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America's First Choice for Nonprofit Startup and Compliance

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When Foundation Group launched in 1995, we were the first specialty firm in America dedicated exclusively to starting nonprofits and helping them to stay compliant with state and federal regulations.

20 years later, we're still going strong!  In fact, our client base continues to grow exponentially every year...and we've never been more committed to bringing our clients the expertise they need to see their vision come to pass.  Simply put, we love what we do and we're passionate about doing it with excellence!

We were the first...and we've never stopped leading!  Call us and see why we are America's first choice for nonprofit startup and compliance services.

Nonprofit Fundraising Basics

Nonprofit Fundraising

One of the most important things that a nonprofit can do to build a sustainable organization is to develop a robust fundraising system. Funding for nonprofits typically comes from three sources: donations, grants, and program revenue. Each of these sources has benefits and limitations, but a critical thing for nonprofits to remember is that they must diversify their funding sources to ensure budget continuity in case any funding source goes dry.

Public Donations & Grants

Most public charities generate a majority of their funding from public donations. These donations can be from an individual, a company, or from another public charity. Donations from individuals are typically tax deductible to the donor, but the tax benefit is typically not the only reason an individual chooses to support a nonprofit. The most successful public charities communicate clearly about their vision for impact and the reasons why they are raising funding. The most successful fundraising campaigns give donors clear information on what their funds are supporting, and follow up with donors on the success of the programs that utilized the funding. The ultimate goal is to build an enthusiastic fan base of donors giving small, sustainable amounts. Then, you won’t find yourself dependent upon major gifts.
Grants, while they often provide larger funding sums to support specific programs, are a less reliable source of funding and should be considered supplemental to individual donor gifts. Grant funding is extremely competitive and typically only the top ten percent of nonprofits (by program size, history, or other criteria) in any given area of impact receive grants. Like relying on a small group of donors each giving large sums, the risk in grant funding is that in any given funding cycle your nonprofit might not get chosen as the recipient. Additionally, grant funding typically requires a very specific designated use that is aligned with the goals of the granting organization, with detailed reporting and oversight.

Program Revenue & Other Funding Sources

Program revenue is revenue generated through the program activities of a nonprofit. In order for the IRS to recognize the revenue as legitimate, program revenue must be directly related to programs that drive the organization’s tax exempt status, e.g. tickets sold by a nonprofit theatre, or tuition and fees generated by a school. Not all nonprofit business plans will include the generation of program revenue, but those that do often find it to be a good source of sustainable income. Another important point about program revenue is that, because it’s tied directly to the organization’s purpose, it is nontaxable just like donation.
Revenue generated from an ongoing activity that is not directly related to a nonprofit’s programs, however, is considered “unrelated business income”, or UBI. Unrelated business income is not a good revenue model for most nonprofits and cannot make up a significant portion of a nonprofit’s revenue regardless, or else that organization’s tax exempt status may be put in jeopardy (as it would be better characterized as a for-profit company activity). In addition, net proceeds from UBI are fully taxable to the nonprofit.
For most startup nonprofits, building a broad donor base of individuals that can give at a variety of levels is the best way to sustainably grow your organization’s programming resources. Supplementing that broad base with major-gift givers and grant funding is merely the icing on the cake. Your donor base is not only your source of funding, but of word of mouth advocacy, in-kind donations, volunteers, and other non-financial resources. For more information on how to create a successful nonprofit, check out some of our other articles!

Greg McRay, EA

Greg McRay is the founder and CEO of The Foundation Group. He is registered with the IRS as an Enrolled Agent and specializes in 501(c)(3) and other tax exemption issues.

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Eladio Hernandez
Guest

Hello we just did a Fundraiser and asked that the Treasurer prepare a report for our next meeting but she stated that one of our directors who was coordinating the event refuses to furnish receipts or give her numbers of sold tickets until the day of meeting. Is this legal can she withhold this information?

Dr. Eric T. Martin
Guest

To Whom It May Concern:
I just initiated a 1,000,000 bulk email campaign to small businesses throughout the USA and did not receive one donation. I believe that I was defrauded. Please reply. Thank you.
Sincerely,
Dr. Eric T. Martin

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Successfully Starting a New Nonprofit
  • Defining Your Nonprofit's Purpose
  • Nonprofit Ownership
  • Board of Directors
  • Executive Compensation
  • Fundraising & Compliance Basics