Grant Reporting

Being awarded a grant is not the end of the line for your grant department.

Nearly all major grantors require some form of grant report or funding accountability statement.

Some are primarily narrative-based, while others require some form of  formal financial statement or utilize a grantor-provided spreadsheet in an Excel-based  format.

There is no one-size-fits-all template. Each grantor usually has their own preferred format.

If one is provided or guidelines given via a website or upon request, I like to download or obtain the information at the same time I research the grant application. That way I can be sure that any budget or information categories will correspond to the grantor requirements from the start. Occasionally the report also gives insight into what areas are of particular importance to the grantor.

In general, the larger the grant, the more complex the reporting becomes. Very large, collaborative or multi-year grants may require interim reports  at either quarterly, semi-annual or annual  intervals.

In addition to the obvious need to prove to your funding partners that you are spending the money as required by the terms of the grant, these reports also provide a snapshot in time of your progress for your Board of Directors.

In general, grant reports might require you to restate your organizations legal description, i.e. your EIN, address, responsible party or parties, date of determination and occasionally even a copy of your financial statements for the year immediately prior to and during the grant period. Some reports will require you to attest that you are still in good standing with the Internal Revenue Service.

If requested you will have to  include any identifying information for the grant, such as its CFDA number or grantor specific-identification (similar to a case number).

It is important that your report reflects alignment with the programs that were funded. If you submitted a line-item budget, the report should reference back to that budget. If the grantor placed restrictions on the amounts used for administrative or capital expenditures, they will want to see that you adhered to those restrictions.

In the case of very small grants from local agencies or private foundations, they may not require anything more than an acknowledgment that you actually received the funds. Still, it never hurts to include a short thank you letter or memo acknowledging the uses of and benefits received from the funding.

The one question that many nonprofits can't answer

That question is…what are your costs?

I do a significant number of business plans and grant applications, and they all require some sort of budget or financial forecasting. For some reason, almost everyone can tell me how much money they think they need for a given program or to start their business. When it comes to filling in the other side, i.e. what costs will that money pay for, less than 50% can provide the information. Added to that is that often they really don't seem to know how to calculate costs. It's almost as though they feel that if they don't think about the costs, they won't have any. If only that were true!

Costs are not just paper plates, postage, and computers. When I ask about things like taxes, the answer is, "We are a nonprofit so we don't pay taxes". Are you sure? What about sales tax, property tax and payroll or self-employment taxes? What about your rent, mortgage and property insurance,  even if your operation is housed in your private home?  If you use your private vehicle in your business or nonprofit, what percentage of its cost of operation can be attributed to business use as transportation costs? Even your internet access fees can be prorated to your operations.

Every single dollar of revenue generates some non-program costs. If you need $5,000 to run a certain program, then you have to know how much of that will truly reach your clients. When you are asked to send in a report on the uses of the funds, it better be accurate.

Donors want to see that you have a grasp on costs and you know where to allocate them. If you don't understand the difference between program costs and administrative costs, there is a good chance that the money the donor thinks is going strictly to programs is actually being used to keep the lights on. Most donors don't like that if they didn't know about it in advance.

Grant applications, loan applications  and business plans always have a section for financial data. Some of them are extremely detailed, while others may just want a total cost figure. Some people try to plug in a number that sounds good, but if pressed for details, they can't provide them. Accurate, detailed financial reporting is important. 

For instance, one grantor followed up on an application with a request for the cost breakdown analysis for a program budget line item. The applicant couldn't provide historical data on the cost to operate a delivery truck, because they had simply never tracked it.

That's why winging it doesn't usually work very well for very long.  More importantly, if you do try to wing it, it is usually pretty obvious to both investors and donors and your funding requests will hit the proverbial round file.

If you aren't sure whether your financial reporting will pass inspection, drop me a line and we'll look it  over together.

Impact of IRS 990 Rule Change for Donated Goods and Services

Effective with  the 2013 instructions, discounts on services or use of goods  can no longer be claimed as contributions,  according to the 990EZ instructions, p11, Section B2:

"B2. Donations of services or use of property Do not include the value of services donated to the organization (such as the value of donated advertising space, broadcast air time (including donated public service announcements), or discounts on services), or of the free use of property (materials, equipment, or facilities) as contributions on line 1."

As in all things relative to the Internal Revenue Service, consult your tax professional for guidance.

What it means to you.

Since many nonprofits routinely record items such as the donated use of office space, discounts on equipment and charitable discounts for services as part of their public support, this may impact their ability to meet the 33-1/3% of public support necessary to qualify as a publicly supported organization.

More importantly, the rule change could lessen participation by donors in these relationships. While most donors say that the deductibility of their donations is secondary to their desire to support a nonprofit, very few are willing to state unequivocally that deductibility is not a consideration in their business strategy. If you can't count it as a contribution, they can't count it as a donation.

In the case of large corporations that may donate excess goods such as software or electronic equipment, these donations provide a way to offset income. While the amounts may be insignificant relative to their revenues, every little bit helps. If the donor is a small business, they may not be able to absorb the cost without any offset to income.

At the very least, you should anticipate the effect on your organization resulting from this rule change. What happens if your office space suddenly becomes unavailable, or the brochures your local printing company has been doing for free suddenly have to be paid for? Can the donor just write a check back to you for the amount of the invoice as a cash donation without the transaction being suspect?

Every business in the U.S. spends a lot of time and money trying to interpret and comply with IRS regulations. Because of their tax exempt status, nonprofits are always under scrutiny by the IRS. Ignoring the impact of this rule change could be a very costly mistake. 

To keep your donors, think like a store.

If I asked you why you shop at your favorite store what would you say? Would your answer sound like any of these?

•         It is conveniently located.
•          The people are friendly.
•          They carry the brands I like.
•          The checkout lines are short.
•          They always thank me for shopping with them.
•          They give coupons for shopping there.

If you are nodding your head to any or all of these, you are reacting to your "customer experience". Something about your favorite store keeps you coming back as a paying customer.

That is the key to donor retention. The basic things most people want from a store are value for their dollar, appreciation for their patronage , and consideration of their time. They don't buy from a store because the store needs to pay its electric bill. They buy because the store fulfills their needs or wants.

Donors want the same feeling when they donate. They want to know that 

• Your mission fulfills their needs, i.e. they feel  their money helps achieve the outcomes they are expecting.
• They want to know that you truly appreciate them for supporting you.
•  They want the donation process to be easy.

Notice the italicized words above. This is often a hard concept for newer nonprofits to grasp. They get so focused on their mission, they forget that donors may have needs and expectations as well.  According to a 2012 report by Giving USA, nearly 9 out of 10 support dollars comes from individuals rather than from grants or sponsorships, so donor motivation is something you need to understand.

Every donor is looking for a reason to support you and your mission. Something about what you are doing needs to resonate with them. They usually know generally what type of cause they want to support. It's your job to let them know why your organization does that best, not to tell them that you are so broke you will be having a going-out-of-business-sale soon.

For stores the process is easy. They just monitor inventory. If a pink and orange starfish print shirt isn't selling, all they have to do is look at how many are left over at the end of the day, and they know it wasn't what customers wanted.

You can create an inventory for your donor appeals as well. Which ones bring in the most support over the shortest period of time?  Do some appeals work better at one time of year than another? What presentation works best, i.e. all text, lots of pictures, personal stories, community events, donor appreciation days,  video, short social media posts, interactive blogs, or private newsletters just for donors? Analyzing your fundraising results will keep you from repeating approaches that don't work.

Not every donor is going to donate every time, any more than every retail customer buys something every time they see an ad. What you want to do is keep donors connected to your organization. You can't force or guilt them into donating. Serial generic appeals usually wind up in the trash at some point.

When they do have the inclination and ability to donate, keep the checkout times short. A three or four step process online  is like standing in a fifteen person checkout line.

Offer them a chance to stay connected, but not at checkout. One NPO used a cliffhanger strategy. They presented most of a story about an animal rescue, but left the outcome hanging. If you wanted to know what happened you could sign up for their email newsletter. They had about a 70% positive response.

Always thank your donors. You should have a process to capture their contact information. Send them a short thank you note addressed specifically to them. A generic popup window when they finish checking out isn't going to provide the same feeling of connection as a personal note addressed just to them.

The nonprofit version of a coupon might be something as easy as a personal invitation to an event,  a badge, or a refrigerator magnet or other inexpensive merchandise item with your name and a short message telling them why their contribution matters.

Not all donor contact has to be or even should be online.  A food pantry serving a very local area sends a personalized small notepad as their "thank you" with the phrase  " Mary, each one of your dollars provides one sack lunch. Thank you from all our kids"  and their organization name.  If you depend on local support an all-online approach may  seem too detached to keep donors engaged.

Stores succeed because they understand where their money comes from and how to capture it.  The next time you think about fundraising, try thinking like a store. 

Is Your Website Wimpy?

Websites in the nonprofit world need to do more than just sit there. Many nonprofit websites I visit look like afterthoughts. They are not informative, they are seldom updated, they don't seem to make it easy to get substantive information, volunteer, or donate, and many focus only on one donor profile or subset.

Engage all your donors

One of the problems with nonprofit financial support is that the traditional sources are either drying up, or evolving. Your nonprofit needs to function in two unique worlds.

One is the world of what I call corporate-think. Serious players such as large foundations or the charitable arm of large companies are looking for hard data. They want formal outcome reports, hard financial data, and want to form what might almost be called professional partnerships. They want organizations that make them look good and that can promote the effectiveness of their mission. Many will look for donor recognition pages.

The other is the world of the so-called "millennial", that is the younger donors in their 20s and early 30s who grew up in the internet world. They use all the latest electronic media toys. They are socially conscious. They are very visual. They are often still very idealistic in their judgments about your effectiveness. They may be more interested in volunteering than giving money, and they may want to contribute small amounts on a monthly schedule.

The first group is interested in the traditional ways for evaluating success. While the emotional element has some weight in their evaluations and desire to participate in your mission, they still want data-based reports. These folks are going to look for, and place emphasis on things like your annual report, financial statements and outcome reporting that is more or less based on something akin to the scientific method. Your website's demonstrated ability to follow their train of thought is important. For them, having things like your financial data, 990 and annual report available on your website is a big plus.

Younger donors are looking for visual proof of your mission. In a 34-page research report  principally funded by the Case Foundation, young donors said they were turned off by stale content and a lack of visual images that show them how they can have an impact by participating. You can download the whole report from this link: http://www.themillennialimpact.com/research.

These potential young supporters are expecting instant electronic gratification when they reach your website. Show them your success, don't preach to them. One or two great photos or quotes will encourage them to look farther, but they won't stay long, at least not on the initial visit. They will either act, or leave.

Achieving a Balance

Many nonprofits try to bridge this gap by directing visitors to their Facebook page. I have seen a number of one-page websites that simply say "click here to follow us on Facebook." That ignores the entire world of corporate-think donors.  Most well established foundations were not born in the Facebook era, and don't see that type of connection as, well, business-like.

Other websites seem to have been designed to look like  board meeting minutes. No pictures, videos or albums that can be downloaded. Very formal language, stolid black and white copy, and only updated one or two times a year. No interactive event calendar that also provides a way to sign up as a volunteer or donate.

 

You need both donor subsets

There is more monthly volume (think cash flow) and personal interaction available from the younger set, while the big lump-sum supporters exist in the older group. Courting one group over the other results in a donor profile imbalance. Nonprofits need to understand both audiences and target them on the website.

The perfect blend, if there is one, is a website with financial and data page tabs visible on the home page, a section with lots of photos, links to videos, and human interest stories, as well as donation buttons that allow easy one-click ways to donate. Text to donate strategies work well with the millennial age group, while more traditional donors may even want your street address to be available. Including a phone number in your contact information will allow donors or prospective volunteers to talk to a real live human. If that number goes to a phone message, let them know that you will respond in no more than 24 hours, and do call back promptly.

Consider Functionality

Mechanically, you don't want things on your home page that take a long time to download for either group. You only have from about five to thirty seconds to capture their interest. Since so many people use tablets or phones to surf the internet, your website needs to work well on those platforms, i.e. be based on what is called a responsive template (it resizes to fit the tool being used). For the DIY website builder, there are a number of inexpensive templates available that incorporate this feature. (From personal experience, I do not recommend most free ones, since they may come with hidden advertising links.)

Leave the flashing words, 2-minute videos and complicated graphics on pages other than your home page, but include links or tabs so they know there is more to see. A FEW (That's less than four!) well-chosen jpg images specific to your mission are OK if they load quickly. Show your social media links prominently, but don't chase the visitor off to a social media site either. And never, ever, have a home or landing page that starts out with "Click here to enter our website".

SEO, or search engine optimization has evolved quickly.  The best language on a website will be mindful of it, but won't look like a search term dictionary. Take a moment to understand guides like Google adwords, but don't let your site become boringly obvious. Good content still plays well.

By all means test-drive  your website.  If it takes a long time to load, or doesn't work well in some browsers work with it to have it load promptly.

 

Both groups are savvy to the "enter your email here" mailing list builder ploy on the home page. And no one wants a boatload of sneaky advertising links downloaded to their computer, so watch out for the affiliate marketing links. Invite them to leave an email later, but don't make their email a ticket into your site. To get them to return, have a simple "follow us" button available but don't make following you a condition of viewing the website.

Nonprofits have to evolve. Making your website a living, breathing, informative and effective donor tool is one way to do that. 

How to turn off your donors

Recently I tried to reach a semi-local nonprofit to donate something to a silent auction. I went to their website, but there was no specific contact information, just a web form that went probably went to a generic address. I never got an email back, so I don't know if the form even works. I found an email address for their executive director online that said it went to their dot org mailbox, but it had apparently been closed, because my email bounced back. On top of that, before I could even send the email form from the website, I had to go through the whole captcha thing, twice. There was a phone number, but it was an answering machine and no one ever called back. There wasn't even a street address so I could just send the item with information and my contact information. Even their donate button required a captcha process.

The organization is 50 miles away, so driving to it wasn't an option. This isn't a small organization. Their budget is well into the millions. They've been around twenty years. They have a staff.

I finally just said the heck with it, and put my item back in the closet. That's a shame because it probably would have generated some good money for their cause.

I see this all the time. Why would any publicly supported nonprofit do this?   Don't make it difficult for people to reach you. Have someone's organizational email on the website. If you use a web form, at least allow it to send an acknowledgement of receipt. Don't make your newsletters private-list only. I get the reasoning behind captcha, but it makes you look as though you don't really want to connect with anyone.

Update - today, three days after the silent auction, and three weeks after my initial attempts to connect with them, someone from the organization, who identified herself as the donor relations manager, did call me but of course by then they had no need for my item, and the person's suggestion that I could just send in a donation instead simply rubbed me the wrong way. When I complained about the process, she said, "well, you  know, if our email was public, people would just bombard us with junk email". They might also bombard them with money or at least interest. What if I wanted to volunteer? What if I was with a foundation that wanted to know more about them? This is donor relations?

As a consultant I find this unprofessional. As a prospective donor, being this impersonal makes me subconsciously wonder what they are trying to hide, and makes me think they don't need my support.  This charity is off my support list. Permanently.

Don't be this nonprofit. Make it easy, painless and efficient for people to connect with you. The friends you make will be worth the junk email.