Is your grants dept.ready for the election?

OK.   I can hear it now.

OMG!  Enough about the cotton-picking election already!

Seriously though, if your nonprofit depends on government grants, and even if it doesn't, now might be the time to put some "what-if" scenarios in place.

In case you are new to the world of grants, an awful lot of the funding tends to follow what's hot politically and tails off when it comes to what's not.

For instance, if the Democrats retain the White House, you can expect that all of the current funding for STEM, social justice issues and the like will continue and even accelerate.

Conversely, if the Republicans win, their pet projects will receive the bulk of the funding.

If you're saying "Well, we get all of our money through private funding" you still need to look ahead.

While it's unlikely that Dems would immediately get a 90% income tax rate in place, there is little doubt that the wealthiest Americans are going to take a hit in the pocketbook.

Who funds private foundations? The wealthiest Americans.

Of course all the politicians would love to have us believe that all of the "new" revenue streams they are cultivating will be immediately returned to the people in the form of better jobs, or free college, or a host of other voter-friendly  programs.

The truth is, it just never works out that way.

For one thing, there's that little thing called the national debt, currently headed north of 18 Trillion dollars.

 

It's a funny thing, but when people (or governments) lend money they usually expect to be paid back.

Interest payments on that money are forecast to eat up ONE TRILLION dollars in just five more years.

That's up nearly 5 times from $220 Billion reported for  2012. If we do in fact add all of the free stuff envisioned by the Democrats, the debt amount could double again in just ten years.

Not paying that amount isn't an option. Given that many of the current and proposed entitlement programs are forecast to grow exponentially simply due to having more users, it stands to reason that discretionary spending will suffer at every level.

No matter which party wins out in 2016, the funding landscape is sure to change in the next decade.

The nonprofits and small businesses that weather the storm will be the ones that plan for it now.

If you are just thinking of starting a nonprofit, it might behoove you to either wait a year or so, or at least run two opposing SWOT analyses before jumping in with both feet.

If you are an existing organization, you may want to factor in significantly higher costs and lower revenue projections when evaluating old programs and before launching new ones.

Another trend may be that local governments will be looking for revenue of their own to replace any missing Federal dollars.  That could lead to the repeal of many of the traditional nonprofit perks, including tax breaks for property used for charitable purposes.

In spite of the handwriting on the wall, many nonprofits will choose to wait to plan until it is too late.

 

Don't let your organization be one of those wringing your hands and holding "going out of business" sales.   

Fundraising – Multi-state registration answers

Lately, my mail has been loaded with questions about nonprofits having to register to solicit funds in various states. These questions reflect a lot of confusion about the requirements. Since this blog reaches so many people, I thought it was worth the time to try to clarify the out-of-state registration issue.

The bare bones explanation

First, these are charitable solicitation laws. They do not require you to create a new corporation  in all 50 states. You simply register the one you already have.

They are intended to control, legitimize, and in most cases account for revenue raised within a state. In many cases the laws are intended to protect the charity from having to pay state taxes on the money raised and they allow would-be donors some protection from fraud as well as the right to deduct donations on their state returns. And, as you might expect, they also allow states to generate some revenue from the registration fees.

Second, there is no all-encompassing Federal law that requires states to have a uniform application process, or that limits states in the amount of registration fees they charge.

Every state has different requirements and fee structures for registration. Some require the IRS determination letter and some do not. Some require an annual renewal and some do not.

It is not a given that you have to register in all the states with such laws. It depends on the specific state guidelines.

Interestingly, many start-ups are of the opinion that if they are only making a general online appeal, such as on their own website or Facebook page, they don't have to register in any state but their own.

Not necessarily true! Depending on your particular situation, you may or may not need to register in a given state.

Where did all these regulations come from?

Back in 2001, a document called the Charleston Principles was approved to provide advisory guidelines by NASCO (National Association of State Charity Officials) to curb fraud in the charitable giving arena, particularly through online campaigns.

If you fundraise in a state other than the one you incorporated in, even via an online donation page, Giving Day or Twitter account, you may need to register as a charitable organization in all the states that require it.

 A fairly comprehensive explanation is found on the GuideStar website at: http://www.guidestar.org/rxa/news/articles/2014/state-registration-requirements-for-fundraising.aspx and http://counsel.cua.edu/nacuanote-reqs-for-charitable-orgs.cfm

If this all sounds confusing, expensive and cumbersome, it's because it is. However, the penalties for soliciting without registering can be substantial, so ignoring the laws is not an option. As of this posting, several more states have been reported as considering or adopting registration regulations, but currently the list includes 40 states and the District of Columbia.

Laws change, so be sure that your information is current. For instance, as of 2010, California removed the exemption from registration for out-of-state charities. You may also be required to file an annual statement of revenues obtained from state residents.

While many people think that educational institutions and churches are exempt from registration, this is not always the case, particularly if you hire a professional fundraising firm.

Arising from the aforementioned Charleston Principles, and in an apparent attempt to standardize the application process, a form was created known as the Universal Registration Statement (URS).

It is the name of this document that I think creates the idea that there is some over-arching Federal control of the process. Again, it doesn't do that, and it isn't even universally accepted by the states.

Since the states still require a varying amount of additional independent documentation, the form is becoming somewhat obsolete, although a few states do still require it. For more info see: http://www.multistatefiling.org/

How do you do it?

Private firms such as mine, or your attorney or accountant offer fee-based registration assistance, or you can do it yourself.

A source citing a synopsis of the various state regulations as of 2013 and the governing state agency can be found at: http://www.nacua.org/nacualert/docs/CharitableSolicitation/2013_JurisdictionalRequirementsCharitableSolicitation.pdf. The URS form is included at the end of the state listings and is worth looking at, including the additional forms required.

What about costs? Fees vary from state to state, with some states having a flat fee and others tying the cost to the nonprofit's revenue, even going as low as zero for many small charities. Some states require registration no matter how little you raise, while others may not require registration until in-state donations reach a set amount.

In some cases, the registration of an aggregating or sponsorship agency (such as the United Way for instance) may provide sufficient legal protection, since these organizations usually require proof of legitimacy as a condition of use.

     

Also, many of the documents that start-ups typically may not have (such as the IRS determination letter and a financial statement or 990) are often required to file with the states, so before you spend a lot of time and money, be sure that you have everything on hand.

Given that fraud in the charity world remains an ongoing problem, it is unlikely that these requirements are going to go away. Some organizations are seeking to update the Charleston Principles to reflect the realities of a world where everyone carries a tiny computer cleverly disguised as a phone, but to date that hasn't happened.

If you are saying "all of this sounds time-consuming and a good way to eat up scarce start-up revenues", you are right.

Nevertheless, if you are contemplating starting a charity, this is information you can't afford to ignore. The costs in both time and money need to be a part of your advance planning.

©2015 All rights reserved. 

Can you afford that free money?

One city in New Jersey has discovered what savvy nonprofits have known for years. There are costs attached to free.

As detailed in this Fox.com news story, a donated helicopter has cost the city of Newark NJ over one million dollars since it was acquired in 2005. That's not surprising when you consider the chopper was over thirty years old when they got it.

    

A deeper dive into the story shows that most of the costs break down into normal maintenance and repair costs, as well as upgrading its technology.

That's the same problem faced by grantees. The initial award just sets the recipient organization up to need ever more grants to maintain the original goals outlined in the first award.

The trick is in deciding if the added costs provide forward momentum for your mission.

New or proposed nonprofit founders often can't see beyond grants when it comes to funding their mission, so they fail to develop a plan to add the necessary diversity in their funding strategy.

If I had a dollar for every nonprofit that has asked me to find grants to fund their start-up, I could not only retire to an island, I could buy the island.

After verifying the need for your mission, the very next thing I ask people who want to start a new nonprofit is "What's your strategy to pay for it?"

Almost without exception the answer is grants.  Wrong answer!

The answer to that question should be something like this.

1.  Develop a five-year plan that includes a budget projection.

2.  Research the funding options available and develop a fundraising plan.

3.  Make grants the least important part of that plan.

As a new nonprofit, you are not going to be able to qualify for grant funding for a minimum of one year, and more realistically it's going to be three years.

More importantly, grants require that you have at least some infrastructure in place and have real results to offer to grantors, meaning that your, like all businesses are going to have to spend money to get the free money.

Throughout the nonprofit world, grants comprise about 12-14% of all nonprofit funding and many have a matching component, meaning that you have to have enough money on hand that you can commit part of it to achieving the grantor's purposes.

I can help youget your nonprofit off the ground, but if you want me to find you free money you'd better understand the costs to acquire it.

Understanding how program development increases funding

All nonprofits have goals, or as they are usually stated, missions. Feeding the hungry, providing shelter for victims of domestic violence, supporting veterans, or rescuing animals are all goals, or missions. They are the reason your nonprofit exists.

To support the main mission, action plans, i.e. programs, are developed to reach the main goal.

In addition to solving or alleviating an adverse condition or circumstance, programs also provide funding parameters for supporters. To put it another way, they provide opportunities for people sympathetic to the main goal or mission to collaborate in achieving that goal, without being directly involved in the management and operation of a nonprofit.

Criticism of nonprofit effectiveness is seldom related to mission. Almost without fail, when nonprofits get in trouble with donors or grantors it is related to failure of the program or programs to achieve the mission.

One of the shortcomings of newer nonprofits is failing to communicate how a program advances mission accomplishment.

Interestingly, sometimes that goes back to the mission concept. Vague or overly ambitious missions can make it difficult to design realistic programs that can be developed to deliver the desired results.

Go back and re-read that last sentence, especially this part. " …design realistic programs that can be developed to deliver measurable optimum results." This is often one of the first things I address when working with new clients.

If your program, or programs aren't designed well, they can't possibly develop methods that achieve the best possible outcomes.

To design realistic programs you need to have a realistic program model in relation to your ability to deliver results.

Reality trumps vision

By way of explanation, let's look at the "No Child Left Behind" mission, a product of the George W. Bush presidency resulting in the 2001 legislation of the same name. The goal was to see that every child in the United States receives access to a quality education.

That's a totally realistic mission in terms of the resources available to support it, i.e. the Federal budget.

If that same nationwide mission was to be undertaken by a nonprofit in a town of 400 people in rural America, then the mission is not realistic in terms of scope, and no program could be designed that would achieve it.

Organizations need to take the availability of resources to achieve the mission into account at the time they decide to become a nonprofit. That limiting factor will determine the initial design and development of the programs. Ideally, future planning incorporates an "if-then" component so the program can be expanded as resources become available.

Well-designed programs provide better funding opportunities

Funding, especially from grants, is seldom sustainable from one source, so having a variety of funding opportunities is critical to mission success.

If a program is designed to provide both an immediate benefit and an opportunity for expansion, it can continue to grow as resources become available.

Setting realistic goals that are measurable and achievable allows the nonprofit to show donors that the program does provide tangible benefits at varying levels. When the organization can document positive results, it can attract more funding.

Thus, a neighborhood literacy program for ESL learners can start with a phased in program that first funds community outreach to raise awareness of the mission, then seeks funding for books or electronic readers, then expands to purchase furniture for a rented space, and finally seeks funding for a building to provide a permanent base of operations.

Each of those phases will attract a slightly different donor audience. For instance a corporate donor in the public relations field might fund a PR campaign, a tech company might provide in-kind donations of tablets or e-readers, a furniture company might grant funds to purchase desks and chairs, and finally, major foundations might grant  substantial funds to purchase the building.

Instead, far too many newly formed nonprofits start out with trying to fund the building before they can even prove that the community is deriving a benefit from the mission. All that accomplishes is to drive grantors and major supporters away.

As frustrating as it can be, good program planning pays dividends far beyond the time it takes to do it.

Nonprofits aren't businesses. Really?

Every once and a while I see someone railing against the idea that nonprofits should be managed much like their for-profit counterparts. After all, nonprofit staff can and actually should work for peanuts, right? All supplies will be donated, all services will be free, and the quality of their programs will still be top-notch.

If only it was that simple.

This morning I was forwarded a link to a nonprofit asking for contract grant writing services. The ad sounded great. 21-year old community healthcare nonprofit, multi-million dollar revenues, offering a long-term contract with a somewhat reasonable budget range for grant writing services.

However, upon looking up their 990 history, I could see why they were looking for grant money. Over the past five years this nonprofit showed steadily declining income. Nearly their entire revenue stream was based on one source of income, i.e. government payments for services. Those payments had dropped by almost 30% in that same five-year time frame. In the meantime their payroll costs had gone up by almost the same amount as a percentage of income. In 2012, they posted their first loss ever and it was in the mid-six figure range.

Healthcare is a very labor and supply-intensive field. Good help does cost real money, supplies are not free, the utilities still have to be paid with real money, and being a nonprofit doesn't change that.

You can see where this nonprofit is going. Newly mandated increased costs for healthcare and the natural progression of increasing salaries as employees stayed in place longer and improved their skills was pushing them over the edge. In their entire 21-year history, they had raised less than one million dollars in funding not related to the provider payments from the government. 82% of their income was now going to employee-related expense. Even in healthcare, that's out of line.

Nonprofits are not immune to market forces or economic reality. If your costs of operation outstrip your income, you are going down the tubes, no matter how big or small you are.

I don't know exactly what happened to this nonprofit. Maybe their patient days went down, maybe the provider payments were less than previously received for services, maybe the employees were asking for unreasonably high salaries or the perks had gotten out of hand. Who knows? The point is, their trend line was obviously going the wrong way, and they waited too long to try to address it. Now they are operating in the red, and that means they are unlikely to be considered for grant funding.

If they survive it won't be due to hiring a grant writer. It will be because they get a hard-nosed business management consultant in there that can get their business operations back on track. That's where they should be spending their remaining dollars.

There is no doubt that there are real differences between the motivations and goals of nonprofits vs. for-profits and that is as it should be. I addressed that in another post. Still, whether you like it or not, the nuts and bolts of accomplishing  the end result are pretty much governed by the same realities. Ignore that at your peril. 

Make your nonprofit website effective

On any given day, I can go to the web and find dozens of little more or less local nonprofits that most people probably never heard of that are struggling to survive and grow. Most of them will limp along for years but never really have much of an impact because they can't scare up enough funding. Why is that?

In some cases there just isn't much support for their mission in their area. But much more often it's because they don't understand how to appeal to and build a wider donor base. Contrary to many nonprofit expectations, grants aren't usually the only or even the best avenue to success. I look at a lot of nonprofit websites, and there are three things that I find common to many of them.

They don't understand why they have a website

Most of them are all about the nonprofit. There are pages about how they came into being, pages about the board members life, pages about their events, and that's fine, but the most important page is the home or landing page. I certainly don't want to imply that having your financial information, a list of your board members or even a short history of the organization isn't important. Institutional (foundation) donors and major gift prospects expect that, but those pages don't draw many individual donations. Telling the visitor to go  to some other website isn't a very good idea either.  Facebook is great for some things, but most people will find you through a keyword search, and that's probably going to go to your website first. Don't run them off.

The primary purpose of all of those pages is to increase financial support for the mission, impart a sense of credibility and maybe enlist volunteers as well. What people want to know when they donate is:

Who or what am I helping, why do they need help and what are you going to do with my money to make things better?

If your home page doesn't grab the visitor's attention with something relative to their interests in the first 10 to 20 seconds, they are very likely to move on before they ever get a chance to learn about your organization.

Contrast these two opening sentences.

1. The Blank County Animal League came into being in 2005 to fight for the rights of animals.

2. You can stop Blank County from killing 10,000 dogs, 15,000 cats and 8,000 other types of animals every year.

Which one gets your attention and makes you feel like you could make a difference?

They don't provide or predict results soon enough

The second paragraph needs to give at least a cursory look at positive outcomes. Tell them how the donations received to date have made a difference.

"Since 2005, our donors provided the means for the adoption of over 5,000 animals, and free spay and neuter clinics every month for the past two  years." Or, "By supporting our plans for a no-kill shelter you can save the life of a future pet." It depends on how new you are to the scene which will work for you. It's OK to add one to three photos that support your emotional appeal, just don't make the photos the only visitor connection on the home page.

They don't actually ask for money.

Go ahead. Give them a number. Tell them that you are looking for a minimum donation of $10.00 and put a second donate button link right in the paragraph. (Of course you should have one at the top of the page, and even on subsequent pages as well.) If you want monthly recurring donors, tell them that. And make sure that the donate button provides an easy way to give, such as a "text $10.00 to 12345 now" or a PayPal or credit card option for instance. It's fine to ask them to call in a donation, or to give your mailing address, but many smaller donations are spur-of-the-moment decisions. Don't lose the moment.

In summary

If this sounds like you should think of your home page as a sales page for a product, good. That's what it is. Your product is your mission. Sell it effectively.

There are other parts of your website that will, and should give in depth information about your organization. You can devote a whole page to testimonials. Your financial information should be accessible to those that care about it. But if you can't get the casual visitor engaged from the get-go, you may never have the chance to develop a more profitable relationship with those bigger donors.