Category: Finance

A reader indicated that she was, “trying to find accounting literature that defines whether we can capitalize the cost of a capital campaign consultant and the project management time provided by development staff who worked on the campaign,” and she asked, are “these costs usually capitalized with the new building or building expansion as project costs?”

1. The technical/accounting answer comes from Christine L. Manor, CPA
( clm@clmanor.com, who wrote “QuickBooks for Not-for-Profit Organizations”) referencing Financial Accounting Standards Board (FASB) guidelines:

In terms of accounting for fundraising costs, refer your accountant to 13.08 Per FASB ASC 958-720-25-4, costs of fundraising, including the costs of special fundraising events, should be expensed as incurred, and costs are considered to be incurred when the item or service has been received.

Fundraising costs incurred in one period, such as those made to obtain capital campaign counsel, compile a list of prospective campaign donors, or actually solicit commitments to a campaign, may result in contributions that will be received in future periods. These costs should be expensed as incurred.

Christine emphasized that, “even though you may lump all the planning and construction costs into a capital campaign asset account, you can’t put the fundraising costs there. Fundraising costs must be charged directly to a fundraising expense account.”

113.43 Per the FASB ASC glossary, fundraising activities are activities undertaken to (prepare to) induce potential donors to contribute money, securities, services, material, other assets, or time…

2. Even though the question seemed to focus on accounting practices, regulations and requirements, let me add that my experience has been that most nonprofits build campaign costs into their overall campaign goals.

So, even though the actual costs of a campaign have to be “accounted for” in the period in which they were accrued, those costs can be recouped by adding the anticipated total amount of the expenses to the campaign goal.

But, caution, those costs must be listed as such in any campaign budget or literature that includes a breakdown of what the campaign is designed to accomplish. Anything else would be unethical.

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Have a comment or a question about starting, evaluating or expanding your fundraising program? Email me at AskHank@Major-Capital-Giving.com. With over 30 years of counseling in major gifts, capital campaigns, bequest programs and the planning studies to precede these three, we’ll likely be able to answer your questions.

This is the first in (what’s likely to be) a long series of postings about the Combined Federal Campaign (CFC).

Workplace giving, with the CFC, is the only type of non-profit fundraising that is subsidized, low-risk and high leverage. If you’re not familiar with the CFC, let me share a few facts and debunk a few myths.

1. Myth   It’s hard to get into to the CFC.
   Fact    94% of nonprofits that apply are accepted.
The CFC actually has an “open admissions” program. If you meet the criteria, you’re in. And, in general, the 6% that don’t get in are the ones that don’t follow the instructions.

2. Myth  The CFC doesn’t raise significant money.
   Fact    One billion dollars of unrestricted funds in the past 5 years.
CFC donors have contributed more than $200 million to thousands of local, national, and international non-profits. CFC monies are unrestricted, reliable and predictable. In terms of actual giving, if the CFC were a foundation, it would be the 10th largest foundation in the United States.

3. Myth  The only place that has Federal employees is Washington, D.C.
   Fact    89% of Federal employees live outside of the DC region.

4. Myth  The CFC is only for the “big guys” (National Nonprofits).
   Fact    40% of the funds raised go to local nonprofits – the “little guys.”

5. Myth  There’s a lot of red tape.
   Fact    No more than any grant application, much less on the “back end.”
The regulations were substantially streamlined in 2006, so even if this was the case before, things have changed. There is zero red tape for the non-profit after the funds are received — (not bad for a government program!)

6. Myth  Some “expert” is going to decide if our non-profit gets any money.
   Fact    Donors designate more than 90% of CFC dollarsto specific nonprofits.

7. Myth  CFC Donors are fickle
   Fact    Most CFC donors are multi-year donors to the same nonprofits.
How many ten year grants have you gotten from foundations that support your organization? CFC donors are consistent !!

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My next posting on the CFC … “What is the CFC and Where to Apply”

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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 Huddleston1@gmail.com .

That question was asked on one of the listserves where I am (usually) just a lurker, but was one I felt moved to answer. What I said was that….

I’ve been a fundraising consultant for well over 30 years, and I obtained my CFRE when the program was relatively new – back in the early ‘80s. I maintained my certification for twenty years, and (for the most part) found the initial process and the required ongoing-recertification to be worthwhile.

The CFRE is a basic certification. It says that the person who has worked for and earned the designation has a minimum of five years in the field and has an understanding of the fundraising/development basics.

But that’s it !! Where having the certification “says” that a person has knowledge of the basics in fundraising, the certificate alone does not say anything about an individual’s skills or ability to use the knowledge.

The field of fundraising is fairly broad, and most people who enter the field have little knowledge/understanding of what all of the elements are and how they relate to and support each other.

So, my response to the question is: If someone plans on staying in the field, it would be to their advantage (and to the advantage of any non-profit that might hire them) to be serious about their education, to discover what it is that they didn’t know they didn’t know and learn to take seriously this field we work in.

The certification process organizes the various elements, relates them to each other and presents them in a way that is relatively easy to grasp. In that context, I believe it is worth the time and cost of pursuing the certification … whether or not you maintain the certification over the long term.

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Have a comment or a question about starting, evaluating or expanding your fundraising program? Email me at AskHank@Major-Capital-Giving.com. With over 30 years of counseling in major gifts, capital campaigns, bequest programs and the planning studies to precede these three, we’ll likely be able to answer your questions.

Although Merriam-Webster defines grantsmanship simply as “the art of obtaining grants,” the reality is so much more than that. A broader, more realistic (somewhat dramatic) definition of that term would be, “The cradle to grave process for ‘birthing,’ ‘raising’ and managing grants.”

Regularly, on this blog, I will share my experiences, real world examples, and other resources to help you develop or expand a grants program for your nonprofit.

So, as promised, in this, my first post focusing on grantsmanship, let’s look at some real world examples…

The Good: According to a 2010 WealthEngine white paper, “Measuring Fundraising Return On Investment and the Impact of Prospect Research,” the average cost-per-dollar-raised for grants is 20 cents … an ROI of 500%. For each dollar raised for direct mail donor acquisition the cost is over a dollar, and it’s often fifty-cents-per-dollar-raised for special events. Clearly, grant seeking can result in a good return on investment … when managed well.

The Bad: If your financial statements and program budgets are not in order, then you’re not ready to start a grants program. Many grantors will scrutinize your financials with a magnifying glass, and if your books are not in total order, don’t expect to be awarded a grant.

Take the case of New Jersey’s application for a U.S. Department of Education “Race to the Top” grant. According to an August 31, 2010 article in The Trentonian, New Jersey “lost crucial points in reporting budget figures for the wrong years in one section of its application.”

The article stated that New Jersey “was a top runner-up in the competition, missing by only a few points.” This financial gaffe cost New Jersey a $400 million federal education grant, and it cost New Jersey’s education commissioner, Bret Schundler, his job.

The Ugly: Grants are NOT a no-strings-attached gift – they are a contract between the grantor, who provides the funds, and the grantee, who performs the tasks and delivers the outcomes described in the proposal. OK, maybe this isn’t The Ugly. It’s just reality. But, if the grantee fails to deliver, it can get ugly, really ugly.

Take the case of the Center for Civic Education (CCE). CCE received grants during FY08 from the U.S. Department of Education to facilitate civic education. The DOE conducted an audit to determine whether CCE administered the grants in compliance with applicable laws, regulations and grant award provisions.

The audit findings were really Ugly, ranging from, “Not meeting the standards for administering federal education grants,” to, “Charging costs that were not reasonable, necessary, or allocable to the programs.” Needless to say, the DOE was not happy, and “recommended” that CCE return over $925,000 that they’d spent in FY08, and that CCE be designated a “high-risk grantee” … subject to special grant conditions.

By the way, the audit and CCE’s response offer some very interesting reading:
The Audit    CCE Response
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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. Lynn can be contacted at lynn.delearie@gmail.com..

An Ethical Question:

The following is based on a question raised by a financial planner….

In the non-profit world, there is an ethical prohibition against anyone profiting by advising/encouraging another to make a gift to a non-profit organization. There is also a specific prohibition against anyone being compensated by a percentage of any amounts donated to an NPO.

It’s OK for a financial adviser to be compensated by a nonprofit organization for advising on and/or managing its assets; and, it’s OK for a financial adviser to be compensated for advising on and/or managing the assets of potential donors.

It seems like it would strengthen the relationship between a financial adviser and his/her individual (wealthy) clients to be able to offer advice/direction regarding their giving … and the benefits they’d derive from giving.

But the advisor should not seek nor accept compensation based on the money that moves from the donor to the NPO.

Four related thoughts:
1) By offering a useful service to wealthy clients, without “additional”
compensation, financial advisers are likely to get more referrals to
other wealthy clients.
2) The recommendations a financial advisor makes to his/her wealthy
clients should be based on his/her knowledge of whether a nonprofit
does good work, manages its finances effectively, and if the potential
donor’s needs will be satisfied by giving to that nonprofit organization.
3) It is considered unethical for an NPO to provide financial planning
advice to a (prospective) donor if the intent of that advice is to get
that individual to make a gift to the NPO.
4) If a (potential) donor wants/needs financial advice about making
a gift to an NPO, and asks the NPO, the NPO must (ethically) refer
that person to his/her independent financial planner.

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Have a comment or a question about starting, evaluating or expanding your fundraising program? Email me at AskHank@Major-Capital-Giving.com. With over 30 years of counseling in major gifts, capital campaigns, bequest programs and the planning studies to precede these three, we’ll likely be able to answer your questions.

Before you apply for a federal grant, you should determine whether your organization has the financial capability to use federal funds properly.

A Financial Checklist…
…to help you determine whether or not you are ready to apply for a federal grant.

□ Has the IRS classified your organization as a tax-exempt entity? To apply for many federal grants, you must be an IRS tax-exempt organization. Most NPOs are 501(c)(3) organizations under the IRS tax code, but other kinds of NPOs can apply for grants too.

□ Are your organization’s financial records audited annually by an independent outside public accountant? A federal agency may require your NPO to produce a “non-qualified” audit report to receive a grant award. This means that there were no financial issues and that all accounting standards were properly observed.

□ Can you meet the financial requirements? Before you apply, you should carefully study the grant guidelines to determine that your NPO can meet all financial requirements. For example, one typical grant requirement is the periodic submission of detailed financial reports.

□ Do you have the organizational financial policies, procedures, and practices in place to use grant funds properly? Once you receive a grant, you will be expected to (1) disperse grant funds according to your application budget; and (2) account for them according to accepted accounting procedures. For example, one important financial practice would be the ability of your NPO to identify and track all grant expenditures.

□ Is your nonprofit ready to be audited by a federal agency? As a condition of award, a government agency may decide to do a pre-award audit to determine whether your NPO can manage a grant … while adhering to accepted accounting standards.

You also may be audited at the conclusion of your grant to determine whether your organization has spent its grant funds properly – i.e., only on those items/activities that were in the budget you submitted with your application, or were approved subsequent to that submission by the granting agency.

Determine your Financial Capability Now
If you can answer all these questions positively, you are financially ready to apply for a federal grant. If any of your answers are negative, address your problems before you apply for a federal grant.

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Dr. Jayme Sokolow, founder and president of The Development Source, Inc. helps nonprofit organizations develop proposals to government agencies, foundations, and corporations. He can be contacted at Jayme Sokolow.

A key problem for many new nonprofits is that most of their founders, that “small number of caring people who want to help,” have the impression that fundraising has to do with “fundraisers” — special events or sales: dinners, circuses, golf tournaments, T-shirts, cookies or candy.

That couldn’t be farther from reality. While those activities seem to produce “quick” money, they don’t help you create a constituency that cares about your success and your long-term survival. Fundraisers and sales attract people looking to be entertained or who really like those thin-mint cookies.

Corporations and foundations are perceived as major sources of funding, so most people new to the non-profit community look to them for support. But, only 12% of funding for NPOs comes from those two sources, combined.

The truth is that corporations will usually provide substantial gifts only if they can benefit/profit by a relationship with your organization; and, most foundations will only support you for a limited time — they don’t want to adopt you, just help you get something started that can-and-will become self sustaining. And, self-sustaining means having ongoing, reliable sources of long-term funding.

Over 80% of funds raised by non-profit organizations come from individual donors or their estates – gifts solicited by various methods, often on a face-to-face basis by volunteers … including founders and other board members.

The traditional methods of ongoing fundraising include direct mail and/or telephone, often supported by email. The majority of funds (roughly 60-65% of all dollars) contributed to nonprofit organizations are in the form of major gifts from individuals.

Successful long-term fundraising, therefore, means creating a plan to identify, educate, cultivate and involve prospective (major) donors with your organization. It also means that, somewhere along the way, you’re going to have to ask them for the gift. “If you don’t ask, you don’t get.”

Non-profit organizations are important, often essential elements of a community, and they provide valuable, and often vital services to people in great need. Creating and operating an NPO must, therefore, be a serious undertaking – with strategic and development plans to ensure long-term survival. When needed, seek expertise and specialized knowledge — accountants, attorneys, consultants….

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Have a comment or a question about starting, evaluating or expanding your fundraising program, your major gifts fundraising program or a capital campaign? Email me at AskHank@Major-Capital-Giving.com. With over 30 years of counseling in major gifts, capital campaigns, bequest programs and the planning studies to precede these three, we’ll likely be able to answer your questions.

Email is a very measurable tool, and it’s important that you measure your results so you can report on the effectiveness of your email program. In this post, I’ll suggest the most meaningful metrics for you to view your email program’s success as a whole. I like to measure this and report it on a monthly basis. In the previous post, I showed you how to examine an individual message’s results against previous emails.

Number of Subscribers: You should have a plan in place to attract new subscribers to your email messages, and so you should be building your subscriber base each month. You probably need to grow at a rate of 1% each month just to maintain the same number of subscribers, because about that percentage of readers change email addresses or unsubscribe (about 20% per year)

Delivery Rate: Most inexpensive email tools do not automatically mark an email address as “undeliverable” after a set number of bounces or failed attempts. It’s of no use to anyone to build up a file of bad email addresses. Remove undeliverable addresses from your file quarterly if you’re paying for your tool based on the number of email addresses in your file. If there are spikes in your undeliverable rate, it may represent a technical problem with the tool you are using.

Don’t believe that “Sent – Bounced = Delivered.” The “delivered” quantity in your email report is the quantity of emails that your email tool delivered to the internet service providers of your subscribers. Unlike the post office, which delivers each piece of mail to each household, no matter how irrelevant, internet service providers regularly discard many emails that they think might be spam. They don’t tell the sender, nor the intended recipient. Some internet service providers (Yahoo!, AOL, Gmail) put some email messages in a “Spam” or “Junk Mail” folder based on their content. Microsoft Outlook does that as well. Many users don’t ever look in those folders. You need to test your email using spam scoring tools to reduce the “spam score” of your emails.

Unsubscribe Rate: Generally individual email messages result in less than 1% of readers choosing to unsubscribe. Look at how your rate is fluctuating over time. If your rate is increasing, perhaps people are no longer feeling your content is relevant or interesting. Too many emails isn’t the problem; too many uninteresting emails is the problem. If all of your email messages are donation appeals, people will just delete them politely from their inbox, and after awhile they’ll decide to unsubscribe to reduce their need to delete them. You need to vary the messaging and subject lines in order to keep their interest high.

Questions about how to measure your email results? 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: RChrist@Amergent.com or at his LinkedIn Page

Non-profit organizations (NPOs) exist to provide services that would not otherwise be available to many in the community. Too many NPOs fail to survive, however, because the people responsible for their creation aren’t fully aware of what it takes to effectively provide for the needs of the community.

Non-profits are usually created by a relatively small number of caring people who “want to help.” The majority of those people have little more than their good intentions to sustain them, and they create their NPOs without many of the “tools” that would help them tip the odds in favor of long-term survival.

Success requires a strategic plan that defines the organization’s mission, direction and future, a plan that details all the activities necessary for the NPO to pursue its mission, and the funding needed to support those activities;

Success requires a development plan that defines the appropriate fund raising activities for satisfying those funding needs; and,

Success requires a leadership committed to doing whatever is required to ensure that the people who need the services of the organization can get those services.

Since you can’t be everything to everyone instantly, you have to begin somewhere. The first step in the process, therefore, is to realistically define the extent of the services you want to provide, to whom, and in what timeframe.

You must then identify what supplies, equipment and personnel you will need, and in what timeframe; whether all work and services will be provided by volunteers and/or paid staff; where those people will come from; what experience/training they will need; and, what all of that will cost.

Once you’ve identified what it will cost, the next step is to identify sources of income.

Will you charge a fee for your services, or will you have to “raise” the money? Unless you know that the need you are satisfying is of a short-term nature, you must be sure that your funding sources will be there over the long-term. And, so you can track your progress and tweak your plans accordingly, definitive goals are essential.

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Have a comment or a question about starting, evaluating or expanding your fundraising program, your major gifts fundraising program or a capital campaign? Email me at AskHank@Major-Capital-Giving.com. With over 30 years of counseling in major gifts, capital campaigns, bequest programs and the planning studies to precede these three, we’ll likely be able to answer your questions.

In many organizations, the announcement of a future event moves staff to wave their hands and raise their voices, saying that, “I want to help, I love events.”

The theme and the goals and objectives of an event are (often) determined by the organization’s development team – the event being part of their annual fundraising plan. Those determinations, and most of the planning, frequently include the E.D. and a consultant who specializes in event design, management and production.

The planning process takes months of discussion and decision-making before any public announcement that an event is planned and scheduled for a particular date.

During the planning period, a wise development team confers/collaborates with their colleagues in other departments within the organization, especially with the folks in communications/media … who will most likely be asked to help draft copy for an event program, and plan a media strategy to help promote the event.

Additionally, it helps to get early buy-in by all staff, so they feel they have been heard, and to include the valuable insights they might have. Someone in the organization’s program department may have some creative thoughts on who to involve in the event; and, the simple task of reviewing lists should be on everyone’s to-do list, regardless of their department.

There is always a chance that a staff member could know someone who would be interested in attending the event … or even sponsoring it. This information can be important, not only to the development team, but to the success of the event.

Do not minimize the contribution of some of the support staff … who should not be viewed as envelope stuffers but as part of the team. Turn the stuffing into an office party, supply lunch or snacks and get everyone together in the conference room … including the development team. The stuffing will go much faster if no one feels like “they had to do all the grunt work,” while the development team sits around eating bonbons !!

Many of our client organizations invite the staff to attend the event and “help out.” A list of tasks is passed around to the staff asking if they would like to volunteer for a particular role.

Everyone knows that the “work” takes place before the event begins (for a 6 pm reception, staff helpers should arrive at 4:30pm). And, once they’ve helped get things ready, those volunteers are able to relax and enjoy the event.

No staff person should be forced to attend and participate, but with the right environment/motivation, most staff members will want to participate. When they do, they benefit, the organization benefits, and attendees benefit by getting to meet staff members in a social setting.

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Have a comment or a question about creating or expanding your special event? Email me at Info@NatalieShear.com. With over 30 years in conference and event planning, we can help you turn your vision into reality.
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Have you seen Natalie’s ebook on Special Events ??