors might be considered as the ‘shareholders’ requesting for accountability and the services these
organizations are rendering to beneficiaries as the ‘products’ they are selling. Sometimes, the donor is also one of its customers e.g., when someone donates to their church or sports club.
Actually, donors could always be regarded as ‘customers’ considering that a ngo meets to the giving ‘need’ of a donor. Because of the unique character of most ngo’s, there is a lack of competition in absence of the comparability amongst services. As there is also no price competition, donors are free to decide how much to give whereas the value of a service rendered by donors depends upon the reputation of a ngo.
Under certain circumstances there exists however, competition between charities (Reinstein, 2006). The competition seems to be larger when categories within the same sector, such as animal protection, health, international relief & human rights, environment, art &
culture, welfare, education & science and religion & humanism, are being served (Mayer, Davis, & Schoorman, 1995) (Ek, 2017). But the sector within itself also cooperates with other ngo’s, thus having incentives to protect its reputation.
Due to scandals but also to social behaviour, ties between donors and these institutions have been changing throughout the years, putting the trustworthiness of the sector at stake. As a response, worldwide charity-organizations have put themselves to self-imposed
accountability (Cordery, Sim, & van Zijl, 2017). During the past few years, supervisors and regulators have advised their organizations with more guidelines regarding risk.
According to Morgan and Hunt (1994, p. 34) a relationship can develop towards more trust and commitment when attention is given to: ‘superiority of alternative partners, high
expectations, market intelligence and evaluations of the partner’s performance and finally, avoiding malevolently taking advantage of their partners’.
From this we can conclude that being more transparent might improve trust and commitment but however, could also be chastised by restraining funds to organizations who are reporting failures or who are not meeting expectations from donors.
With several organizations it is possible to support a child, for which in several cases a monthly fixed amount of 30 euros is being asked by some Christian organizations like Woord en Daad and World Vision. (Woord en Daad, 2021) (World Vision, 2021). With World Vision the donor receives the child’s photograph and on a regular basis, personal information from the child. However, little is known of how much of the 30 euros is being spent to the child itself in form of school support, family support and community support benefitting the child. When sponsors learn it isn’t as much as expected, it could crush a bubble.
During the years 2004-2016 auditor PwC organized in the Netherlands ‘De Transparant Prijs’ to help charity improve their reporting (PWC.nl, 2017). Between 84 organizations who took part in 2004, up to about 200 organizations on a yearly basis, listed for the prize with winners in six categories, which resulted into one overall winner.
Nowadays, many charity organizations in the Netherlands, like KWF (cancer research), Oxfam, Cliniclowns (clowns performing for ill and disabled children) and some other world-wide known charities like World Vision (supporting children and their families) have their annual reports available on the internet, which gives us an insight of how they are reporting to stakeholders. From a financial point of view, the actual numbers in which mainly larger stakeholders like the government, banks, some donors and collaborating ngo’s take a vest in, are often to be found near the end of the report. In fact, most accountability
information regarding compliance, financial data and risks are commonly to be found near the end of many annual reports.
Earlier, in their public management letter of December 2012 to all Dutch charity organizations, the NBA (Koninklijke Nederlandse Beroepsorganisatie van Accountants), the Dutch professional organization of auditors (NBA, 2012), advocated for a more socially committed role for auditors, as they stated that achieved goals are as important as the financial part of the annual report. According to their management letter, auditors are only responsible for the latter in contrast to what stakeholders seem to expect from them (p. 14).
Upon reviewing some annual reports, certain charity organizations inform
stakeholders about their projects in which they often mention how many people have been helped (Novib, Oxfam Novib Annual Report 2018-2019, 2019, p. 7), how many complaints
were sent to Rabobank for investments in the polluting livestock industry (Greenpeace, 2019, p. 8) and how many research proposals were done (KWF, 2019, p. 8).
The main part of annual reports promotes largely the projects ngo’s are involved in, but projects are lacking timeliness, do not inform of how many aid workers, hours and money were involved and which obstacles (project risks) were overcome by new insights.
This paper seeks to investigate whether charity organizations can improve their accountability reporting by taking on and propagating more transparency in terms of communicating organizational and project risks and how well that will fare with private donors.
Firstly, we will discuss some basic theories involving trust, accountability,
stakeholders and institutionalism. Then we will give some clarity regarding the amounts of funds that ngo’s have at their disposal and in addition, answering some fundamental questions as: who are the donors? This evolves into the matter of a charity’s accountability to
stakeholders from which we will show how some mechanisms are influential to how ngo’s report to certain stakeholders.
As it was our intention to study the behaviour of private donors, we went into human giving behaviour to be able to set up an online survey by asking questions to donors regarding their giving behaviour and by showing them examples of text and analytical reports stating the overall organizations’ efficiency and a statement with project performances with additional explanation, which will also show lesser than usual performance.
The survey took place in the Netherlands as the Dutch are known for their history in giving behaviour, ranking high in giving rates. The Netherlands is a small country with a dense population of over 17 million inhabitants that has a major cultural background of
protestant Christians with Catholics in minority, which has been changing since a few decades due to secularization and second and third generations of Muslim immigrants who arrived in the last three decades of the former century.
Being a small country means everybody has access to, or picks up through work relations or communities, the same information from media such as tv, radio and newspapers.
By the early presence of some organized oversight bodies in the charity sector, the Netherlands may also be considered as an example to shed a light on the changing
mechanisms regarding accountability, which has evolved throughout the years as a result of the financial crisis starting from 2002 and the governmental cuts on ngo’s, from the last decade.
In the fourth paragraph we will explain the results of our survey and in the fifth part you will find the conclusion to our research.
2 Theory
2.1 Basics of donating
This paper is based upon the theories of accountability, stakeholder, trust, institutionalism and risk. It investigates how much faith donors have in an organization in such a way that they entrust it with some of their resources e.g., time, money or goods.
Being held accountable means there are different ways of reporting to stakeholders, including to the organization itself, from an ethic point of view (Ebrahim, 2003). This paper also
analyses how different stakeholders, donors in particular, are exerting pressure on charities.
The stakeholder theory encompasses the disclosure of specific types of information which can be used to gain or maintain the support of particular groups. In this paper we will also go into how charity organizations communicate and disclose information to donors and the methods that are being used.
Trust is the will of accepting vulnerability in which we can consider the risk as being the vulnerability that, in spite of an organizations’ good intentions, private donors do not get what they had envisioned. Givers most likely do not have access to inside information and need to rely on the information that charities are providing the public with, which may cause givers to limit their donations.
Risk is generally considered as the possibility that something bad might happen.
While many donors do enjoy giving as an act on itself, they also might consider that a monetary gift cannot solely go to relief, as a charity needs to be managed and promoted.
Apart from the necessary administration and fundraising costs, funds could get lost into bad performing projects or disappear into the pockets of shifty managers.
The relation between risk and trust was made more distinctively by Mayer, Davis and Schoorman (1995), by indicating how much risk the trustor is willing to take being
dependable upon the trustor’s ability, benevolence and integrity. In addition, Bohnet and Zeckhauser (2004) found that untrustworthiness is punished differently, which is dependable of how it was caused: by accidental or intentional harm (p. 480).
Finally, the processes from which charity organizations have established themselves in society and how they are communicating with donors is referred to as institutional work.
2.1.1 Funding of charity organizations in The Netherlands
How charity and the funding of ngo’s has evolved during more than seven decades could be illustrated by studying charity in the Netherlands.
Traditionally, The Netherlands has had a long history of charity which originated from the church and local city governments to help the poor (Pegtel, 2003). Appendix 1 of this paper represents roughly the founding year of charity organizations and the income these generate nowadays.
In addition, in the Netherlands with its colonial history (Indonesia claimed its independency in 1945, only to be confirmed by the Netherlands in 1949), new views on development aid evolved after 1950, with the Dutch government as a main funder (O'Dwyer
& Boomsma, 2015).
In the literature of O’Dwyer and Boomsma we find an overview of the founding schemes that the Dutch government has developed for ngo’s since 1965 (p. 47). During decades, the public and other organizations also contributed fair sums of amounts to the public good. The total Dutch ODA (official development assistance) for official and private flows amounted 5,29 billion US dollars for 2019 (OECD, 2019).
2.1.2 Shifts in funding
Starting from 2010 after the financial crisis, the Dutch government was retreating from funding ngo’s, which forced ngo’s to find ways to compensate for the loss of funds. During the years 2003-2010 the Dutch government donated 770 million euros on a yearly basis to ngo’s, which declined to 600 million euros between 2011 and 2015 and to 350 million euros in 2016, a decline of over 50 % (Schulpen, 2016). It would be interesting to know whether a shift in funders and the shift in funding amounts has an impact on accountability within ngo’s, like the Dutch saying: ‘wie betaalt bepaalt’ which translates as: ‘who pays decides’, which was often used from financials related to auditors’ independency.
Schulpen en Van Kempen (2020) were able to draw data from the CBF and combined it with data from missing ngo’s from whom they knew received funds from the Dutch
government. This resulted into a report with data from 366 ngo’s generating a yearly funds of almost 2,3 billion euros in 2017 (p. 10). In their report, they analysed data from these
organisations for the period of 1950-2010, in addition to more detailed financial data for the years 2010-2017 (Schulpen & van Kempen, Publicaties, 2020). They differentiate between 5 categories (Income Group) based on revenues: > 10 million, > 3 million, > 0,5 million, > 0,1 million, < 0,1 million. About 42 organizations categorize for > 10 million (see appendix 2).
From the numbers it can be derived that during 2010-2017 most organizations in the first category of over 10 million receive lesser funds from the Dutch government (see
appendices 5 and 6). Roughly, the category of over 3 million seems, however, to receive more funds from the Dutch government (p. 14). According to the authors there appears not to be some consistency from the side of the government or the indication that maybe some
organizations are better in bringing in funds. But they do emphasize this study is only a first approach (p. 17).
Overall, it can be said that although the first category receives lesser amounts, it still involves distinctively amounts of money. On page 15 there is a top list with 34 most funds receiving organizations (see appendix 7) with a top 3 involving Cordaid (130 million euros) (Cordaid, 2017), Oxam Novib (195 million euros) (Novib, 2018) and Artsen zonder Grenzen (Médecins Sans Frontières) (81 million euro in NL, 280 million euro overall) (Artsen zonder Grenzen, 2017), although the ranking is somewhat unclear as it seems that for an international organization like Artsen zonder Grenzen also funds from outside the Netherlands was
included.
In 2017 (financial year 2017-2018) Oxfam Novib received governmental subsidies of 81 million euros, which is 81/195 x 100 % = 41,5 % of the budget. During 2010-2017 the first category of ngo’s received 82 % of the overall available government funds. The other 18 % went mainly to the ngo’s that are categorized from 0,5 to 3 million euros. Only 0,01 % from the government budget went to ngo’s < 0,1 million euros.
After 2011 ngo’s succeeded in generating their own funds (p.13) (see appendix 5) which means that the percentages of governmental subsidies in relation to the total funds declined for the first category (> 10 million euros), but that still for the second category (<
10 million euros) the percentages of governmental subsidies in relation to total funds was increased.
The percentage of government subsidies for the larger ngo’s from the first and second categories (> 3 million euros) is slightly above 40 % (p. 12). For the ngo’s < 3 million euros the percentage drops below 30 % and for the ngo’s < 0,5 million euro the percentage is below or around 5 %. And only 1 to 5 of these smaller organizations receives a subsidy from the government.
In the knowledge that organizations have succeeded in generating more additional funds next to the occasional government subsidies, it would be interesting to understand how they have succeeded. Did they work together? Did the CBF help? Did it have to do with the
economic climate, although there was an economic downfall to 2016. In one of the next subjects more clarity is given to the ‘who gives matters’ and how ngo’s are collecting funds.
As it is evident that organizations from the second category (< 10 million euros) are receiving more governmental funds, will this have effects on their accountability? To be eligible for a subsidy, organizations need to meet to certain demands from the government. To understand what type of demands there are, the accountability of ngo’s and how this has been developed throughout the years is examined.
Next to the government as a funder to ngo’s, there are also companies promoting and collaborating with ngo’s, as for the ngo’s themselves they are also collaborating with each other, such as outsourcing scientific research by health charities from which more than one health ngo could benefit by finding insightful results in health care.
Besides this, since 1989 there also exists some lotteries, like the ‘Nationale Postcode Loterij’ (based on zip code), ‘Bankgiro Loterij’ (based on bank account number) and
‘Vriendenloterij’. These three lotteries are part of ‘Holding Nationale Goede Doelen
Loterijen’ and claim to donate at least 40 % of their net income to charity organizations. All three lotteries and Holding Nationale Goede Doelen Loterijen own the ANBI status (which will be explained in paragraph 2.2.1) and in 2019, they donated 523 million to over 100 charities (Holding Nationale Goede Doelen Loterijen, 2021).
2.2 Accountability, reporting and self-regulation
The obligation to explain, justify, and take responsibility for one’s actions is called accountability. Because charities are wired to service the needy as much as possible, all efforts are directed into taking actions, which seems to be the core of the business, including actions to raise as much as possible funds to feed the action process.
With certain charities, especially in the development countries it is hard to measure the outcome of all efforts. That is to say, that it is hard to find standards that can precisely
‘calculate’ the outcome, caused by lack of manpower or both manpower and money as investing in controls and measurements would draw away the resources from the needy.
From a donors’ point of view some controls or accountability, however, need to take place to safeguard the proper use of their resources for relief. Kearns (1994) points out to four possible internal responses to external controls, two of which he considers tactical
(compliance and negotiated) and two strategic (professional/discretionary and anticipatory).
Ebrahim distinguishes five accountability mechanisms (Ebrahim, 2003) where ‘reports and disclosure statements, performance assessments and evaluation’ could be considered as
tools and ‘participation and self-regulation’ as processes, where ‘social audits’ are combining both.
To understand where accountability to private donors stands nowadays, we discuss in the following paragraphs how accountability has evolved throughout the years and the mechanism that enabled stakeholders to influence or even impose accountability on ngo’s.
2.2.1 Legal Reporting Obligations
Different from some other countries like in the USA where ngo’s need to fill out an extended form, there are no extended reporting rules in The Netherlands. Where commercial
organizations need to fill out an income tax form and make their balance sheet public by submitting to the Kamer van Koophandel (Chamber of Commerce), none of these exist for a foundation in the Netherlands.
As donations to a foundation were eligible for tax-deductions, Dutch authorities always had to rely on the filled out amounts by the tax payer. During the last two decades, things have slightly changed. Since 2008, under certain rules organizations can apply for an ANBI (Algemeen Nut Beogende Instelling) status if they service a ‘common interest.
Being an ANBI provides tax deductions for the donors only if an ANBI does not sell a service (like raffle tickets), but also foresees in the liability to publicizing on the foundations’ website some additional data regarding the foundation, the balance sheet and income, in case the tax authorities wish to check certain numbers regarding fees, income etc. (Belastingdienst, Gegevens van een ANBI publiceren op internet, n.d.). When a foundation develops certain economic activities tax authorities will ask to fill out a corporate tax form. (Belastingdienst, Wanneer moet een stichting, vereniging of vergelijkbare organisatie aangifte doen?, n.d.) 2.2.2 Self-regulation and accountability to stakeholders
Providing stakeholders with only a short income statement may work for a small local organization, but a larger organization with many different stakeholders would need more extended reporting for the simple fact these would request for some form of accountability.
To improve the quality and the usefulness of external reporting, in 1981 the foundation Raad voor de Jaarverslaggeving (Advisory Board for Annual reporting) was founded by a few important interest groups, mainly representing employers, employees and auditors.
With the yearly new standards and improvements for reporting, they developed the RJ640 model for non-profit foundations and the more extended RJ650 for non-profit fundraising
organizations, which has improved reporting substantially. The ‘RJ’ reporting is not
obligatory but is stated as a recommendation in the Dutch law. For reasons of comparability, it occurs that a category of organizations has made the use of the ‘RJ’ reporting obligatory.
With a history of charity which has extended during the twentieth century, a first sign of the need of some sort of oversight already evolved in the Netherlands in 1925. Several organizations initiated ‘Centraal Bureau voor Fondsenwerving’ (CBF, 2020) when they prompted for a supervisory body to the collection of money. More initiatives for collaboration were taken from the sector itself, but the CBF remained an independent supervisory body.
Nowadays, the CBF supervises about 626 fundraising charities who are generating over 80 % of the donations from private persons (CBF, 2021). They developed a logo which serves as a quality indicator for stakeholders, so that they know that their donations are not going to malicious organizations.
In 2004, Goede Doelen Nederland (former Vereniging van Filantropische Instellingen (VFI)), the association for ngo’s in the Netherlands asked economist Herman Wijffels to advise on a corporate governance code for the sector, which resulted in a 29 pages report.
(Commissie Code Goed Bestuur voor Goede Doelen, 2005). The CBF has acknowledged this
‘code Wijffels’ in July 2008 as a standard for approval when ngo’s opt to make use of the CBF quality mark (CBF, 2008).
Later on, in January 2016, the ‘erkenningsregeling Goede Doelen’ with the CBF as its supervisor, saw its light replacing older existing regulations for charity organizations (CBF, 2020), which was initiated in an arrangement between the government and the sector’s representative Samenwerkende Brancheorganisaties Filantropie (SBF).
It was issued by association ‘Goede Doelen Nederland’, in which over 190 charity institutions with more than 10,000 employees were organized, and concerned guidelines regarding
finance management and governance responsibilities in which they advise to prevent
investing in funds that would harm public trust e.g., violation of human rights, corruption and child labour. (Goede Doelen Nederland, 2020).
Fundraising foundations who wish to qualify for membership to make use of the CBF quality mark, need to meet to certain standards dependable of the yearly amount they are generating (CBF, 2020) as, in terms of costs, it makes no sense to burden small organizations with many compliance rules. In addition, for easy readability and comparability the CBF also advises to make use of the ‘RJ’ standard (p. 19).
According to Bijlage 10 of CBF Reglement en Bijlagen, the minimum requirements
100.000 euro (CBF, 2020, p. 40), encompasses an organization’s budget, policy, independent governance and transparent and audited balance sheet and profit & loss accounts. The CBF addresses in its article 3.3.4 on page 17 minimum requirements for the efficiency rate of being at least 70 percent for a period of three years, which is the percentage that is effectively spent to a charity’s purpose.
From an international point of view there’s the aid transparency index (ATI), which was set up during 2006-2013 by the small UK-based NGO ‘Publish What You Fund’, in order to influence development aid donors’ behaviour, in taking into account transparency and the quality and type of information (Honig & Weaver, 2019).
By gathering information from major worldwide aid donors such as the World bank, United Nations, Governmental agencies and the European Union (Publish What You Fund, 2021) and by examining and ranking these on a regular basis in categories as very
good/good/fair/very poor, to be published with a report, Publish What You Fund tries to convince aid donors of the importance of data and its transparency.
In addition, they also provide working papers with information on development aid in which they explain the boundaries in gathering data, the data quality and how to overcome these e.g., in Benin and Tanzania (Publish What You Fund, 2021).
Upon referring to Ebrahim’s accountability mechanisms of the former paragraph, we have discussed legal reporting and disclosure statements and forms of social audit which were included in the self-regulations of the CBF. We will now go into performance assessment and evaluation and participation.
2.2.3 Performance assessment and evaluation
When we read the annual accounts of certain ngo’s, they refer to how many wells have been dug, how many children have been vaccinated or how many aid kits were provided.
However, these numbers are not translated into financial costs as in how much the costs of a well exactly are, or the costs of a vaccine or an aid kit, or in the case of a sponsor child, how much is being spent. Organizations are asking donors for certain amounts for certain persons or products to be obtained but it remains unclear what the cost price is of certain rendered services.
To judge whether an organization has succeeded in reaching its goals and projects to justify its purpose, may not be an easy task. Upfront, organizational and project risks need to be assessed. A project involves objectives, the starting and ending date, funding limits,
resources and functional lines (Kerzner, 2009, p. 2). To be able to measure a project, expected
results need to be offset against the outcome results. It will underpin the reasons of success or failure, which can be used in the reporting to stakeholders and which can provide ngo’s with a more analytical view on projects. The latter offers organizations to evaluate and to briefly explain some involved complexity in a way of asking commitment from stakeholders.
With a focus on relief, this does not appear to happen, although some scholars
propagated in taking more effort into scientific evaluations to benefit from earlier experiences for the long run like Duflo (2004) on the Annual World Bank Conference on Development Economics. The author also points out that process evaluations are necessary but these are however, insufficient to determine program impact. It may be better to see if a project works on a small scale before rolling out over more regions or countries, which takes time but preventing from money being misspent.
These problems especially arise when there is a large distance between an ngo’s headquarters, often located in a western country, and the social workers in development countries in the south which may make it harder to engage into local projects due to social, cultural and technical circumstances. Upfront, fundraising takes place for certain projects that sounds appealing to donors, but when a project starts circumstances might demand other measures which shows from a case study of Agyemang, O’Dwyer, Unerman and Awumbila (2017). They examined upward accountability processes in Northern Ghana, West Africa, by interviewing 30 local fieldworkers on their experiences in communicating their performance to funders and how it impacts their work.
Communicating accountability existed from filling out quarterly interim disclosure reports and a yearly disclosure report. Next to financial performance, also operational performance was requested in the form of key performance indicators, like the number of clients visited or the number of women that received a micro credit. In addition to that, there was space to write a summary about narrative achievements and lessons that fieldworkers learned from the undertaken activities.
According to the fieldworkers, as it was a one-way direction to the top, it was mainly to legitimize the funders’ donations and which the ngo used it as an external control. One of the fieldworkers noted that the organization he works for required a certain number of hand- dug wells or bore holes but that a better solution for the long run would be to spend the money on a lesser number of more expensive water delivery systems.
According to Fry (1995) effective performance exists when accountability and felt responsibility are aligned. How accountability is experienced by agents depends on how far
expectations and standards. Also, the principal needs to show a real interest in the good cause and should largely be deprived from self-interest. At last, there must be a certain respect and honesty to the agent with regard to the overall accountability process.
Upon a closer view of the case study, we may conclude that there is a lack of
reciprocity in communications as the reporting mainly takes place upwards. Also, there seems to be missing a lack of interest and ngo’s appear to regard the reporting as sufficient,
overlooking the opportunity of gathering and evaluating project data and giving some feedback, direction and guidance on a project. However, from the case study it is uncovered that fieldworkers have to work around the reporting to prevent cutting funds as they do not wish to let their clients, the supported people, down.
Much closer to home we can regard some health organizations who are providing the public with information upon certain diseases and who initiate scientific research for better treatments, often working together with other healthcare organizations. Generally, it is considered that without research, human kind never discovers or uncovers information about the world surrounding us. How much spending is justified on certain research topics and how the outcomes should be regarded may be hard to explain to non-experts. On the other hand, some project data like invested hours, should not be too hard to communicate.
2.3 Accountability to governments
In their case study of Oxfam Novib O’Dwyer and Boomsma (2015) examined the construction of accountability within the relationship between government funders and development non-governmental organizations whereas the authors distinguished three mainstreams from literature: felt, adaptive and imposed accountability. What has started as a government initiative by funding Oxfam during the fifties of the previous century, became a collaboration evolving into funding schemes starting from the eighties, merging into a more adaptive accountability up to 2007, towards more governmental scrutiny with starting from 2011 the threat of imposed accountability (p. 47).
The collaborative and interactive relationship between the Dutch government and Oxfam Novib worked because Oxfam Novib succeeded in gradually improving their organization in terms of “cost consciousness, increased professionalism and enhanced ngo- cooperation” (p.1) and also became a more adaptive organization. However, politics and policies change and when from the beginning of 2001-2004 the funds were open to more ngo’s, certain accounting standards as objectivity and comparability became important, which was a change for Oxfam Novib as it shifted from adaptive to imposed accountability.
From this case study can be concluded that the Dutch government as a founder has the authority/power to demand certain standards of accountability and that certain imposed accountability rules are not always a good fit, because ngo’s can widely differ from each other. Promoting its success for instance, would work for Oxfam Novib but not for a human rights organization like Amnesty International because promoting their success would work against them as certain governments might losing their faces by giving in to Amnesty’s demands for fair trials.
However, a case study from New Zealand in how institutional work is exercised, shows a more adaptive approach which also indicates some freedom given to an ngo (Yang, Northcott, & Sinclair, 2017). A community manager from a philanthropic funder declares
‘Our [funding] recipients might achieve 60% of their outcomes and they might fail, but then it will lead to some other stuff that grows into this big, beautiful, blossoming tree that we were not expecting … I think trust is a key component. It might look risky, but it is actually not if you … do the reference checks, meet them and see what they have achieved’.
Being financially dependent on one or more larger donors is something to be taken into account as these donors might have to justify more stakes, which threatens to drive ngo’s away from their origins and to preventing to choose their own policies which is shown by a case study from Amnesty Ireland by O’Dwyer and Unerman (2008).
2.4 Conclusion to accountability
With lesser governmental stakes on ngo’s however, former paragraphs give evidence of the fact that there are existing more stakeholders like companies and other ngo’s which could be highly influential to ngo’s, of which Holding Nationale Goede Doelen Loterijen (national charity lotteries) encompassing three lotteries has become a major one. The lottery that generates most income is called the Nationale Postcode Loterij. To prevent financial dependability upon the lottery, annual reports are stating it will never finance over 50 % of the yearly revenue of a fund (Nationale Postcode Loterij, 2021, p. 19). Back in the days during the eighties and nineties the lottery had been initiated by several charities, which are now entitled to percentages of income of the first 100 million and the second 100 million euros.
How influential private donors can be may depend upon the charities itself and the type of charity that they are e.g., a health charity may attract donors with high standards of personal health, while a charity with a Christian background may attract more altruistic donors. In overall we can conclude that major donors and regular donors are welcome to a
charity as it needs a steady monetary income to create a solid basis with experienced employees to be able to achieve its goals.
2.5 Giving
2.5.1 Giving behaviour
When visiting the websites of ngo’s it shows organizations are optimizing their
communications to the public in their accountability reporting, but how much interest do private donors take in the information? From early on economists regarded an individual as a self-calculating person taking the best decisions into his own interest. To be able to do this, he must have complete information and think in a very logic and rational way, clouding out all kind of behaviour like impulsions, emotions, feelings and needs. Due to the work of Richard H. Thaler (see hereafter) and others on behavioural studies it has been acknowledged that it’s not the case.
How can we define the private persons devoting their hours, time or money to a charity ‘for free’? Which information do they need to decide an organization is trustworthy?
How much faith do they have that all of their donations will land? Which are the personal motives that they have for giving? Do they incorporate risk/some distrust in their donation?
How do they limit devoting their resources to a charity?
To be able to set up a survey, an understanding of the process of giving is needed.
Bendapudi, Singh and Bendapudi (1996) developed a framework of people's helping
behaviour with regard of charities, where they recognized the four sequential steps for giving:
perception of need, motivation, behaviour and consequences. They argue that when an ngo addresses the call for need, the recipient of the message needs to believe it. When the charity's image lacks credibility or the message itself isn’t credible enough, prospective donors may ignore the message.
According to Mayer, Davis and Schoorman (1995) organizational trust is “the
willingness of a party to be vulnerable to the actions of another party based on the expectation that the other will perform a certain action import to the trustor, irrespective of the ability to monitor or control that other party.” A donor could be viewed as the trustor party who entrusts his resources e.g., money, hours, goods to the other party, which is a charity, who will expend the resources to a predefined destination.
There is a difference between the trust that is inhabited by an individual as a personal characteristic being the ‘basic trusting attitude’ and ‘social trust’, a more general trust in mankind meaning having faith in strangers (Uslaner, 2002). Social trust comes from how a
society is organized which can be impacted by governments and institutions (Putnam, 1993) (Putnam, 2000). Bekkers (2003) addresses the differences in the trust levels of countries like The Netherlands, UK and USA and links general social trust to donations as donations are higher when the social trust of a society is higher.
Why does a donor, who might not be able to monitor or control that other party entrusts his resources to that party, whilst he receives nothing in return as it is the predefined destination, which is the eventual beneficiary? There are however, a couple of personal reasons a donor could have to do so, which will be addressed in the following paragraphs.
Before to entrust his resources to a ngo, a donor needs to trust the organization, from which we can conclude that if there is no trust, there will be no donation. How organizations can build trust will be explained in the following paragraphs.
2.5.2 Reputation
It is learnt from past research that when charity organizations fail, donors withdraw.
Examples are scandals with Foster Parents Plan, Unicef and the Catholic Church
(Marketingtribune.nl, 2018) (Foster Parents Plan: het verhaal achter het 'schandaal', 2021).
The scandals were about sexual abuse, money misappropriation by private persons or not clearly communicating certain information like (high) salaries of directors, respectively.
That reputation is an important factor was found by Schlegelmilch (1988) who investigated donations to a Scottish charity and revealed that its donors had a more positive image of the charity than non-donors, but nevertheless he also found that nearly a quarter of the donors thought that the charity did not distribute the money fairly. In such cases it is important that a charity provides the donors with better explanation of how the donations are being allocated.
Webb, Green and Brahear (2000) found that a positive image or knowledge of the charity increases monetary donations. Depending on country size and its organization, building a reputation is a major achievement for small charity organizations amongst the many already existing charities, all calling out for donors’ attention.
Peng, Kim and Deat (2019) distinguished three major factors which should drive the reputation of a non-profit organization: financial efficiency, media visibility and accreditation.
Media coverage appeared to be lesser important than financial efficiency, but nevertheless, organizations that received more attention in the media received more donations than organizations that had lesser attention, meaning that it is important to be visible.
From their survey, Penge et al. (2019) concluded that financial efficiency was much more influential than the other factors as donors appear to value that their money is being spent in the most effective way, which sounds logical as for their worry of organizations failing to addressing their resources in an appropriate way.
In addition, non-profits which were accredited appeared to be favouritised in comparison to non-accredited organizations, which would account for a certain need of individual donors having an organization being held accountable, as they are not able to press sufficient measures on a charities’ accountability. As mentioned earlier, in the Netherlands, however, financial efficiency is part of the CBF accreditation which has a minimum standard for non-profits to be accredited.
Whilst small donors appear to be almost powerless, larger donors however, such as government agencies seem to be more able to exert their influence through institutional work (O'Dwyer & Boomsma, 2015)(Yang et al., 2017). Schiff (1990) argued that when an ngo receives donations from a government agency, donors might see it as trust from the side of the government and thus regard this trust as ‘a seal of approval’ while De Wit and Bekkers claim that government funding serves more as a signal of social needs (2020) following Andreoni (1989) urging donors to do the same. Whilst it has not been proven that government spending on an organization induces giving, we can however, conclude that government funding could positively contribute to the reputation of an ngo in terms of reliability, as ngo’s are being scrutinized and held accountable by governmental organizations.
We discussed the reputation of an organization and the factors that influence its reputation, in particular when there is a rather ‘distance’ between potential donors and the organization. Firstly, trust from donors needs to be built to be able to draw resources from them. Is financial efficiency, media visibility and accreditation still as important when organizations are ‘close’ to potential donors?
From research by Meer (2011) is learnt that social networks are influential and that people who are socially connected are more likely to donate upon a solicitation from someone of their own network, which not only derives from peer pressure but also from other social motives like identification with the cause. This finding stems from the research of Kelman (1961) who studied how people form opinions through interactions with other people using conformity, identification and internalization.
Being ‘close’ to an organization results from the fact that a donor, to his own opinion, has sufficient information to consider its reputation and that the organization has passed the donor’s judgement for attributing his’/hers’ resources.
How socially embedded relationship works in entrepreneurship shows from Anderson and Miller (2003) who explored the surrounding theory and gave examples of people who were able to build their company through their use of personal networks where it is important to have strong bonds within a related group but also to have weaker bonds with other
completely different groups. In order to save marketing and advertising costs, smaller ngo’s could benefit from this insight by extending their network through the horizontal and vertical relationships from donors/members.
Organizations that are closely related to donors do not only receive more donations in money but also in time, like the membership of a religious organization such as a church or mosque of which donors realize it cannot exist without attributing their time and money.
The same holds for primary schools and sport clubs who ask parents to be actively engaging in time or sponsoring their child for charity activities. This argument stands for a lot of charities: without donors or government funding the activities charities are engaging in, cannot exist. So, the more persons are engaged in charities, the more they see and understand the importance of donations. In fact, people are establishing, developing and maintaining a
‘relationship’ with the charity.
To attract new donors, charities could engage themselves in the strategy of
‘relationship marketing’ (Morgan & Hunt, 1994) of which trust and commitment are key factors. Brennan and Brady (1999, p. 331) advocated the use of relationship marketing because of its relation to providing services and its focus on “long-term relationship, interactive marketing, quality of interactions, managing the ‘customer’ base through direct approach, real-time ‘customer feedback systems, interface of substantial strategic importance and internal marketing of substantial strategic importance to success.” Karlan and Wood (2017) investigated direct marketing solicitations to prior donors in which the ‘standard qualitative story of an individual beneficiary’ is explained. They found that larger private donors were more likely to give and higher amounts and that smaller private donors were less likely to give.
2.5.3 Donor characteristics 2.5.3.1 Who are the givers?
Since the eighties of the former century, there has been extended research to find the characteristics of the persons that entrust their resources to charities being it important for ngo’s to know where to find and how to address possible donors to effectively expend their
marketing budget. Researchers have tested on more or less ‘observable’ parameters to distinct between different groups of people, such as gender, income, education, family size, life-cycle stage, visiting religious services in an effort to predict donating behaviour.
2.5.3.2 Objective demographic donor characteristics
Andreoni, Brown and Rischal (2003) investigated charitable giving by married couples in the United States. Women tend to give more and to a wider variety of charities by giving lesser to each, while men tend to give more to a charity than women, but prefer to give to a smaller selection of charities than women, when the decision power lies with either one of the
spouses. When spouses start bargaining in their intention to decide together, charities receive 6 % lesser. Men are also more likely to decide what is given to charities when they have a higher income or higher education.
De Wit and Bekkers (2016) found similar results on the giving behaviour of women in the Netherlands but found no indication why it is different to the giving behaviour of men.
Interestingly, 80 % of the couples in the Netherlands decide together, whereas only a slight majority of the married couples in the United States decide on charitable giving (Wiepking &
Bekkers, 2010) (Rooney, Brown, & Mesch, 2007). Earlier, Bekkers (2003) discovered that people who are more religious, work more hours and earn higher incomes and living in smaller communities tend to give more.
2.5.3.3 Subjective donor characteristics
More extended research beyond observable characteristics came from research on human behaviour, which addresses human social behaviour to formulated plans, which resulted in the theory of planned behaviour (Ajzen, 1985, 1991).
According to Ajzen, these formulated plans may be daily routine actions like getting up, make breakfast and take the car to drive to work. Each action consists out of tasks which also could be more than less routine, like planning a vacation abroad by car. The outcome of these tasks is the intention to display certain behaviour. The tasks each individual performs, is based upon attitude, subjective norms and perceived behavioural control in which: 1) attitude is how the individual perceives the action 2) subjective norms are norms generalized by others which impact the behaviour of the individual, more known as social pressure and finally 3) how the individual perceives the control he/she has over the action.
Smith and McSweeney (2007) used earlier investigation by Armitage and Conner (2001) who addressed the component ‘norm’ as a weak predictor for intentions, due to the
wide definition of norms and poor measurement, for a revised theory of planned behaviour by dividing the subjective norms into injunctive norms, descriptive norms and moral norms.
They derived the injunctive and descriptive norms from the work from Cialdini, Reno and Kallgren (1990) and Reno, Cialdini and Kallgren (1993). An injunctive norm is behaviour displayed under pressure of distinctive peers who influence the performance because the individual wishes to conform to their standards. A descriptive norm is to be considered as a norm that is perceived by the individual whether others also perform the same behaviour.
Moral norms however, are norms which are inhabited by an individual because he/she feels responsible (Parker, Manstead, & Stradling, 1995).
Based upon work from other researchers regarding past behaviour, Smith and McSweeney (2007) found special evidence in the field of charity by the research from Lee, Piliavin and Call (1999) where past behaviour was indicative of performing the action again which is to be considered as a development of attitude and a form of self-concept: the control one has over the action.
Which specific subjective characteristics are needed that explain why an individual gives to charity, has been investigated by several researchers during the past twenty years.
Kahneman (2003) defined system I decisions characterized by emotional, fast, effortless and automatic decisions and system II characterized by neutral, slow, effortful and controlled decisions whereas system I would originate from intuition and perception and system II from reasoning.
In their literature review of giving to philanthropy Bekkers and Wiepking (2011) recognized eight giving mechanisms: “awareness of need, solicitation, costs and benefits, altruism, reputation, psychological benefits, values and efficacy.” We would rather like to consider ‘awareness of need’ and ‘solicitation’ as the tactic a charity can deploy to elicit donations and would therefore concentrate more on the characteristics inhabited by donors regarding their giving behaviour, which include the remaining mechanisms: altruism, reputation, psychological benefits, values and efficacy.
James (2017) states that “giving depends upon the tangibility of a gift’s impact on altruism (direct or code), reciprocity (transactional or friendship) and possessions relative to its alternatives which translates into the subcomponents: direct altruism, code altruism, transactional reciprocity, friendship reciprocity, possessions and relative to its alternatives.”
He distinguishes altruism into direct altruism and code altruism. In behaviour that displays code altruism the potential for reciprocity seems absent and stems from an internal principle,
which may be derived from e.g., religion, upbringing, group behaviour. With direct altruism the significance of the gift, the tangibility, is important to the donor.
The donor expects some recognition in form of compensation with transactional reciprocity, which may not be blatantly visible and which is at marginal costs. This may be e.g., access to a board of donors, ticket to a (sponsored) concert or raffle tickets. With friendship reciprocity, the qualities a donor inhabits are expressed as a potential partner for friendship for e.g., the gifts of university alumni in the United States, a sponsor run for gifts, visiting church members in a hospital by other church members. The tangibility of the costs is important when we speak of possessions as donors offset the costs against the feelings of altruism or reciprocity being the tangibility of the donation which could be judged very differently by each donor. Simply postponing the decision to give to a charity is what is considered as relative to its alternatives, which in fact leads to not giving at all, avoiding the negative social consequences of just saying blatantly ‘no’.
2.5.4 Tactics: ‘C’est le ton qui fait la musique’
Knowing the donors’ objective and subjective characteristics is very important to an ngo, as it may better be able targeting donations from potential and existing donors by providing better service (information) tailored to their needs which also entails the tactics, the means of how this information is communicated. An example is the time around Christmas and Ramadan when Christians and Muslims do their donations, which may be a suitable time for a charity to call upon their giving (Faraz & Danish, 2019) which is based upon code altruism. To satisfy the needs of this group of people the message needs to be packed in such a way that it fulfils their specific giving expectations by addressing feelings of sentiment and emotion.
Improving services to customers comes from relationship marketing which originates from MacNeil (1980) who considers that a ‘relational contract depends on the collective adherence to the usual norms of relational exchange’ where the mutuality of interest should be equal or the relationship becomes damaged. Where at that time sales efforts were aimed at attracting new customers, Berry (1983) emphasized the long-term relationship with existing customers which may be more fruitfully. Attracting new customers is more expensive for its higher sales efforts than servicing and maintaining existing customers who are already known by an organization.
As many charities have problems retaining their donors, Sargeant (2001) promoted providing better service to donors by encouraging donors to engage into a mutual relationship instead of an ‘intrusion’ way into an ‘inviting’ relationship where the donor can decide how
he wishes the relationship to be formed. Berry (2002) distinguishes five forms: core service strategy, relationship customization, service augmentation, relationship pricing and internal marketing. There are a couple of factors which come from behavioural studies that can be used to tailor the marketing strategy to the customers which involves time, framing of money, collecting strategy and information which will be addressed in the following paragraphs.
As a whole sector upon itself, charity has also attracted the attention of tech companies. Funraise.org is an organization that provides software which helps charities in drawing attention from donors and Nptechforgood.com is a fundraising and social media blog for non-profit organizations. Starting from 2018, both organizations are involved in producing a yearly ‘Global Trends in Giving Report’ providing useful information about giving around the world. The information they were providing for the year 2020 came from on an online survey, which was held between March and May 2020 with 13,468 respondents across the world (Funraise.org & Nptechforgood.com, Global Trends in Giving Report, 2020, p. 3) providing a lot of useful information for charities and researchers, from a marketing point of view.
2.5.5 Mental accounting/tangibility of costs and impact/possessions (minimalize perceived loss)
The prospect theory of Kahneman and Tversky (1979, 1984) explains that human decision- making surrounded by uncertainty is depending on the circumstances, where people in case of loss prefer to take more risk and in case of profit opt for certainty, which from a rational point of view is irrational.
Drawing from this theory Thaler (1999) addresses the importance of mental
accounting by explaining the framing of gains and losses, mental accounting decision making, budgeting, choice bracketing and dynamic mental accounting. According to Thaler who discusses three components, mental accounting is ‘a set of cognitive operations used by individuals and households to organize, evaluate, and keep track of financial activities.’
‘How outcomes are perceived and experienced, and how decisions are made and subsequently evaluated’ (Thaler, 1999, p. 184) is one of the first components. The second describes the labelling of activities to specific accounts and the third involves the frequency with which accounts are evaluated which is labelled ‘choice bracketing’ by Read,
Loewenstein and Rabin (1998).
When people are purchasing goods or are donating money, they wish to ‘pleasure’
themselves by obtaining a very good deal, which explains why selling shares at a loss to prevent a larger loss is a more painful decision than selling shares at a profit.
From a marketing point of view Thaler describes four principles which come from hedonic framing, ‘the way of evaluating joint outcomes to maximize utility’ that could ‘ease’ the pain:
segregate gains, integrate losses, integrate smaller losses with larger gains (to offset loss aversion) and segregate small gains (silver linings) from larger losses (the utility of a small gain can exceed the utility of slightly reducing a large loss).
With a purchase, Thaler also distinguishes transaction utility, being as what could be considered as a consumer’s price, ‘the deal’s value’, and acquisition utility being the value that would be paid if the purchase was a gift. An example would be the price of a premium brand ice-cream: a package containing four pieces from the local supermarket which is the deal’s value, is relatively lower priced than an ice-cream from a local dinner which would also be cheaper than when you would buy one on a hot summer’s day in a vacation resort.
With donations it could work the same way, although it is hard to distinguish the transaction utility and the acquisition utility because not a good but a service is ‘purchased’.
In this context we would suggest that when an existent donor would donate extra resources, the regular donations he makes would be the transitional transaction and the extra resources could be considered as acquisitional transactions.
Separating the receipt of the purchased goods/services which calls upon the happy feelings from the pain that might come with actual payment could trigger sales of
goods/services. This also holds for soliciting donations involving a time lag where the moment of giving/buying is not the same as the actual payment, which is the case with credit cards (Breman, 2011). People more easily commit to future payments where at the moment of commitment they experience the ‘warm glow’ of giving and at the moment of actual paying the provision to a public cause.
According to Thaler (1999) individuals/households separate their money into budgets for living expenditures like food and housing, accounts for wealth like pensions and ‘rainy day’ and special categories for income like regular or windfall. With this split, money is turned from a homogeneous form into a heterogeneous form which has implications for how it is spent.
Reinstein and Riener (2012) conducted a research for the tangibility of money where they discovered that money from ‘windfall’ was easier donated than money that was earned.
From the same experiment they also got confirmed that when cash money is given a smaller
amount is donated than the amount that origins from ‘plastic/electronic’ money, which could be contributed to the previous mentioned time lag.
The means by how fund is being collected also matters which shows from how a door- to-door collection in the United States (DellaVigna, List, & Malmendier, 2012) could impact the percentage of success and the amount given. When a door collection was announced the previous day, lesser doors were opened the following day than when a collection came unannounced, which could be explained from the fact that people feel pressure to donate and rather shirk than facing the fund collector. When the option was given to opt-out for a
collection visit the following day, even more people opted out. However, in favour of the advance prenotice with additional information, slightly higher amounts were collected from the people who gave, explaining their altruistic behaviour.
In the Netherlands however, many door-to-door fundraisers use a plastic can in which donations are not visible from the outside, but from which one can hear the sound it makes when the collector’s holding it, if only small coins are donated, meaning low amounts, or larger coins, meaning donations in coins of one or two euros, which also provides evidence that the donations come from the earlier mentioned living expenditures. In fact, the cash given under social pressure has a ‘utility price’ which can be considered as the price of ‘not losing a reputation’ which appears to be attributing to the collection of funds.
Over more than a decade a ‘new way’ of fundraising is finding donors through social media (Saxton & Wang, 2014) used by the charity’s fans to spread information through their social network via Facebook or Twitter eliciting new donations through promoting the good cause based upon the recommendation and a form of social pressure. Saxton and Wang (2014) found that members of social networks give smaller amounts and easily responded with a ‘like’ for becoming fundraisers, but that it is harder to get them donate. The major advantage for charities is a cost saving way to reach donors, but it is a challenge to convert them into long-term donors.
When people receive a reward when they are near the completion of a goal, they take more effort and thus are more likely to being generous, which can be explained from the satisfaction they feel upon receiving the reward (Cryder, Loewenstein, & Seltman, 2013). The impact of being generous is also very important e.g., being one of the first persons who buys a gift for a good cause as it has more impact than being the 35th person towards a goal of selling 50 gifts. Highlighting these goals could trigger giving based upon direct altruism which makes evident using tactics based upon donor’s subjective character traits can improve
When victims are identifiable through a personal story, people are more inclined to show affection, which draws more donations (Small, Loewenstein, & Slovic, 2007). In
addition, Erlandsson, Björklund and Bäckström (2014) studied the perceived utility and found that proportion matters as people regard the relativity of the given help, meaning that helping a few victims of a small group, or just a single victim, are more likely to receive a lot of donations than a small percentage of a large group as it is perceived as being more or less
‘useless’.
Verkaik (2018) investigated whether donors are susceptible for output and impact information where output information was presented as ‘how a donation is being used and how it helps the recipient’ and impact information as the ‘perceived prosocial impact’ of which the latter seems hard to be judged by donors, translating into the fact that he found evidence in an increase in giving for output information only. However, the average amount given to a charity stayed the same, but the number of donors increased for the higher educated donors, who might be making more rationalized decisions.
As described in paragraph 2.2.3 it is hard to distinguish performance measures and the same holds for donors to judge these, which explains why perceived prosocial impact does not elicit extra donations.
2.6 Limitations to giving
Is there any point when people do stop giving? Whether donors are substituting
amounts of giving between charities was investigated by Reinstein (2006) in a U.S. dataset, where he found a larger effect for large donors and a small effect for smaller donors,
explaining the latter from the shock effect that occurs when a charity puts an urgent pressure upon the donors and where large donors are committed to charity giving, stemming from a more ‘warm glow’ impact. From this research we also see confirmed that donors have a maximum budget for donations (Thaler, 1999).
De Wit and Bekkers (2020) investigated what happens if governments are cutting their budgets and found similar results about substitution. Their research concerned governmental cut downs on KWF, where they found that wealthy earlier donors would give more when confronted with the new information that the Dutch government would cut down subsidies on KWF. This new information appeared to be of importance to people with low empathic concern, indicating opportunities to converting non-donors into donors and drawing extra funds from wealthy citizens who value a high standard of health care. People who are already
