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The Challenges of Expanding Your Nonprofit

One of the most challenging situations your nonprofit organization can face is the need to expand.  It is also an exciting challenge.  Compared with the alternative of diminishing effectiveness and shrinking support, growth is a good thing.  At least it means (usually) that your programs are having a positive impact and people are motivated about your organization’s cause.

But with expansion comes growing pains.  To significantly increase your footprint or your scope (or both!) requires a huge commitment on the part of the leadership, members, staff and volunteers.  When your organization is faced with opportunities that scream “Take action!”, there are critical things you must consider.  In this post, we’re going to take a look at two scenarios:  1) location expansion and, 2) additions to program services.  Knowing what to do in these situations can spell the difference between success and failure.

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Safeguard Your Mission: How to Protect Your Nonprofit from Fraud

Fraud is a word that conjures up many images in your mind.  Maybe your definition of fraud is someone lying to you, stealing from you or conspiring against you while pretending to help you.  All of these are true…and it can happen to your nonprofit if you don’t know how to protect it.

Those who seek to harm or defraud you can come from both inside and outside your nonprofit.  Either can be devastating to the health of your organization, both financially and psychologically.  Let’s take a look at both scenarios and I’ll give you some tips on how to avoid becoming a victim.

Outsiders. For anyone who hasn’t been victimized by an outsider, it can seem like a remote concern.  “Surely we can spot a scam”, you tell yourself.  Ask any victim of Bernie Madoff how easy it is to be taken.  Just among our clientele at The Foundation Group, we have a Florida nonprofit that invested its entire endowment in a sure-thing Madoff fund.  It’s all gone…every penny.  Granted, this one was hard to spot.  Madoff made-off for many years right under the noses of regulators!  But it doesn’t take a Bernie Madoff to cause severe damage to your organization.

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How Much Is Too Much? The Limits of Benevolence

The idea for this article came from my good friend, Belinda from Madison, Alabama.  A few weeks ago, she wrote us an email asking the following:

“Due to the economic downturn and, with the increasing requests for benevolence assistance, are there guidelines for churches and non-profits on what they can assist with and how much?”

Great question, Belinda.  I know others are asking the same thing.  Benevolence is synonymous with charity.  It’s the very definition of it.  But, there is a definite line between charity and what the IRS calls inurement (or private benefit).  This economic recession has caused many churches and charities to be overwhelmed with requests for help.  So, what follows are some things to consider when asking, “How much is too much?

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Charitable Solicitations – Time to Get Compliant!

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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Your 2009 Nonprofit Survival Guide

You’ve seen the news.  You know it’s tough out there.  Just this morning I saw the following headlines on my Chronicle of Philanthropy RSS feed:  “Charitable Donations Fell by Nearly 6% in 2008”, “Ford Foundation Offers Buyouts to One-Third of Employees”, and “Robert Wood Johnson (Foundation) Offers Buyout to 40% of its Employees”.  Tough stuff indeed.  I’m sure that you have your own stories about what the current economic situation has meant to your family and friends.  So, the question is this:  Is there any way to survive, maybe even thrive, in such circumstances?  We resoundingly say, “Yes!”  Consider this your 2009 Nonprofit Survival Guide.

First off, stop listening to the news.  I mean it…turn it off.  I’m not advocating locking yourself into a cave and shutting out the world.  But, the constant drumbeat of negativity takes its toll on you after a while.  I saw a great sign on a realty office near my home the other day.  It said, “We have decided not to participate in this recession.”  What a great message!  The half-empty folks driving by no doubt scoff at such a sign and call it denial.  I call it taking responsibility for your own success.  The facts around them may not have changed, but at least for this one realty office in Mt. Juliet, Tennessee, they aren’t making excuses.  So what about you?  Yes, it’s harder to win than to lose.  But you have people (or animals or something) that need what your organization brings.  Determine to make it.

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A Tale of Two Nonprofit Websites

Once upon a time, there were two websites, each belonging to a different charity.  Our tale follows the adventures of these websites.

The first website…we’ll call it “the good site”…was considered a real asset to its owner.  While not fancy or flashy, it was nice to look at and was obviously well taken care of.  The content of the good site talked about the charity, the charity’s mission, its programs…it even had nice pictures of some of the volunteers helping the charity’s beneficiaries.  And, everything was correct and up to date.  The good site was very good indeed.

The other website…we’ll call it “the bad site”…was also considered a real asset to its owner.  It was fancy and flashy and quite beautiful to behold.  The content of the bad site talked a little about the charity, the charity’s mission, its programs…but, it talked a lot more about the charity’s president, John, and John’s for-profit business.  In fact, it was kind-of hard to tell who the website was supposed to be promoting, John or the charity.  There were some nice pictures of John, John’s family…even John’s dog…plus lots of conveniently placed “Buy Now” buttons for website visitors to snap up John’s new book.  The bad site was very bad indeed.

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IRS Stepping Up Nonprofit Oversight

The headline for this article is not really “new” news.  The Internal Revenue Service has been stepping up enforcement of its regulations governing nonprofits for several years now.  Those who have been keeping up with the changes to the Form 990 annual reporting requirement know this to be true.  What is new this time is that the IRS is focusing hard on two, key areas:  1) nonprofit pay practices and, 2) abusive activities by charities.  Let’s take a look at each of these.

1) Nonprofit pay practices. The topic of nonprofit pay practices has long been an area of concern for the IRS.  Federal regulations require that compensation paid to employees of tax-exempt organizations must be “reasonable”.  Unfortunately, “reasonable” is a subjective evaluation of the situation as a whole, not necessarily an objective check list.  Moreover, the IRS is the ultimate arbitor of what is considered reasonable.  So what is new?  The overall economic downturn, along with the focus on executive pay, has ramped up IRS scrutiny of the compensation nonprofits pay their executives.

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How To Get Funding For Your Nonprofit (Part II)

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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Understanding IRS Form 990
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Understanding Charitable Solicitations
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