The fundraising database audit
John Rodd* and Lawrence Stroud**
'John Rodd & Associates, Coombe House, Stoke Hill, Chew Stoke, Bristol BS18 8x6 UK;
Tel: +44 1275-333106; e-mail: johnrodd@compuserve.com
**Tel:+44 1947-840123;e-mail: law@stamap.co.uk
Received: 18th February, 1998
John Rodd is a database marketing con-
sultant based in London and Bristol with
a consulting practice in software, database
management and marketing strategy for non-
profit organisations. He jointly designed with
Lawrence Stroud and colleagues the Sup-
porter FOCUS@database audit method, upon
which some of the following paper is based.
Lawrence Stroud is founder of the Statis-
tics ?L Mapping Company Ltd. based in Whitby,
North Yorkshire, and runs database services
for nonprofit and for-profit organisations. He
was for 20 years a fundraiser at Botton
village, Danby, North Yorks., one of the Camp-
hill Communities, where he pioneered their
fundraising and database management.
Top: John Rodd ABSTRACT
Bottom: The coricept of the database aiidit is relatively
Lawrence Stroud m i $ both iri corrtrriercial arid iri rioriprojt
riiarketirg. This paper sets oiit the case, beriejits,
pifalls arid tecliriiqires that are part of database
aiiditirg,
The prirrciples of database aiiditirg are
explairied, iuitli riieasiirerrierit, corriparisoti,
retrospectior I , trerids, top - do im, KPIs, diagr r os-
tics arid other key coricepts explored. A typical
aiidit seqiierice is slioiivi. The berrejits of
aiidititg are described, arid several siipportirg
tables arid clrnrt exarriples frorri real charity
aiidits giveri, iriclridirig lijtinre valrie, growth
arid attritiori of a database arid active/irractive
siipporter cohorts. The c/iallet~esarid d@cirlties
cxperiericed iri arrditirig are desm'bed, arid
sofiiimc tools illirstrated. Corrirtiori pifalls arc
described arid the jrtirre of database aiidits is
predicted.
INTRODUCTION
Most UK nonprofits have some form of
donor database. The size and sophistica-
tion of donor databases vary widely, with
databases of a few hundred to over a
million records. In many nonprofits the
donor database brings in a substantial
contribution to annual voluntary income.
There are nonprofits that do not exhibit
a high degree of dependency on the donor
database, for example those with substan-
tial volunteer or shop/retail income, those
with large statutory or grant aid, and those
with a happy windfall of legacy in-
come.
However, most database-using organisa-
tions recognise that the management and
manipulation of donor data is an important
activity, and harnessed to direct marketing
schemes to create both ad hoc and renew-
able income, the annual value derived
from the database can be great.
There is a problem that arises with the
growth in database size, and that is
understanding what it contains and what
'quality' it has. It is common for donor
databases to grow to many hundreds of
thousands of records, each with its own
attachments of donation or transaction
histories, communication histories and
other attributes. Under such circumstances
it is impossible for the fundraiser ever to
know his or her donors, and some remote,
computer-aided tools are necessary.
AUDIT DEFINITION
Chambers Dictionary defines an audit as ‘a
check or evaluation of specified quantities,
and where examination and verification
takes place’.
The origins of the accounting au&t are
well known and relate to financial probity
and honesty, so that auditors can say that
the accounts they are to present are a true
and fair picture of the business.
For marketing people the audit angle is
rather different, and is less concerned with
probity and more focused on customers,
revenue and profit.
PRINCIPLES OF FUNDRAISING
DATABASE AUDITS
Experience shows that a number of recur-
ring principles arise:
-there is a strong emphasis on measure-
ment and comparison: it is usual for
database audits to count, add up, calcu-
late simple aggregates and percentages
and to compare year on year
-multidimensional: audits usually look at
the same data &om different angles,
much in the way that modern data
warehousing technology does; it is
common for a marketer to want to see
data ‘sliced and diced’ by, say, the
human factors (donation patterns of
males versus females) and then to take
the same data set and look at it
differently, perhaps sorting the data by
recency with no mention of people
-retrospection: most database audit work
looks back at what has happened and is
not predictive (although past trends are
often used to divine fbture perfor-
mance)
-trends: there is a strong interest in time
series data and trends
-top down: good audits do not plunge
into detail too fast and begin ‘right at
the top’, and then progressively divide
and sub-&vide the database into smaller
pieces
-diagnostics: audits contain diagnostic
tests to determine the ‘health’ of the
database, for example Pareto/80:20
(above), by using measures of time
since donations (recency), by calculat-
ing the number of gifts per donor per
annum
-key performance indicators (KPI): a
result of diagnostic is often that a KPI
can be generated, such as the renewal
rate (for a membership charity); the KPI
is a quick, summarised measure that
monitors the vital signs of supporter
behaviour, much as the pulse and blood
pressure do for humans
-internal and external data are both used:
internal data, dominated by transac-
tions, is easy to come by and is readily
processed to provide pictures of income
by many different variables; external
data - such as demographic codes -
provide a window on the donor that
takes in the wider world with attributes
for wealth and social class
-location: there are usually strong dis-
tributive patterns to the location of
donors and these add an important
geographic dimension to the under-
standing of supporters.
Nonproffts are different
In what follows a dwinction is drawn
between audits in the for-profit world
and the nonprofit environment. Nonprofit
marketing is not generally concerned with
auditing the following:
-physical distribution channels: because
charity fundraisers are not generally in
the business of shipping products via
distributors’
-product-based audits: unlike com-
merce, fundraisers do not ‘ship’ tan-
gible products,’ and in fact most are
rather vague about the nature of
‘product’, although there are some
notable exception^.^
By contrast, nonprofits are usually far more
advanced in the techniques of relationship
marketing than their commercial counter-
parts, and so it is usual to see measures
applied of the ‘state of the relationship’.
This can be done by looking at:
-the degree of commitment: fiom a
study of the proportion of one-time
versus regular supporters, or fiom the
conversion rate to formal commitments
such as covenants and direct debits
-the numbers of regular, lapsed or soon-
to-lapse supporters.
WHAT MAKES A DATABASE AUDIT?
Unlike financial auditing, the donor
database auditing process is not regulated
or the subject of agreed professional
practice, so what follows reflects a view
based on the authors’ research and
experience. The audit is divided into the
following stages.
Stage 1: Financial and donor overview
-income by year (fwal, calendar or
both)
-database size (growth and attrition)
-year on year trends (time series)
-supporter loyalty: how long is the
relationship? how many supporters
remain after one, two or ten years?
-seasonality
-Pareto or 80120 analyses (in every
donor database analysed a strong 80:20
rule can be found)
-lifetime value (LTV) reporting (gross,
with net LTV only if cost data is readily
available)
-origins of support (recruitment sources
and what they have generated since
donors ‘joined’)
Stage 2 Tactical measures
-RFM (recency, frequency and value
analyses, as single dimensions and
plotted together)
-supporter giving ‘states’ (new, growing,
lapsed, faihng, reinstated, committed)
-donation bands (banded donation levels
that a donor’s contribution has fallen
into, eg up to ElO, E10.01-L20 etc)
-donation averages and other measures
of central tendency (modal values for
example)
-gender (dividing donations across male,
female, and couples).
Stage 3: Demographics
Data enrichment with ACORNTM,
MOSAICTM or other demographic
indicators4 followed by:
-cross-referencing segments identified
above by demographic groups, eg
most/least loyal, Pareto top 20 per cent,
male/female etc.
Stage 4: Mapping
Using all or part of the above to display via
a GIS (geographic information systems):
-scatter plot of supporters across the
United Kingdom
-income density using thematic shading
from light colour (least income) to
darkest (most income)
-penetration indices (using UK Royal
Mail delivery point counts and indexed
penetration tables ranked hi-lo)
-income by standard counties, standard
UK regions or any other geography
that is important to the organisation
-income by fured points, eg nonprofits
with care or residential buildings, or with
a voluntary branch or groups structure.
 Number
100,000L
80,000
60,000
40,000 -
I I
Year ~ 1990 1991
Number +-I 12,392 48,1481%,435,59,082 67,969’81,022 48,838
WHAT ARE THE BENEFITS?
There is an appreciable cost in doing a
database audit and cost:benefit justification
is necessary. The most common benefit for
an audit is that it is the first time ever that
a file has been cut up into meaningfbl
sections for examination.
If a nonprofit is considering its market-
ing strategy, the decomposition of a file in
the manner described above can yield
insights that are unavailable until some
kind of analysis is done, for example:
-growth and attrition: studies of the rate
of gain and loss in a database are
essential for the satisfactory planning of
cash flow and predictions of forward
value; a failure to monitor the rise and
fall of database assets is among the
gravest crimes of which a database
marketer can be guilty.’ Figure 1 shows
a very basic plot of file changes
-active and inactive supporters: it is
widely held that it is not the overall
quantity of donors in the database that
Figure 1
Database
growth/shrinkage
chart
____-
-
,
1992 , 1993 1994 ’ 1995 1996
I
counts, it is the number who are
actively giving; marketing managers
are interested in the proportions of
their databases that are active at any
one time, and the analysis by ‘giving
states’ is one way of measuring the
active/inactive proportions. In Figure 2
it can be clearly seen that overall file
growth masks a worrying trend for the
inactives (lapsed and soon to lapse or
‘failing’)
-lifetime value: the audit is often the first
time for a fundraising manager to view
the lifetime value of supporter seg-
ments. Figure 3 shows the real picture
in a well-known UK charity, where it
can be clearly seen that the majority of
the database is a net loss maker for the
charity. This is fi-equently an unpleasant
surprise, and has a profound effect on
marketing planning
-the scope for higher level giving:
value-band studies show the spon-
taneous presence of larger than average
gifis, and it is not uncommon to find
 Figure 2 50,000I
Active and inactive
donors
40,000

30,000

20,000

10,000

n
" 90 91 92 93 94 95 96

Figure 3
Net 'lifetime profit' Break-even
by decile

Top 10%

Loss-making donors

Bottom 1
(200) (100) 0 100 200 300 400 500 600 700
f Sterling value

Lifetime avg. net profit f30.06

 a usefbl percentage of a database
where donors are habitually giving
sums greater than E100; where the
marketing manager has proof of such
spontaneous high level giving, there is
immediate support for the develop-
ment of higher level schemes, as
dustrated in Figure 4.
CHALLENGES AND DIFFICULTIES IN
DATABASE AUDITING
Data
The database auditing process, like its
accounting version, is not without its
challenges and problems. Far and above
the greatest for the auditors is getting data
in a usableformat and suitablefor auditing. It
is usually the case that several tables have
to be exported and merged into one large
fit-fde for auditing to take place. This
requires considerable skill and assistance
fiom in-house data processing or database
managers, who are usually hard pressed.
It is sometimes the case that database
managers do not know or understand the
deep-level structure of their data, and this
means a slowing down of the auditing
process as ambiguously named or unpopu-
lated fields are tracked down.
Data selection
Not all supporter data is used in auditing.
Most chanties receive anonymous dona-
tions, which usually means 'address-less'
income. This is usually excluded fi-om
tracking studies, on the basis that without
a name and address there is nothing to
track.
Legacy income is usually excluded, or is
taken aside for hrther study. If it is the
direct marketers that are driving the audit
(and it often is) then other income streams
 from community, regonal or corporate
fundraising are excluded.
Tools
The host software is usually unsuitable for
doing the audit. In transaction-based sys-
tems it is usual for some management
reports to be delivered as a standard part
of the work cycle. Although these are
useful they are not in any way a full-house
set of auditing reports, and usually data has
to be removed and manipulated outside
the host system.
Data extracts are usually easy to obtain
from the host system’s database manage-
ment utilities, which have export tools.
Transfer is by disk or tape, and it is essential
for the auditor to be able to read a wide
variety of tapes and data formats.
Data extracts are next placed in another
database and, for most record sets,
PC-based systems such as FoxPro or
Access are normally adequate. The data
is first cleaned, with names and ad-
dresses postcode-checked, essential if any
geographic or demographic analysis is
required. At this stage any internal
duplication is checked, and most transac-
tion software delivers reasonably dupli-
cate-free data sets.
For the calculation of audit summaries,
the data is decanted once more into
another software suite. In the United
Kingdom (and probably most of Europe)
the well-known and highly advertised
package SPSS is adequate for the task,
SPSS originated long ago in the days of
mainframes and in another business world
(the letters originally stood for Statistical
Package for the Social Sciences), and today
it is an all-purpose toolset with many
add-ons (CHAID for example) that suit
the marketer.
Using modern Pentium processors and
as much RAM as can be afforded, large
datasets can be manipulated and reports
created. Formatting and presentation is a
crucial step, and it is no use providing good
quality audit reports if they cannot be
understood ‘at a glance’ by those who have
commissioned them.
Colour output is well received, and the
incorporation into word processed docu-
ments is usual, so that the implications can
be seen and commented on.
If GIs-based maps are to be used,
large-scale laser printers and/or colour
plotters are needed.
Expertise
This is probably the toughest area, and
means that auditing is usually done by
specialist f m s or individuals. The issue of
expertise in database work arises fie-
quently. It is the human factor that limits
nonprofits’ abilities in database work more
often than technical challenges. The
software cited above (SPSS), for example,
has a modest per-unit cost, and, allied to
a powerful Pentium machine, can process
data with a modest investment.
The ‘liveware’, however, is not s o easy.
Trained users of statistical packages are not
common either in nonprofits or in the
commercial world, and there is a general
shortage. What is equally hard to find is the
expertise in designing the audits in the fmt
place, added to which each nonprofit has
its own special needs or ways of worlung
that will require some customisation.
But things are changing. Some of the,
larger UK nonprofits have trained business
analysts and statisticians, but they are
still a rarity compared with the generally
higher level of expertise in drect market-
ing proper.
Common pitfalls
The most common pitfall is the mind set
that says that audits are unnecessary. There
is nothing instantly exciting about an audit,
and the dullness of the word itself does not
help. It is a strange omission in manage-
ment thinking, but so often it is seen that
 a newly appointed marketing manager in
database work in a charity does not ask the
question: ‘What data assets do I have to
play with and what state or condition are
they in?’ It is inconceivable that a newly
appointed sales director in a for-profit
organisation would not ask a similar ques-
tion and expect answers in detail.
Costs for setting up audits are appreci-
able, although it does mean that sub-
sequent checks on an annual basis are
Gcilitated and made cheaper. In-house staff
are usually not able to run audits, and they
are done by specialist bureaux or consult-
ancies. The amount of technical resource
‘spare’ and available for setting up manage-
ment information is limited even in the
largest nonprofits, in the authors’ ex-
perience.
Vendors of charity software seem un-
aware of the need for audit-type reports as
standard array of reporting from their
suites. It is most likely that this is due to
their tendency to be reactive to every-
thing and not to develop functions proac-
tively. Software vendors who do provide
reporting on a full range of factors will
create competitive advantage for them-
selves. However, it wdl be when the
clients themselves start asking that the
emergence of audit hnctions will be seen
as a matter of course.
The issue of external data enrichment
stan& in the way of some of the measures
mentioned above. However, in the United
I(lngdom some sofiware for postcoding
and addressing now comes ‘bundled’ with
geographic and demograpluc data, mean-
ing that the codes are already available, and
at a low Cost.
The most common problem however,
is the skill level of marketing managers. All
too fiequently there is a focus on the short
tern and the results of operations, not on
the more strategic issues; for whatever
database auditing is, it is strategic by
nature.
THE FUTURE OF THE DATABASE
AUDIT
The authors predict that database audits
will become a regular feature of the direct
marketing landscape in the future. The
insights gained in auditing generally alter
the marketing management’s perceptions
of their customer bases, and it is not
uncommon for the seeds of major changes
in strategy to be traced back to an audit
and what it uncovered.
Another new feature in direct marketing
practice is the annual audit. This takes
data on a recurring basis and looks at
the movements and changes over time.
In the USA some research practitioners
seek measures of a supporter’s upgrade or
downgrade behaviour.6 This requires se-
quential years of data to be available, and
allows calculation of those whose per-
formance improves, frnancially speakmg,
those whose commitment appears to be
falling, and the many who ‘fly straight and
level’. Figure 5 illustrates how the differing
segments are visualised.
The question of campaign
performance
Readers will note that the authors have not
brought this into the audit. This is because
it is one area of nonprofit marketing that
is usually done and done quite well. The
sequence of ROI, percentage responses
and other data that accompany a campaign
analysis are often to be found.
Other auditable areas
In the opening paragraphs of this paper it
was stated that, unlike commercial or-
ganisations, chanties and nonprofits have a
poor sense of product. In industry it is
common to see measures such as direct
product profitability measured on a recur-
ring basis. One day this will become
commonplace in the nonprofit world
too.
Similarly the whole issue of profitability,
 Figure 5 Upgrade and downgrade assessment
Upgrade and Percent
downgrade
assessment 120% I
100%
80%
60%
40%
20%
- o/n
0 .-
Upgraded Stayed Same Downgraded
1992m -- ___
-_16.5% - __46.6% 36.8%
- --
39.7%
__
1993m 10.9% I 49.4% I

using different angles of attack, is rarely
audited in UK nonprofits. In the il-
lustration in Figure 3 of net lifetime
value, where so many supporters are loss-
making, it is clear that a pragmatic and
perhaps hardhearted marketing manager
would be less inclined to go on ‘carrying’
these loss-making and resource-eating sup-
porters. The authors believe that niarket-
ing managers will get more profit-minded
as time goes by. In lectures given by the
authors during the last five to ten years, the
audience (of fundraisers) has fi-equently
been asked if they have any problems with
the term ‘profit’, and the answer is always
a resounding ‘NO!’.
CONCLUSION
For large data assets it makes good sense to
check out the quality, quantity and key
perfomiance indicators at least once a
year.
The database marketer is able to do his
o r her job better when armed with intel-
ligence about the state of the database and
its good, bad and indifferent segments.
All this has two aims:
-to understand the ‘customer’ better
-to create long-term, stable income at
the lowest effective cost.
REFERENCES
(1) However, the issue of area-based donor
locations and penetration of markets is
generally important.
(2) UNICEF with its strong focus on the
greeting card may be judged an
exception.
(3) ‘Help a Blind Man See’ fiom Help the
Aged is a notable example of an
acquisition product, and Greenpeace’s
several ‘Frontline’ high-value donor
products are well known.
(4) ACORN is a trademark of CACI Ltd.
 London and MOSAIC a trademark for
Experian Systems Ltd. Noningham,
England.
(5) Simon McGrath’s excellent article in The
Journal of Voluntary Sector and Nonprofit
Marketing, Vol. 2, No. 2 deals with
growth and attrition models and ‘what
if?’ calculations.
(6) Bruce Campbell, Glendora California,
private communication.