Lessons Learned from Knight Foundation's Digital News Study

This article from NonProfit Quarterly summarizes highlights from the Knight Foundation's study Finding a Foothold-How NonProfit News Ventures Seek Sustainability.   While the focus in on news organizations, the observations from the study are valuable to any nonprofit:

1- compare yourself to your peers and target those from whom you can learn
2-revenue diversity with a focus on individual donations is key
3-while some donations might be significant donations from high net worth individuals, most donations were much smaller
4-the correlation between stakeholder engagement and donations
5-attack your assumptions always
6-measure what matters

If you don't have time to read the whole report, the NPQ article is a great summary and the discussion of the recommendations at the end of the report are a quick but thought provoking read.

Thinking of Serving on a Board?

Maybe one of your New Years Resolutions was to get more involved in the community by serving on a Board.   Before you jump in, check out this article in the January 2014 Journal of Accountancy   Consider This Before Serving on a Board    Amy Waldron, CPA interviews attorneys James K. Thurston and Peter J. Larkin about the possible liabilities to be aware of when serving on a Board. 

The one issue they note--personal liability for unpaid payroll taxes is one we address in our Board Boot Camp.   We have seen some nonprofit clients get behind on payroll taxes--and the Board Members are not aware.   Because Board Members can be personally liable for these unpaid taxes, it is important for Board Members to make sure their nonprofit is current.

The attorneys note a number of strategies a Board Member can take to reduce risk.

Fundraising Q&A-Auction Items

QUESTION:  What is the charitable contribution for the winning bidder of an auction item?

 

ANSWER:  The winning bidder of an auction item can take a deduction for the amount in excess of the value of the item.   For example, a bidder pays $80 for a $50 restaurant gift certificate.   Their charitable contribution is $30—the amount the price paid exceeds the value by.   If they bid $50 for the $50 gift certificate there would be no charitable contribution.

Another example,  the bidder pays $1,000 for a painting valued at $800.  The charitable contribution would be $200.

The other side of this question is—what is the charitable contribution for a donor of an item that will be used in the auction?

The donors charitable contribution will not be noted by the nonprofit.  The letter from the nonprofit should say thank you for your donation of (describe item) with no mention of the value.  The donor should determine the value.  The donors charitable deduction is limited to the donors cost for the item. 

For example, the donor asks the restaurant to donate a $50 gift card.   The gift card sells for $100.  The donors charitable contribution is zero.   If the donor purchased the gift card for $50 and donated it to the auction, their charitable contribution would be $50.

In the painting example, the artist who donated their own painting that would normally sell for $800 at a gallery, gets a charitable contribution only for the supplies—paint, canvas, etc.  Their time is not valued.

 

It Can't Happen Here

When we are asked to speak about fraud at conferences, attendees will sometimes say

"that could never happen in our organization"

I wish that was true.   I wish I didn't pick up the local paper and see articles on embezzlements at local companies, nonprofits, churches, and youth sports organizations throughout the year.  I wish I didn't read the articles and realize that in most of the cases, the fraud could have been prevented.

This article here discusses the damage that a fraud can do to a nonprofits reputation and signs to look for in your organization.

For more about what you can do to deter fraud in your organization, contact us at cbergvall@bbco-cpa.com

Fundraising Q&A-What can a participant deduct for a special event?

QUESTION:  What can a participant deduct for a special event?

ANSWER:  The general rule for special events is that participants can take a charitable deduction for the part of the event fee that exceeds the benefit to the participant.  For example: if a dinner ticket to an event in $150 per person and the value of the dinner is determined to be $100, the attendee can take a $50 charitable deduction.  It is the responsibility of the nonprofit to notify the attendee of the value they received.  This is an IRS requirement when the value received by the participant is more than $75.

QUESTION:  How should the nonprofit notify the participant of the value of the special event?

ANSWER: There are several ways a nonprofit can do this.   The notice can be printed on the ticket to the event.    $50 of this ticket price represents a charitable contribution.      It can be part of the text of a follow up thank you note from the event.   Thank you so much for joining us as we celebrated 25 years of fighting poverty.  We raised over $30,000 at our event.   Please note that the FMV of the dinner was $100 and  $50 of the ticket price is a charitable contribution.

Fundraising Q & A-5K Fundraiser

 

QUESTION   How should a 5K fundraiser be handled?  Is the registration fee a tax deductible contribution for the donor? 
ANSWER   Typical registration fees for a for profit 5K range from $25 to $100 depending on the amenities available to the runner.   A run that just provides a T Shirt usually is $25.  A run that provides a T Shirt, water bottle, other give away items and food may be $100.  Given those parameters, a nonprofit can determine the value of their run to the participant.   Typically registration fees to run in a nonprofit fundraising run will not be tax deductible to the participant.  Usually a nonprofit fundraising run will involve participants raising money from sponsors.  Those funds raised will be deductible by the sponsors.  A participant who sponsors themselves will be able to deduct that sponsorship portion that is over and above the registration fee.

Ex-Jane Runner pays a $50 registration fee to run in the 5K to benefit Community Nonprofit.  Her friends contribute $500 through sponsorships.   She also adds another $150 to her sponsorship beyond the $50 registration fee.   Her friends will receive a $500 charitable contribution and Jane will receive a $150 charitable contribution.  Jane cannot take the $50 registration fee as a charitable contribution.

The nonprofit needs to carefully word their thank you notes so that it is clear that the registration fee is not a charitable contribution.

Fundraising Q&A-PANO Resources

Over the summer Liz and I presented the popular PANO session-Fundraising Practices: Track It Right! Book it Right! Report it Right!  at the beautiful historic site Pennsbury Manor, right on the Delaware River.   The audience was very engaging and had a number of great real life stories of transparency in fundraising.    Some good questions came out of the session and I’ll share them in the next few posts.   

The great part about teaching the session is that we talk to the group about best practices in fundraising and PANO has a treasure trove of resources to help nonprofits follow these best practices.   These resources are available free to members or for a small fee ($10 to $15) for nonmemebers  at the PANO website.   There are sample policies, guidelines, and procedures that will save you time and frustration.    You can order the materials here.   Select Educational Resource Packets.