Monday, March 7, 2011

One big mess

The state of marketing spending at Canadian non-profits is even more clouded than first thought.

In the 2010 Non-Profit Marketing Year-in-Review painted a challenging picture of spending in our sector. It concluded that non-profit marketing is consistently underfunded. In Canada, there are few statistics on spending, but in the US a 2008 study by the American Marketing Association and Lipman Hearne found overall marketing budgets were typically 2% to 3% of the organization’s overall operating budget. More importantly, it showed that spending across the sector varied wildly, showing that there are few rules of thumb on marketing spending at all.

Now, a review of a US study shows that the picture of marketing spending is even more clouded.

Nonprofit Overhead Costs, a study conducted in 2008 by the Bridgespan Group in the US, concluded that marketing costs were often hidden from plain view, even in tax returns.

“…nowhere in its definition of program, management and general, and fundraising expenses does the IRS explicitly address how to account for marketing and communications activities. As a result, many organizations allocate all marketing and communications expenses to programs when, in most cases, these expenses would more accurately be reflected as administrative or fundraising overhead,” the study said.

While tax policy in Canada is different, the problem of how marketing spending is accounted for in taxes remains. The Canada Revenue Agency is perhaps a little clearer in getting charities to disclose marketing costs. Usually, these are considered fundraising expenses. But again, marketing spending is spread out across many activities. Line 4800 of the T3010 charity tax return asks specifically about advertising and promotion. A review by Imagine Canada in a 2009 study called Perspectives on Fundraising showed that 18% of charities with budgets under $30,000 a year used advertising and promotion, while 21% charities in the $100,000 range did. The rate was 39% for charities making more than $10 million or more. That’s helpful data.

However, marketing spending is also likely to be part of bingos, lotteries, fundraising dinners and mail campaigns, each of which has a separate reporting line on the T3010. So, the true cost of marketing is hard to figure out.

Where does that leave Canadian non-profits? Likely, confused. There are no benchmarks for marketing spending and no easy way to draw out answers even from tax data. Once again, marketing at non-profits is clear as mud.

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