This post from Nonprofit Quarterly discussed what areas the IRS has targeted for 2013 with regards to nonprofit organizations. A few notable areas:
1-Nonprofits that report unrelated business income, but don't file the form 990-T for unrelated business income
2-Nonprofits that report significant unrelated business income but don't show any profit for the income
3-Regulations and guidance for supporting organizations
4-Regulations for church tax inquiries and examinations
The article also noted the reduction in IRS audits of exempt organizations, the reduction of staff in this area, and the tasks mandated by the health care act that further reduce their available time for audits. Over a period of 30 years, only one of our nonprofit clients was audited by the IRS and it turned out to be a random selection of a small nonprofit client to train the IRS agent.
Regardless of whether or not you are likely to be audited by the IRS, your 990 needs to be accurate, transparent, and compliant. More and more donors are accessing nonprofit 990's on Guidestar. This comes up in our conversations with businesses and individuals when they are making donor decisions or if they are deciding to serve on a Board. It is also coming up in conversations with estate attorneys who advise their clients to research the organizaitons they note in their wills. If you are following the 990 instructions and providing clear information on your 990, it can increase your favor in your donors' eyes.
Friday, January 25, 2013
Wednesday, January 2, 2013
Thanking Volunteers can get you in trouble with the IRS
Nonprofits thrive through their volunteers. When looking to say "thank you" some nonprofits may consider issuing gift cards. This post by Katie Thomas, CPA with Henry & Home in Arizona reminds you to consider the implications of gift cards for volunteers. Thanks to Jim Ulvog for highlighting this post in his blog-Nonprofit Update.
Monday, December 17, 2012
Year End Giving Tips and the Influence on Your Donors-Part 3
We have been looking at year end giving tips--most of which usually cite the tips from Charity Navigator. Their discussion is much more in depth than the summary here so make sure to review their listing. Our focus has been on how you as the charity can put your best foot forward. The last three...
8. Look at the charity's financial health. Review the last three years of the Form 990. Generally you would expect to see 75% of the expenses spent on program and 25% on administration and fundraising. I was pleased to note that Charity Navigator affirms that well run organizations need to spend money on raising funds and the administrative functions of running the organizations. I am always wary of charities who proclaim that 100% of your donation goes directly towards the program. A sustainable organization spends money to continue fundraising and has a solid administrative foundation. You should also have money saved for the future.
We sometimes find that smaller nonprofits only allocate direct program costs to the program category. You should have a reasonable method for allocating occupancy costs, office costs, and other costs to program, administrative, and fund raising.
9. Concentrate giving. If you have spent time evaluating a charity, give more money to that charity instead of spreading smaller amounts among multiple charities. Charities spend time and money processing your gift and following up with future requests, newsletters, etc. The cost to process a $10 gift will be likely the same as to process a $100 gift. Overall, concentrating your gifts saves charities money. This is an interesting perspective. As a charity, you may be thinking that you welcome that $10 gift because you can demonstrate success in increasing that first $10 gift to a larger gift in the coming years. If that is not the case, what can you do to engage donors so that they want to invest more with your organizaiton in the coming years?
10. Make a long term commitment. When a donor sees the value of their partnership with the charity they will want to be engaged for the long run. Do your donors feel like partners? Similar to the prior point--how can you further engage your donors?
These posts have been aimed at helping you see your charity through your donor's eyes. In the end, you are the steward of your donors funds. By working in partnership with you, they hope to see impact in the community. The more clearly you demonstrate this, the more they will want to partner with you.
8. Look at the charity's financial health. Review the last three years of the Form 990. Generally you would expect to see 75% of the expenses spent on program and 25% on administration and fundraising. I was pleased to note that Charity Navigator affirms that well run organizations need to spend money on raising funds and the administrative functions of running the organizations. I am always wary of charities who proclaim that 100% of your donation goes directly towards the program. A sustainable organization spends money to continue fundraising and has a solid administrative foundation. You should also have money saved for the future.
We sometimes find that smaller nonprofits only allocate direct program costs to the program category. You should have a reasonable method for allocating occupancy costs, office costs, and other costs to program, administrative, and fund raising.
9. Concentrate giving. If you have spent time evaluating a charity, give more money to that charity instead of spreading smaller amounts among multiple charities. Charities spend time and money processing your gift and following up with future requests, newsletters, etc. The cost to process a $10 gift will be likely the same as to process a $100 gift. Overall, concentrating your gifts saves charities money. This is an interesting perspective. As a charity, you may be thinking that you welcome that $10 gift because you can demonstrate success in increasing that first $10 gift to a larger gift in the coming years. If that is not the case, what can you do to engage donors so that they want to invest more with your organizaiton in the coming years?
10. Make a long term commitment. When a donor sees the value of their partnership with the charity they will want to be engaged for the long run. Do your donors feel like partners? Similar to the prior point--how can you further engage your donors?
These posts have been aimed at helping you see your charity through your donor's eyes. In the end, you are the steward of your donors funds. By working in partnership with you, they hope to see impact in the community. The more clearly you demonstrate this, the more they will want to partner with you.
Monday, December 3, 2012
Year End Giving Tips and the Influence on Your Donors-Part 2
In the last post we started looking at advice given to donors on reviewing charities and how you as the charitable organization can put your best foot forward. The articles typically site this listing from Charity Navigator. Let's continue with the next few:
4. Commitment to Accountability and Transparency-charities that follow good governance practices-such as an approval process for the CEO salary; conflict of interest policies; a whistleblower policy; etc.--are more likely to follow good practices in accomplishing their mission. Your potential donor can find out information about your good practices by reviewing your IRS Form 990 either by obtaining a copy from you or the online site, Guidestar. Look at your Form 990 and read page 5 and Schedule O. An organization following good practice will have answered affirmatively to the questions on page 5 and it will be supplemented by clear explantions of how these practices work in Schedule O. Make sure the explanations in Schedule O can be easily understood.
5. Review Executive Compensation-compare it with counterparts in organizations of similar size, mission, and location Charity Navigator notes that the compensation for the Executive Director for the average organization that they review is about $150,000. Their 2012 study covers this in more detail. Your own compensation review process should verify that your Executive Director and key staff's compensation is in line with organizations of similar size, mission, and location. Ocassionally our clients are asked by stakeholders to defend their Executive Director's pay package. Make sure you have the written results of your annual compensation review so you can answer any questions.
6. Be careful of sound alike names. Watch out for organizations that adopt the name of a reputable organization to boost their fundraising. If there is another organization with a name similar to yours, what can you do to ensure donors aren't confused. In some situations, our clients have trademarked names or logos and have legally enforced those trademarks. The legal costs might be expensive but becuase they had a national brand it was important to protect their name.
7. Don't give via phone telemarketing. Typically telemarketers keep 25 to 95 cents of every dollar they raise. This is considered an inefficient way of fundraising. If you use telemarketing, look at the cost. It may not be worth it. If you are the exception, and this practice is cost effective (for example, volunteer students raising money for an alumni association) recognize the negative impact that this practice may have on your donors. How can you overcome the negative perception that might be turning potential donors away?
Just three more to go and we will cover them in the next post.
4. Commitment to Accountability and Transparency-charities that follow good governance practices-such as an approval process for the CEO salary; conflict of interest policies; a whistleblower policy; etc.--are more likely to follow good practices in accomplishing their mission. Your potential donor can find out information about your good practices by reviewing your IRS Form 990 either by obtaining a copy from you or the online site, Guidestar. Look at your Form 990 and read page 5 and Schedule O. An organization following good practice will have answered affirmatively to the questions on page 5 and it will be supplemented by clear explantions of how these practices work in Schedule O. Make sure the explanations in Schedule O can be easily understood.
5. Review Executive Compensation-compare it with counterparts in organizations of similar size, mission, and location Charity Navigator notes that the compensation for the Executive Director for the average organization that they review is about $150,000. Their 2012 study covers this in more detail. Your own compensation review process should verify that your Executive Director and key staff's compensation is in line with organizations of similar size, mission, and location. Ocassionally our clients are asked by stakeholders to defend their Executive Director's pay package. Make sure you have the written results of your annual compensation review so you can answer any questions.
6. Be careful of sound alike names. Watch out for organizations that adopt the name of a reputable organization to boost their fundraising. If there is another organization with a name similar to yours, what can you do to ensure donors aren't confused. In some situations, our clients have trademarked names or logos and have legally enforced those trademarks. The legal costs might be expensive but becuase they had a national brand it was important to protect their name.
7. Don't give via phone telemarketing. Typically telemarketers keep 25 to 95 cents of every dollar they raise. This is considered an inefficient way of fundraising. If you use telemarketing, look at the cost. It may not be worth it. If you are the exception, and this practice is cost effective (for example, volunteer students raising money for an alumni association) recognize the negative impact that this practice may have on your donors. How can you overcome the negative perception that might be turning potential donors away?
Just three more to go and we will cover them in the next post.
Thursday, November 29, 2012
IRS posts 2013 mileage rates
The new auto rates for 2013 are:
56.5 cents per mile for business miles driven
24 cents per mile driven for medical or moving purposes
14 cents per mile driven in service of charitable organizations
These rates have increased 1 cent from 2012.
These rates have increased 1 cent from 2012.
Monday, November 19, 2012
Year End Giving Tips and the Influence on Your Donors-Part I
At this time of year when the focus is on giving, I have seen a number of articles in local and national magazines on selecting charities for giving. The one that I read recently sited Charity Navigator's post Top 10 Best Practices of Savvy Donors As I read through the points I thought about how charites can be prepared for these savvy donors.
Here are the tips (in italics) and what you can do to put your best foot forward this giving season.
1. Be proactive--identify what results are most important to you and be specific about the goals you expect by giving Make sure your mission and your community impact are obvious to people who may not know you well. Look at your website, your facebook page, any recent newspaper articles. Can a donor easily see what you do and the impact you deliver? Do they have to read through information or click onto other pages? Most organizations communicate clearly what they do but is your impact obvious?
2. Engage in dialogue-talk to the staff to learn about the group's accomplishments, goals, and challenges. How easy is it for a donor to reach someone who can answer these questions? Do you have several staff they could speak with? Are there opportunities for people to volunteer with your work so that these conversations happen naturally in the course of the volunteer experience? Are your Board members equipped to have these conversations? The more opportunities that someone has to learn about your organization from a number of different contacts, the easier it will be for them to engage as a donor.
3. Confirm nonprofit status. Make sure the organization is registered as a nonprofit charity. You can check your organization's status here on the IRS website at Publication 78. The IRS revoked the status of a number of small nonprofits that had not filed tax returns. We have also come across older organizations that were filing tax returns with the IRS but were not registered. Better for you to check and make sure than to be surprised by an inquiring donor.
The next few posts will continue to look at the other points.
Here are the tips (in italics) and what you can do to put your best foot forward this giving season.
1. Be proactive--identify what results are most important to you and be specific about the goals you expect by giving Make sure your mission and your community impact are obvious to people who may not know you well. Look at your website, your facebook page, any recent newspaper articles. Can a donor easily see what you do and the impact you deliver? Do they have to read through information or click onto other pages? Most organizations communicate clearly what they do but is your impact obvious?
2. Engage in dialogue-talk to the staff to learn about the group's accomplishments, goals, and challenges. How easy is it for a donor to reach someone who can answer these questions? Do you have several staff they could speak with? Are there opportunities for people to volunteer with your work so that these conversations happen naturally in the course of the volunteer experience? Are your Board members equipped to have these conversations? The more opportunities that someone has to learn about your organization from a number of different contacts, the easier it will be for them to engage as a donor.
3. Confirm nonprofit status. Make sure the organization is registered as a nonprofit charity. You can check your organization's status here on the IRS website at Publication 78. The IRS revoked the status of a number of small nonprofits that had not filed tax returns. We have also come across older organizations that were filing tax returns with the IRS but were not registered. Better for you to check and make sure than to be surprised by an inquiring donor.
The next few posts will continue to look at the other points.
Monday, November 5, 2012
Board Members & Fundraising
It is probably one of the top 5 questions our nonprofits have in relation to their Boards--how can we help our Board Members feel comfortable with fundraising? This post by Claire Axelrad at her blog Clarification answers that question in an insightful memorable way.
My favorite quote from the post:
My favorite quote from the post:
No one is asking for money merely for the sake of money. They’re asking to serve a greater purpose and are engaging others in a compelling story; then matching folks who are interested in this story with a cause they value and a solution they can endorse.
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