The Strength of Individual Donations over Federal Funding

The news articles and emails about the federal and state budget crisis’ and the effect on nonprofit funding are rampant. Many of these are a call for nonprofits to contact their legislators and fight for their service. Others advise nonprofits to plan for the coming funding cuts through various strategic initiatives.

This past week I heard Dave Ramsey interviewed and he noted that if individuals gave more freely to the social sector, it would eventually make the government irrelevant. While this statement might seem too idealistic, think for awhile what happens to your tax dollars before they actually get to a nonprofit.

While nonprofits receive federal monies directly, many—especially the smaller nonprofits receive “pass through federal money” either through the state or through the County. In some cases, the money goes from the federal government to the state, then to the County, then to the nonprofit. Each step involves administrative costs—people, paperwork, compliance issues, etc. And this is in both directions. The nonprofit applies to the County for funding, the County applies to the state, the state applies to the federal government. Even if there isn’t an application, there are contracts signed, budgets agreed to, funding changes, statistical information, federal, state, and county procedures and rules to follow.

If your nonprofit receives government money, while I am sure you are very grateful, you know of the forms and paperwork. Monthly, quarterly, and annual financial and statistical reports. Countless phone calls and letters if your financial information doesn’t agree with their financial information. One client had to submit all invoices and front and back copies of canceled checks in order to get their reimbursement. And someone at each level is reviewing all of that paperwork.

And at year end (this is where we come in)—additional audit procedures are required at additional cost to the nonprofit.

It’s just a guess—but I suppose that less than 20% of your tax dollars that are supposed to go to nonprofit purposes actually make it to the nonprofit’s bank account.

Your tax dollars get so watered down before a tiny piece actually gets to the charity (with tons of redtape, bureaucracy, & strings attached). Give directly and 100% goes to the charity.

Don’t think the individual sector has money to give? I would propose that a number of individuals have not yet experienced the joy of giving and if they were better acquainted with some nonprofits and were asked to give, they would give more.

If you can still get Federal and State funding, pursue it aggresively and secure what you can, while you can. But even more aggressively, pursue your individual donors. Form relationships, find ways to engage the community with your nonprofit, get the word out. Speak out about the benefits and blessings of giving. Federal and state budget cuts are inevitable and individual donations can and should fill the gap.

PA Decennial Filing for Nonprofits: Do You Need to File?

Decennial Filing with the PA Department of State will ensure protection of the corporate name.

The next Decennial Filing may be made any time from January 1, 2011 through December 31, 2011. A Decennial Filing is required ONLY IF the corporation has not made a new or amended filing with the Corporation Bureau of the Department of State in the 10-year time period from January 1, 2002 through December 31, 2011.

If the nonprofit corporation has filed an "Annual Statement" with the PA Department of State, within the 10-year period from January 1, 2002 through December 31, 2011, then it is not necessary for it to file a 2011 Decennial Filing. The advantage is that there is no cost to filing an Annual Statement, whereas the fee for the Decennial Report is $70. An Annual Statement is required whenever a nonprofit corporation changes Officers. This has been a long standing requirement that not many organizations have adhered to in the past.

PANO is now encouraging all nonprofit corporations to file that report the next time you change Officers of the Corporation. That way the PA Department of State has indication that the organization is active and the 2011 Decennial Filing will not be needed if an "Annual Statement" has been filed between January 1, 2002 and December 31, 2011.

Below is the information that is contained in the Standards for Excellence Legal Checklist regarding the Annual Statement filing:

Description: Form DSCB: 15-5110 Annual Statement - Nonprofit Corporation

Nonprofits must file annual reports only if there has been a change in corporate officers during preceding calendar year. (*No fee is required for this filing)

From the PA Association of Nonprofit Organizations

Ten Simple Tips for Good Governance (What I Learned from PANO)

The end of the year is quickly passing. At the end of October, Liz and I attended the PANO Standards for Excellence consultant training. The session was full of very beneficial information. Liz wrote this article summarizing some of what we learned on good governance in our firm's newsletter for nonprofits and I wanted to post it here as well.

1. If your Mission Statement is more than 1 sentence, it is probably too long.

2. Review your Mission Statement every three years. Document your review and approval of the Mission Statement by clearly noting it in the Minutes.

3. Your Minutes should include who was present--identified as Board or staff, who was absent, the type of meeting, what was done not what was said, the start and end times and should be signed by the Secretary.

4. Question to ask when reviewing financials “Are all the bills input (whether they are paid or not)?

5. Every organization should have a Reserve Policy. 3-6 month Reserve is recommended.

6. 3:1 ratio is minimum when looking at funds raised vs. expenses (some exceptions apply)

7. If you are soliciting gifts in other States, you need to be registered there. Use a service like Labyrinth, Inc. to assist in the process. http://www.labyrinthinc.com/

8. Conflict of Interest Policies are not just for the Board-but for anyone who has decision making authority for the organization including staff and volunteers.

9. If your organization is involved in Lobbying, even a little bit, consider making the federal 501(h) election. The h election is an expenditure test that answers the question of whether your organization is doing too much lobbying by examining how much you spend on lobbying (lobbying expenditures).

10. Invest in the Standards of Excellence Educational Resource Packets. They are inexpensive and chock-full of great information.

Upcoming Payroll Changes: Get Ready!

The Affordable Care Act included a number of changes to payroll reporting.

• On your 2011 W-2’s you will need to report the value of the employee’s health insurance. The amount reported does not affect tax liability. These are the W-2's that you will file in 2012 for the 2001 year. However you should take some steps now to get ready for next year. You need to contact your outside payroll company or your financial software company if you prepare payroll in-house, to make sure that the health insurance expense for each employee can be captured and included in next year’s W-2. Also check with your health insurer to make sure you will receive a yearend report that shows the health insurance expense for each employee.

• Starting January 1, 2011, the cost of over the counter drugs cannot be reimbursed from a Flexible Spending Arrangement unless a prescription is obtained.

20 Questions - Part III

You want to have a good system to track data so that you can use it easily in your analysis process. Here are some things to think about when you are tracking data.



Do we have a good system to track data?
14. What are the deliverables that we can communicate to the grantor? Are they outputs or outcomes?
15. How many people can we serve with the grant? How many units of service can we provide?
16. Can we clearly communicate statistics? Will charts or graphs help us pictorially represent our impact on the community?
17. Are we consistently reporting our statistics to the community? Number of people served; units of service. Is our definition of units of service consistent?
18. Are we already collecting data for other purposes that can be used for grant seeking purposes?
19. Are we protecting the integrity of the data? How is the information verified?
20. Can we use national, state, or local statistics to further communicate the benefit of the grant?

20 Questions-Part II

It can be tempting when you are desperate for funds to apply for every grant that even remotely seems close to your mission. However you need to make sure that the grant will not end up costing you more money in the long run. Here are four more questions from 20 Questions that Data and Financial Analysis can help you answer, that address this issue.


Is this grant the best fit for us?
10. If the grant is to fund collaborative work between two organizations will the collaboration be financial beneficial (or at least financially neutral) for both of the organizations?
11. If the grant is to start a social enterprise, will this social enterprise be financially beneficial to the organization?
12. If the grant is for a new program, can we afford to deliver the new program? Can it be sustainable beyond the grant period?
13. If the grant is provide a springboard to start a new program and we are expected to support the program on our own after the grant period is done (usually 2 to 3 years); what is the plan to become self supporting (sustainable)? How will we pursue donations from other sources for the program?


The last seven questions will be covered in the next post.

20 Questions that Data and Financial Analysis Can Answer

A number of my posts have been about the information that you can gain to help you better manage your organization through the analysis of data and finances. Remember that data and financial analysis is part of the picture. Most donors give because of relationships; their commitment to the cause; and/or their values. However, data and financial analysis can help answer the following questions that you and/or your donors might be asking:

How can our resources best be used?
1. Where do we most need the money? What program will benefit the greatest from this investment?
2. Which programs will be able to increase services and the number of people they serve (increase capacity) with additional funds?
3. What is the power of investing with our organization?
4. What programs have the potential to attract more funding from other sources if we expand the programs?
5. Will this grant help us attract more volunteers or help us to use volunteers more effectively—adding to our capacity with both funds (the grant money) and people resources (the volunteers)?
6. Are we using our facility, staff, volunteers, specialized resources to their fullest capacity? Is there untapped capacity that we can develop with the grant funds?
7. Do we have a “wish list” of needs and the approximate dollar cost so that we can easily and quickly respond to grant opportunities?
8. How do we compare to other organizations offering similar services?
9. Why are we the best organization to receive the grant funds?

More questions will be listed with the next post.