Posts Tagged ‘donations’

As long-time readers of our articles know, most of our posts focus on tips and best practices for effective nonprofit management.  This post is going to be a little different.  There is so much going on right now that affects nonprofits, we thought it would be a good idea to provide you with a brief run-down of some things you need to know.  Some of it is related, some not.  Here we go…

1.  Many smaller nonprofits could lose their tax-exemption this year. How?  Tax filing year 2009 is the third year that the IRS has required the filing of Form 990-N for organizations averaging under $25,000 in annual revenue.  Prior to 2007, no filing was necessary.  IRS regulations state emphatically that any 501(c)(3) public charity that fails to file a required Form 990 for three consecutive years will automatically lose their tax-exempt status.  Unfortunately, many organizations are either still unaware or just whistling Dixie and not taking this seriously.  I expect panic to set in when letters of revocation start hitting mailboxes later this year. Read the rest of this entry »

It’s one of those administrative tasks that must be done every year:  mailing your donors a year-end statement of their contributions.  Even if you are receipting on a per gift basis, a year-end itemized report is a best practice that should be adopted.  If you are already doing that, good for you!  But let me ask you this…

Is your year-end donation letter making money for you?

Have you noticed that some nonprofits are still doing fairly well in this economy, even thriving, while others have suffered dramatically?  What do they know that you don’t?  While there are many contributing factors that underlie success in fundraising, I submit that the most important element is effective communication.  One of the best places to communicate is in your receipting to donors.

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One of the things that you learn quickly when starting and operating a 501(c)(3) organization is that you have to handle money wisely.  A nonprofit is no different than any other business in that you must make ends meet.  Otherwise, your charity will cease to exist.  The current economic difficulties make this task even more challenging as we all are stretching dollars until they are see-through.

But here’s a question you probably haven’t considered:  In all of your efforts to keep the lights on, could it be that you are misappropriating funds without knowing it?  Is it possible that you are even committing a crime?  If you do not understand what the IRS requires regarding designated funds, you might be.

I cannot begin to tell you how many times we see this situation messed up.  Most of the time, it is an innocent attempt by a board or executive director to just be good stewards of the money people have donated.

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Well, we are pretty much down to it.  There are only a few, short weeks left in 2009…and during much of that time, most of us will be preoccupied with all things Christmas.  But in all the hustle and bustle, there are a few things regarding your nonprofit that require your attention.

A few weeks ago, we talked about some key, end-of-year planning topics (read the post).  Extremely important, but somewhat conceptual.  The following is a checklist of year-end forget-me-nots that absolutely require your attention.  Ready?  Here we go:

Financial records. What is the current state of your financial recordkeeping?  Good, bad…or ugly?  Hopefully it’s more good than bad.  If it’s ugly…well, you’ve really got some work to do.  The fact is, you have a legal requirement to maintain proper financial records.  If your bookkeeping status lies anywhere south of good, get it fixed.  If necessary, hire someone who knows how to do this.  The truth is, the legalities are not even the most important reason to get this right.  You cannot effectively manage your organization without consistently good financial recordkeeping.

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Thanksgiving is a wonderful, home-grown holiday.  It is a time for family and friends, eating way too much and, most importantly, a time for reflection about all the things we have to be thankful for.  I heard someone mention this a few days ago, and it is very true:  Thanksgiving is about the only major holiday in America that is not, almost cannot be, commercialized…so much so that retailers just overlook it and start hawking Christmas stuff about 1 minute after Halloween ends!

Instead of just looking at what you are thankful for personally, how about reflecting upon a few things your nonprofit can be thankful for this year?  Here are three things if you cannot think of any:

A giving spirit. The citizens of this great land give more to need around the world than all other countries combined.  Sure, we are a blessed people…rich by the standards of most other countries.  But did you know that as a percentage of GDP, private philanthropy in the US is 1.7%…2 1/2 times the percentage of the next highest countries, Canada, Great Britain and Australia (average 0.7% each).  Other wealthy nations barely register on the radar by comparison.  Did you know that 3 out of 10 Americans gave to the tsunami relief efforts a few years back?  That ordinary citizens donated $1.4 billion to 9/11 charities in the days following the attacks on New York and Washington, DC?  That nearly four times that amount has been donated to Katrina relief efforts?  Even in these tough economic times, the number of people giving to charity has not decreased, only the amount they can afford to give.  That’s something to be thankful for.

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Boo!

Halloween is upon us…and there is no more appropriate topic that we could cover than how to effectively scare away donors.  In the, um, spirit of the season, let’s look at six ways to guarantee donors will want nothing to do with you!

Be undefinable. Keep ‘em guessing, we say.  Why box yourself into a specific purpose when you can be fluid and flexible…you know, all things to all people.  You need the freedom to pounce on whatever new cause-de-jour comes along.  Let those other nonprofits label themselves.  Not you, though…you be a chameleon.  Keep changing it up.

Be ineffective. Boy, this one gets them every time.  If you want to make a really bad impression, just refuse to accomplish anything measurable.  Rely on grand platitudes and empty rhetoric.  Plan constantly, but never, ever get anything done.  That’s waaaay too much work.  Hey, I know…just pretend you are a congressman!  Talk the talk, then talk some more!  With a little practice, you’ll be a pro at kicking the can down the street.

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So, you want new donors?  You want to make sure that you keep getting funds from the donors you currently have?  What are you doing to make sure that both of these things are happening?  If you lack a strategy and purposeful intent to cultivate and maintain a donor base, you will certainly have money troubles.  “Form it and they will give” doesn’t work well for many nonprofits.  Here are three things to consider to cultivate and maintain an active donor base:

1)  A Compelling Purpose.

You need a compelling purpose.  Are you doing anything that a donor might want to support financially?  Are you providing your community with services that are indeed needed?  If a donor can relate to, or is interested in, the services your nonprofit provides, the donor is more likely to be happy giving to that cause.  If there are many other nonprofits in your community that are providing the same services, you will have to try harder to differentiate your organization from the other nonprofits.

Maybe your purpose IS compelling…to you.   You understand things about the need for your program that the public doesn’t easily grasp.  For example, the need being met by a homeless shelter is pretty obvious.  If, on the other hand, your organization’s purpose is to research treatments for dry-eye syndrome, you are going to be challenged trying to garner wide monetary support for your efforts.  Those with the problem will jump on board, but your work is cut out for you with everyone else.  You need to understand #3 below:  communication.  But don’t skip #2.  It’s big.

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At the end of every newsletter, we put out the call for “topic requests”.  We have used quite a few reader questions or topic suggestions for article topics.

Some questions or topics do not require a whole article to answer or discuss.  We save those to make a multi-topic article from time-to-time.  That’s what we’re going to do today.  Keep sending your questions or topics and make sure that you read our blog articles for more information on other topics.  On to the questions…

Q:  Can any or all of the nonprofit’s board members live out of state?

A:  While not required by federal law, many states have residency requirements for a corporation’s board members.  No states require that all board members live in the state of incorporation, only the registered agent is required to live in-state.  Our suggestion is that at least one board member live in the state of incorporation.

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Charitable Solicitations Registration. “Never heard of it,” you say.  Well, you are not alone.  As astounding as it may seem, estimates of noncompliance range from 85-95% of charities and nonprofits nationwide.  This level of noncompliance has persisted primarily because of 2 reasons:  1) lack of communication between state agencies and 2)  grace.  But, the times…they are a changin’.  It is time to get compliant!

What is it? It is helpful to start by explaining what we’re talking about.  42 states and the District of Columbia require nonprofit organizations that raise or intend to raise financial support from the public to register with that state’s Charitable Solicitations Department.  This department is typically run from within the state’s Attorney General’s office, though some originate within the office of the Secretary of State.

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Tonight’s title match:  In the red corner, numbering 948,954, representing over half of all 501(c)(3) organizations, are public charities.  And in the blue corner, numbering 108,594, having increased 54% since 1998, are the 501(c)(3)s known as private foundations.  Both competitors bring a long and varied history into the ring.  Though greatly outnumbered by public charities, private foundations bring a lot to the contest.  Let’s take a closer look at the differences, and similarities, between these title contenders.

Many people have a layman’s understanding of the difference between public charities and private foundations:  Public charities are understood to perform charitable work, while private foundations support the work of public charities.  That grassroots definition is, in practice, mostly true.  The specifics, however, are slightly more complicated.

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In last week’s blog post, we looked at a set of core principles that are critical for nonprofit organizations needing to raise financial support.  If you haven’t read it yet, check that one out before diving into this one.  It will make the ideas discussed below more effective.

So, what are some funding strategies that work?  Let’s explore four categories of fundraising:  direct appeal/pledging, professional programs, self-directed programs and grant funding.

Direct appeal/pledging. With this type of fundraising, you are literally asking people to give money to your organization, either through an individual gift or a pledge.  This is the simplest and most direct method of funding your nonprofit and it should be a component of most funding plans.  To be effective, however, you must be able to clearly articulate your program’s purpose and why someone should support it.  This requires your program to be a more attractive target for someone’s giving than some other cause.  I would again recommend you read last week’s blog article for a refresher on getting your pre-funding ducks in a row.  After convincing someone to donate, you must maintain a consistent stream of communication with your donors, keeping your program before them on a regular basis if you want them to continue supporting you.  That can be done through a variety of creative methods, one of the best being monthly newsletters.  Technology has made this so much easier and cheaper, too.  Instead of the hassle of dealing with printed material and postage costs, you may wish to consider a number of online communication tools that allow you to send newsletters, promos, etc. via email.  We like Constant Contact for this purpose.  You can also check out Aweber and some others.  All are similar in features and price.  They all come with pre-designed templates that make it simple to create good looking communications.  Another often-overlooked tactic is to send a receipt/thank you letter for every donation, not just at the end of the year.  Just remember that donor cultivation is a never-ending process.  As soon as you start letting that slide, you’ll see your support slide right with it.

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This opinion piece is from the Wall Street Journal, March 3, 2009.  We are reprinting this timely article as a wake up call to charities of the battles to come.  Philanthropy has its enemies indeed.

By Naomi Schaefer Riley

Nonprofit leaders are reeling from the recent news that President Barack Obama’s proposed budget would limit tax deductions on charitable contributions from wealthy Americans. But now the philanthropic world has something else to worry about. Today the National Committee for Responsive Philanthropy (NCRP), a research and advocacy group, will release a report offering “benchmarks to assess foundation performance.” Its real aim is to push philanthropic organizations into ignoring donor intent and instead giving grants based on political considerations.

The committee is part of a rising tide of politicians and activists who are working to change the face of American philanthropy — and not for the better.

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In this tough economy, nonprofit organizations are needed more now than ever.  More and more people are finding themselves in difficult circumstances and, according to all available evidence, it’s going to get worse before it gets better.  Despite all the assurances of government, it simply isn’t possible for government to keep up with the need.  And even if it could, America’s charities prove on a daily basis how much more effective and efficient the private sector is.  But, there lies the quandary.  If times are tough for individuals and governments, times are also tough for charities…at just the time they are needed the most.  So, what steps are required to make sure the organization you are starting (or currently running) can work in tight economic conditions?

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Sounds like scary stuff, doesn’t it?  The decision to start a nonprofit organization is difficult in the best of circumstances.  But in a downright frightening economic climate, does it make any sense at all?  Some experts are predicting that this economy may doom up to 100,000 existing charities this year.  Could you possibly pick a worse time?

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Got your attention? Good…because what we’ve got to report on will shock you…and could have a devastating impact on some charities and the families that depend on them.

Congress, in a stroke of genius that was too smart by half, passed the Consumer Product Safety Improvement Act in August 2008. It takes affect February 10, 2009. The public is only now becoming aware of the draconian nature of the statute.

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