Category: Finance

Not long ago, we received an email with a “programs-vs-finance” question….

“Finance is telling me that once a grant is approved it should be listed in the GL immediately, because it becomes a liability not to do so.

“We have always waited for the grant award letter to be returned before actually marking the grant “approved,” in case a donor has an issue with something in the letter.

“Since most people want their money, I get the letters back within a week and pay out within two to four weeks.

“How would an auditor look at a grant that was approved on May 1 but not posted to the GL until July 1… This grant would probably have a start date of June 1.”

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The accounting rules state that gifts must be recorded as soon as you know about them and they are unconditional (not contingent on something else happening). When approved by the funder, the grant is recorded as income in restricted funds and a receivable. As the money is sent to the organization, the receivable is relieved. As the money is actually spent on funded expenses, the income is released from restricted to unrestricted. This transfer is usually done at the end of each month in a lump amount for the month, rather than with each transaction. After the transfer, the income and expense report for the grant should show net income of zero because the recognized income will equal the expenses. This continues until the grant is used up or you return funds.

Many people outside the nonprofit world have a hard time understanding this concept – that you have to spend money in order to recognize income.

Sometimes this leads to strange looking results. If the grant is approved in May 2011 and your fiscal year begins in July 2011, it is completely against audit rules not to record that grant in the fiscal year ending 30 June 2011. That leaves you with a large source of income in one year and a large expenditure in the next year. The classified Balance Sheet (one with columns for unrestricted, temporarily restricted, and permanently funds) makes it clear when restricted funds have been received and spent. It’s the total column that you are likely to see in your day-to-day accounting software that looks extra good in one year and extra bad in the next.

Back before SFAS 116 (1993), the restricted funds would be shown as a liability called Deferred Income. Now the funds are shown in the equity section as Restricted Net Assets.

There are some segments of SAFS 116 (www.fasb.org) that govern the financial statement presentation of restricted funds.

To obtain a full understanding of the subject look at the PPC Guide to Nonprofit Contributions

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Christine L. Manor, CPA, wrote QuickBooks for Not-for-Profit Organizations, available from The Sleeter Group … at www.sleeterstore.com. Christine can be reached at [email protected]

Good government grant proposals tell a compelling story. To tell a compelling story you must have strong Win-Themes because they help reviewers understand why you can provide the best solution to the problem identified in the grant guidelines. When you start your proposal, first create your Win-Themes.

Developing compelling Win-Themes for your government grant proposal is not an easy process. It will involve several meetings with your proposal team and plenty of brainstorming. However, the results will justify the effort because your Win-Themes will provide overarching story lines for your entire proposal.

A Strong Win-Theme:
• Links your solution to the problem identified in the grant guidelines — a problem or a need that your project is supposed to address.
• Supports your solution by providing evidence that your program will help address the problem or need
• Provides reasons and proof that evaluators need to give you a high rating.

A Strong Win-Theme has Three Elements:
Features are characteristics or elements of your solution. They may be software or the number of key personnel, to use a few examples. They are the means to your end, not the end itself.

Benefits are advantages that solve the government agency’s problem or address a major concern. In grant proposals, they usually involve the provision of services. Benefits address the all-important “So What” question.

Proof is the evidence that demonstrates your solution is likely to work.

Creating Great Win-Themes
Step 1: State the basic problem or need identified in the grant guidelines. Example: Increase contraceptive use in Ethiopia.
Step 2: Add your features and benefits. Example: A social marketing campaign (feature) will increase contraceptive use by 5 percent over three years (benefit).
Step 3: Add proof. Example: The same campaign has been successfully implemented in Sudan and Kenya.

Now there’s a great Win-Theme: Our social marketing campaign will increase contraceptive use in Ethiopia by 5 percent over a three-year-period, as it already has done in Sudan and Kenya.

A terrible Win-Theme simply rehashes the grant guidelines and fails to answer the “So What?” question. A bad Win-Theme is all features and no benefits. A great Win-Theme combines features, benefits, and proof to frame your grant proposal.

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Dr. Jayme Sokolow, founder and president of The Development Source, Inc., helps nonprofit organizations develop successful proposals to government agencies. Contact Jayme Sokolow

An email raised the question as to whether “Major Gifts” should be counted in the total for the “Annual Fund.”

I can’t help it. I have to say it, “I really hate the term, ‘Annual Fund.’” (See: The Annual Fund Is Obsolete.)

OK, now that I’ve gotten that off my chest….

By a literal definition, annual gifts are those from donors who (only) give once each year. If some people make multiple gifts during a fiscal year, and if others make gifts some years but not others, their gifts cannot be rightly called “Annual Gifts.”

To distinguish between annual donors and Major Donors, the latter make their gifts based on a number of factors, not necessarily according to the calendar. (See: Major Gifts).

For the former … only “lower-rated donors” are (should be) solicited for “Annual Giving.” These are donors who are likely to give relatively small amounts, and who are not likely to give more than once each year — probably because they are not asked to give more than once each year !!!!! (They are often donors who have been conditioned to think that they’re only supposed to give once each year.)

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A Fundraising Program may generate income from direct mail, telephone solicitation, grants, special events, Major Gifts and any other methodology. At the end of the fiscal year, all of that income is accounted for under whatever headings exist in an organization’s budget/accounting process.

The totals for each methodology, then, are combined to provide a total for the year. Even though not all gifts made to the organization that year were “annual gifts,” the overall total is often referred to as “Annual Giving.”

Some NPOs make a distinction between income raised by the usual A-F modalities and that from a Major Gifts Program; some include a Major Gifts component in the A-F; and, some make no distinction at all.

It’s up to you (your institution) how you define “Annual Fund,” and what income you include in its total.

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Have a comment or a question about starting, evaluating or expanding your fundraising program?
Contact Hank at [email protected]. With over 30 years of counseling in major gifts, capital campaigns, bequest programs and the planning studies to precede these three, he’ll be pleased to answer your questions.

Hints On How To Make Giving To You A Lot Easier

a: Always have a prominent “Where the need is greatest” choice – many people will trust you to allocate their gift as you need to, and unrestricted gifts are the primary goal of every client we’ve ever had.

b: Give people the chance to give a gift to two or more funds at the same time. It’s surprising how many people will give to multiple funds online; these donors tend to be better repeat giving prospects

c: Offer the option to make this a recurring gift. Some nonprofits generate a surprising number of new monthly donors from their website each month.

d: The way you arrange the gift options on your page matters. Test a horizontal gift array ($25, $50, $100, or “other”) against a vertical array. Test an ascending array against a declining array. Test different amounts in the array. Each test will yield a different rate of completed donation forms and average gift amounts.

e: Online gifts by credit card are NOT the only way people like to give online. Give them choices including PayPal, a printable form, and e-check.
[See: “Getting The Whole Pie”]

f: After you’ve gotten their gift amount and attribution, then ask if it’s an honor or memorial gift, and if so, collect that information. Then get their name and address, and finally, ask for their method of payment. This way, if they have to go hunt for their credit card, they’ve invested enough time already that they’re likely to get up off their chair and find it.

g: Don’t ask questions that are not necessary for completing the gift. Phone numbers, “how did you hear about us” and other pieces of useful information tend to get in the way of people completing a gift

h: The donation form is no place for links to other pages on your site with more information. You don’t want to give them chances to leave the donation page except by clicking the “submit” button at the bottom of the page.

i: There will always be errors made by donors in the donation process. They’ll enter their credit card number incorrectly, for example. Make sure that your error messages are clear and forgiving. Here’s a good example of a bad example:

j: Measure the success rate of your donation page:

Look at your web site analytics reports (Google Analytics, Webtrends, etc.) and look at the total “page views” of your donation form each month.

Divide the number of online donations (of all types – PayPal, printed forms, phone, e-check) into the number of page views. That’s the completion rate of your form.

Then divide the total dollar amount of online gifts by the number of gifts to yield an average gift amount. Keep testing different arrangements of your form until you have maximized those two ratios.

Keep reviewing your own site — make it easier to find, easier to get to your donation page, and easier to complete the gift — until you start to see real increases in your online donation results. Do this internal work before you invest a dime in drawing more traffic to your website.

Questions about the online giving process? Or, how to improve your results? Ask Me.
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Rick Christ has been helping nonprofit organizations use the internet for fundraising, communications and advocacy since 2009, and has been a frequent writer on the subject. He delights in your questions and arguments. Please contact him at: [email protected] or at his LinkedIn Page

A recent email asked:
“Do you have an article or statement on what is the standard “special event fundraising equation” used to determine financial success? Obviously, one would set a goal, and if that goal is set, you have been successful. Raising awareness and “making friends” is priceless. But, is there a basic non-profit formula goal such as ‘for every dollar spent to organize, coordinate, market, and produce the event, you would hope to raise two dollars?’”

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Sadly, there is no “Special Event Fundraising Equation.”

The cost per dollar raised, or return on investment, is dependent on a number of factors. Since those factors have been addressed in prior postings*, I’ll keep it simple. (See: Special Events)

The first time, or even the first couple of times an organization runs an event, they’d be lucky to break even. Only after an NPO’s community/constituency is familiar with the event can there be any assurance that there will be a sufficient number of people interested in the event and willing to attend.

Over the years, as the event becomes a “tradition.” and the organization knows what works and what doesn’t, do the costs and income become predictable.

As the event “matures,” the gap between costs and “profit” increases. A fully mature event can generate two, three, even four times its cost … but that does not happen overnight.

As to setting a goal for an event, you can only do that after you’ve had a number of years of experience with that event. Setting a goal in the first couple of years would be an exercise in wishful thinking or in self-delusion. And remember, you only set a goal when you KNOW you can reach it. Failure to attain a fundraising goal sends a wrong message to your current and future donors.

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Have a comment or a question about creating or expanding your special event?
Ask Natalie Shear. With over 30 years in conference and event planning, she can help you turn your vision into reality.
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Have you seen Natalie’s ebook on Special Events ??

Had a “wrong number” phone call recently from a “Director of Development” of an organization based in my area who was trying to reach a totally different business.

Even though I was not the intended recipient of the call, when the caller learned that I was a fundraising consultant, she thought that it was “kismet” that we had connected.

She had “questions” related to obtaining corporate contributions … the apparent focus of most of her (organization’s) fundraising efforts.

She talked about her emphasis (to corporations) on the wonderful things her organization does for its constituents, but she totally missed the concept that if you want money from a corporation you have to show them how giving to you will improve their bottom line and/or their public image.

I asked about her background in development and learned that, after many years in industry, she’s been in fundraising for ten years – with a singular focus on corporations. With her emphasis on corporate fundraising I asked if she was the Corporate Affairs Director, but she emphasized that she was the D.O.D.

I asked about her background/training in development … and there was none !!

Even with her participation/attendance at AFP chapter meetings, she seems to believe that anyone can be a Director Of Development … with or without the experience/skills needed to direct a development program. That also suggests that AFP isn’t effectively conveying to its members/attendees what development is and what a Director of Development does. That’s sad.

It’s also scary/depressing how often NPOs hire development staff/directors who have no clue that there’s a difference between fundraising and development. Of course, the people at the NPOs also have little-or-no understanding of what that difference is. They’re only looking to hire someone to raise money … so they won’t have to !!!!!

What do you think ?? Let me know, and I’ll post your comments.

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Have a comment or a question about starting, evaluating or expanding your fundraising program?
Contact Hank at [email protected]. With over 30 years of counseling in major gifts, capital campaigns, bequest programs and the planning studies to precede these three, he’ll be pleased to answer your questions.

In a CFC campaign, each Federal employee gets a pledge card with a long list of charitable organizations, and many folks check the boxes of more than one. Most donations are by designation to specific non-profits, and most donations are made by payroll deductions.

CFC campaigns are in the fall, payroll deductions begin in January, and the Federal employee’s year-end payroll statement lists the amounts donated to their chosen nonprofits.

Why People Give

Findings from Gilmore Research provides these statistics:
● 60 percent will give when asked by someone they know well
● 40–50 percent will give to a fundraising activity when asked by a co-worker
● 10–20 percent will give to a cause they learn about from the media (print,
   radio, TV, telethons)
● Fewer than 10 percent will give when solicited by a stranger at the door,
   on the phone, in print ads, or in a letter.

Benefits of Workplace Giving Campaigns

When you consider the above, the benefits of workplace giving campaigns become readily apparent. In workplace giving:
● People are giving to people, people they know;
● They are being asked to give by their co-workers;
● The CFC creates a campaign atmosphere, with individual and group
   recognition;
● They are being asked by “enthusiastic” solicitors.

The CFC Is The Most Donor Friendly Means Of Giving !!

The Federal employee, with one pledge card and one transaction
● Can donate to multiple charities with just one pledge.
● Gives money to the non-profit before it ever hits their checkbook
● Accrues no interest charges from credit card donations
● Feels secure—their personal information is never on the Web
● May remain anonymous if they wish … and through the CFC they have
   the option to have or not have their contact information passed on
   to the organizations they support.

Developing Lifetime Donors

In the non-profit world, when you ask who are our most important people, depending on who you ask, you’ll get different answers: “Our clients, our volunteers, our staff, our donors….”

But it’s easy to make the argument that a non-profit’s donors are their most important constituency, because without them, the non-profit ceases to exist.

The CFC provides a unique way for you to develop lifetime donors. Once they get in the habit of donating to your organization, these individuals can continue to provide support for multiple years, if not decades.

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In the next post in the CFC series we’ll take a look at one of the biggest mistakes made by CFC charities, and the simple ways to avoid them.

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During his 25-year career in the Federal sector, Bill Huddleston, The CFC Coach, served in many CFC roles. If you want to get involved in the Combined Federal Campaign, maximize your nonprofit’s CFC revenues, or just ask a few questions, this is the guy to contact … Bill [email protected] .

It’s Not About Me; It’s About You, Really !!
Relationships are at the heart of all fundraising activities, and grants are no exception. Just like dating, the nonprofit grantee needs to find a compatible match in a prospective grantor.

But, unlike a good date, the grantee/grantor relationship is very one-sided. It REALLY is all about the grantor.

Given the proliferation of U.S. public charities – just over one million in 2010, according to the National Center for Charitable Statistics – coupled with the current economic climate, foundations are the much-courted belle-of-the-ball. And, like public charities, foundations have also been pinched by the economic downturn.

As per IRS regulations, private foundations are required to distribute about 5% of their assets annually for charitable purposes. So, when the market is down, their assets generate less income, so they give less.

According to the Foundation Center, grantmaking by private, community, and operating foundations fell by almost 9% in 2009 – figures aren’t out yet for last year.

In addition to financial constraints, foundations are also limited to the charitable purpose(s) established by their donors and managed by their trustees. Unlike individual donors, foundations usually have a well-documented purpose that they are trying to fulfill by making grants.

They are looking for nonprofit organizations that can help them make the changes/improvements in the world that are their raison-d’etre, and deliver the services and outcomes that matter to them.

What should you look for when courting prospective foundations?

Most importantly, look for a foundation with a “purpose” that has significant overlap with your organization’s mission.

If, for example, your mission is to rehabilitate wildlife, then you should be looking at foundations that identify animal welfare as a priority. Conversely, if you are a charter elementary school, then a foundation that funds higher education is not a good fit.

So, when your intended foundation partner breaks-up with you after the first date (or rejects your first proposal), try not to feel hurt. Just do a better job prospecting for your next match … it might be the one made-in-heaven.

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Lynn deLearie Consulting, LLC, helps nonprofit organizations develop, enhance and expand grant programs, and helps them secure funding from foundations and corporations. She can be contacted at [email protected]..

An email asked: “What advice is there for new nonprofits without a funding history? So many groups with a lot of potential just don’t know where to begin.”

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The biggest mistake most new NPOs make is the assumption/belief that, because they want to do wonderful things, everyone (read: gov’t, corporations, foundations and “rich people”) will want to give them money.

The fact is that an NPO must prove itself — prove it can do what it says it can, prove it can be fiscally responsible, prove it is actually needed — before gov’t, corps and fndns will be willing to invest in it.

Of course (he says with tongue-in-cheek), that leaves rich people, and all new NPOs think that Bill Gates is going to send them a check — all they’ll have to do is write him a letter, then watch the mail.

Hey, don’t hold your breath on that one.

A major factor for getting money from rich people is having access to those people. If you have personal relationships with the wealthy, then it’ll be easy for you to pick up the phone and make an appointment to go see your “friend” and ask for that big check. The same if you know someone who has those connections and can/will do that for you.

Failing all that, it comes down to the hard realization that, if you don’t know someone with an “in,” you must rely on the tried and true methods for obtaining that initial funding.

If you can’t rely on outsiders (the gov’t, corps, fndns and the wealthy), it’s up to the insiders to make it happen.

For each new non-profit, the specifics may be different, but the general circumstances are pretty much the same. There must be an understanding that if the people who created the new organization can’t/won’t give of their own resources (to the extent they can) then why would anyone else want to … why should anyone else??.

Once that is understood, the founders of that new NPO must take an inventory — who of the people that they know might come to care (as much as you do) about the reasons why the NPO was created … and eventually want to support that organization.

There must also be an evaluation of how those founders and the people with whom they have relationships can begin to make a difference. This step is often best accomplished with some expert guidance.

Many new NPOs bring in someone to speak with their leadership, to educate them as to the processes and procedures that are, typically, most effective, and to help them determine what might be most effective for them. Founders of many new NPOs also attend seminars/workshops designed to educate new NPO leaders.

Bottom line for a new NPO is — to paraphrase, “Only when you’ve helped yourself will others be willing to help you.” PROVE you’re worthy, and future funding will be a lot more likely.

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Have a comment or a question about starting, evaluating or expanding your fundraising program?
Contact Hank at [email protected]. With over 30 years of counseling in major gifts, capital campaigns, bequest programs and the planning studies to precede these three, he’ll be pleased to answer your questions.

The best way to begin a government grant proposal is with a great kick-off meeting. If the meeting goes well, you will inform, motivate, and focus the grant proposal team on the task ahead.

The proposal team is comprised of the people who will be working on the grant application. They should include the Proposal Manager, the grant writers, the subject matter experts, the accountant or Chief Financial Officer, and anyone who will be actively involved in putting together the grant proposal.

The Kick-Off Meeting is the first step in the process of developing your proposal. The best kick-off meetings involve the entire proposal team sitting face-to-face around a conference table. For efforts that involve partners around the country, a conference call will be more cost-effective and less time-consuming.

The Proposal Manager should run the kick-off meeting. Thorough preparation for that meeting includes:
• Creating a complete agenda for distribution at the meeting.
• Inviting the entire proposal team.
• Inviting senior management – the President, Vice President, and Chief
   Operating Officer. They should attend for two important reasons – to learn
   more about the proposal effort and to support the team.
• Arranging a comfortable setting, and, if the meeting is long, provide
   refreshments or a meal.
• Providing relevant materials in advance – such as the grant guidelines and
   the Application Instructions.
• Providing contact information about the proposal team.
• Describing the process and schedule. The schedule is very important
   because most proposal efforts operate on tight deadlines.
• Explaining why your effort is important is important to the NPO.
• Explaining how the proposal team will work together and in what roles.

Desired Outcomes of the Meeting
• Attendees should leave the room confident in your ability to steer the
   proposal effort as the Proposal Manager.
• They need to believe that the grant proposal has a good chance of being
   funded.
• Management should be committed to providing strong support and advice
   as needed.
• The proposal team should have a clear understanding of their individual roles.
• The proposal team should be committed to adhering to the schedule.

If you can accomplish these goals, you are off to a great start!
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Dr. Jayme Sokolow, founder and president of The Development Source, Inc.,
helps nonprofit organizations develop successful proposals to government agencies. Contact Jayme Sokolow.
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From this posting, until after Labor Day, the Fundraising Blog will post only once each week. We will resume the twice weekly postings in September. Enjoy your summer. ….Hank, Natalie, Jayme, Lynn, Rick & Bill