Tag Archive for Charitable Donations

Navigating The Crowded Non-Profit Sector

Nonprofit donors

How organizations can set themselves apart to secure—and retain—donors

By Shannon Crowley, CPA, MSA
Accounting Manager

Despite the Great Recession and the long process of economic recovery of the 2000s, the non-profit sector has become one of the country’s fastest-growing industries. According to the National Center for Charitable Statistics’ most recent research, the United States is home to more than 1.5 million registered non-profit organizations—marking a nearly 20 percent increase over the last 10 years, a time frame in which many businesses in the for-profit sector have struggled.

This rapid growth is certainly a sign of success, and—as non-profits employ nearly 11 million American workers and contribute roughly $887 billion to the national economy—it is difficult for anyone to argue against the economic value of a thriving non-profit sector.

However, the unprecedented rate at which new organizations are being created is also creating a challenge. The non-profit sector is more crowded than ever before, making it very difficult for organizations to secure—and retain—their donor bases.

On a local level, there are 33,000 non-profit organizations registered in Massachusetts—each competing with one another for precious dollars from a limited pool of individual donors, corporate foundations and other fundraising sources. In a recent cover story in The Boston Globe, many industry experts argue the field of non-profit organizations in Massachusetts is simply too large to sustain.

However, the organizations themselves, and the tens of thousands of Massachusetts residents employed by non-profits, are doing everything they can to prove those experts are wrong.

And that starts with donor retention.

The Association of Fundraising Professionals reports that, on average, donor retention rates across the non-profit sector are around 43%, meaning less than half of an organization’s 2016 donor base will contribute. In order to grow in a competitive non-profit environment, organizations have to find a way to land recurring donors. To do this, non-profits are employing several strategies. For the purposes of this article, we’ll focus on three:

Differentiating themselves from other, potentially similar organizations

Many potential donors or grant-awarding foundations would love to support every deserving cause that asks for and needs their help. Realistically, though, donors need to choose between hundreds, if not thousands, of similarly operating organizations to which they can lend their financial support. Non-profits, especially non-profits working to support similar demographics, are under enormous pressure to set themselves apart to attract new sources of funding. It’s never been more important for a non-profit to have a very clear, very specific mission.

Investing in “fundraising infrastructure”

Fundraising success is entirely beholden to the amount of time and resources organizations are willing to invest. In order to succeed in today’s hyper-competitive non-profit sector, organizations must invest in fundraising professionals, such as high-ranking development officers, and fundraising “infrastructure,” such as top-notch technology and donor databases.

The clear, specific vision makes an organization attractive to donors. Development professionals and in-depth donor databases help organizations find them.

Increase efficiency by streamlining their accounting functions

Back-office financial work is crucial to the long-term success of the organization. That said, it’s also very time-consuming. As many organizations are investing significantly more time to their fundraising operations, some non-profit leaders are finding ways to take complex financial paperwork off their desk so they can focus on the organization’s core competencies. This may entail creating new jobs for a full-time accounting team, or hiring a third-party financial organization to take on those responsibilities.

How BlumShapiro Can Help

BlumShapiro offers the accounting, tax and business consulting expertise non-profits need today. We are one of the largest non-profit accounting service providers in New England, our blend of accounting expertise and knowledge of non-profit organizations means we can offer you tremendous added value. We can assist you in complying with state and federal grant requirements, charitable giving rules, capital campaigns, endowment fund responsibilities and other specialized needs. Learn more >>

View Shannon’s Bio Here >>

Donor Acknowledgment – Reminder as the end of the year approaches

iStock_000001334173MediumAs the calendar year end approaches, and we all get ready for 2016, this is to serve as a reminder about the requirements for donor acknowledgments. Many donors wait until the end of the calendar year to make their donations to non-profit organizations in order to receive an individual tax deduction. Management should make sure their procedures around donor acknowledgments are up-to-date and adhere to the IRS requirements.

In brief, a written acknowledgment for all contributions over $250 and for all quid pro quo contributions over $75 are typically required within 60 days after the contribution is received by the organization. For more information: Here is a link to a prior article on this matter as well as the IRS guidelines.

Shannon Crowley Massachusetts CPAShannon Crowley is a manager in BlumShapiro’s Accounting and Auditing Department, based in Quincy, Massachusetts, Shannon oversees audit engagements and is responsible for engagement planning, staff supervision and coordination with client personnel to ensure successful completion of projects. Shannon has worked with clients in a variety of industries, including healthcare, higher education, non-profit, manufacturing and distribution.

How Interested Parties Learn About Your Non-Profit Organization and How to React

Interested Party Communication - Nonprofit CPAIndividuals looking to learn more about your non-profit organization have a wealth of information at their fingertips thanks to the many resources available to them on the Internet.  In today’s competitive environment, it is important for leadership to view these resources as opportunities to generate interest from those who seek out information and invest the time necessary to produce comprehensive materials that will help them tell their story.  It is also important for your organization’s leadership to understand where and how information is made available.  With that knowledge, a comprehensive approach to addressing each one of these resources can be developed to ensure the message conveyed through them is positive and thorough.

Nonprofit Resources

Below are a few resources that can be accessed by the general public and provide details of your organization’s standing and compliance with filing requirements:

  • The IRS website and GuideStar. These sites provide visitors with an opportunity to review the exempt status of your organization and determine whether or not it is in good standing.
  • GuideStar and Charity Navigator. These allow for access to your organization’s federal informational returns.
  • Secretary of State, Attorney General or other agencies that monitors charities at the state level. Many websites for these state agencies include a searchable database of registered non-profit organization filings, formation documents, by-laws, etc.  For example, the Massachusetts Attorney General’s charities database includes copies of federal and state filings as well as the audited or reviewed financial statements (for larger organizations).

Because your exempt status and federal and state filings can be reviewed by the general public, it is important that you remain up-to-date and in compliance with all applicable laws and regulations.  Further, these filings should be viewed by the leadership within your organization as a marketing tool where accomplishments can be celebrated and where you can clearly demonstrate that the mission has been put into action.  Take the time to review these documents thoroughly with the board before they are filed and ensure everyone understands how easily accessible they are to potential donors, grant makers and others who want to learn more about the organization.

In addition to the above resources, those desiring to gain further knowledge about your organization will likely review the following:

  • The organization’s website. Your website should provide a great level of detail on the organizations mission, programs, fundraising initiatives, board of directors, etc.  In addition, it should also include testimonials and stories about those who have been positively impacted by the work of the organization.
  • Facebook, LinkedIn and Twitter accounts.  Social media has become an important way for organizations to communicate what’s happening in real time.  While organizations should be cautious with their use of social media, responsible use can produce extremely positive results as a great message will be spread very quickly.
  • Search engine results.  Often, the best way to learn about an organization is simply to “Google” it.  Search engines are a great tool for interested parties to see how your organization is connected to others, what people are saying about the organization and review the services you provide or causes you support.

With knowledge of the fact that people are using these resources to learn more about your organization, it is important to keep them up-to-date and to continuously prepare new content.  Having old and outdated information about your organization available to interested parties could result in them concluding that your mission and activities are also old and outdated.  Set roles and responsibilities within your organization for maintaining the website and social media accounts and know what your competition is doing so you can stay on the cutting edge.

Chris Ernest, CPA oversees audit and tax engagements and is responsible for engagement planning, staff supervision and coordination with client personnel to ensure successful completion of projects.  Chris provides services to a wide range of  non-profit organizations, including independent schools, country clubs, museums and trade associations. In addition, he specializes in audits of employee benefit plans.

Written Acknowledgements for Donors

As a tax-exempt entity, you are provided with the privilege of receiving charitable donations from the general public; however you are also responsible for complying with federal laws applicable to charities and churches that receive such tax-deductible donations.  These rules exist for not-for-profit entities in order to facilitate the strict recordkeeping and substantiation requirements imposed on donors, in order to receive a tax deduction on his/her federal income tax return.

Rules for donors:  A donor must have a bank record or written communication from a charity for any contribution before taking a tax deduction.  A donor is responsible for obtaining a written acknowledgement from a charity for any single donation of $250 or more.  For in-kind donations, the donor is responsible for obtaining/assigning the fair market value of the donated item.

Written Acknowledgements for gifts over $250

While this requirement is technically the donor’s responsibility, the donor may not claim a tax deduction without this written acknowledgement.  Therefore, to best serve its generous supporters, the organization should provide a timely statement containing the following information:

  • Name of Organization
  • Amount of cash contribution
  • Description (but NOT the fair value) of non-cash donations
  • Statement that no goods or services were provided by the organization in return for the contribution (if that is a factual statement)
  • Description and good faith estimate of the value of goods or services, if any, that an organization provided in return for the contribution (commonly referred to as “Quid Pro Quo” – see below)
  • All acknowledgements should be contemporaneous – typically no later than January 31st  of the calendar year following the donation. Best practice would be to provide this acknowledgement within 30 days of receiving the gift.
Written Disclosure for Quid Pro Quo

When a charity provides any goods or services in exchange for a donation, this is partly an exchange transaction and partly a contribution.  A donor may only take a contribution deduction to the extent that the contribution exceeds the fair market value of the goods or services received.  It is the organization’s responsibility to provide the estimated fair market value, which must be in writing if the original payment exceeds $75. Penalties may be assessed if an organization does not meet the written disclosure requirement. The penalty is $10 per contribution, not to exceed $5,000 per fundraising event or mailing.

The written disclosure statement must:

  • Inform the donor that the amount of the contribution that is eligible for deduction for federal income tax purposes is limited to the excess of money (and fair market value of property other than money) contributed by the donor over the value of goods and services provided by the organization.
  • Provide the donor with a good-faith estimate of the fair value of the goods or services provided by the organization.
  • Be in writing and be made in a manner that is likely to come to the attention of the donor.  The statement may be included in the solicitation of the donation or provided along with a receipt of the donation.

There are exceptions for certain “token gifts” and “intangible religious benefits” which are received by the donor in exchange of gifts, in which case written acknowledgements are not required.


  • Unreimbursed expenses may be another form of contribution, such as out of pocket transportation expenses in order to perform donated services or provided supplies for a program activity.  In this case, the donor must obtain a written acknowledgement from the organization containing the same information listed above for donations over $250, except it also should include a description of the goods or services provided by the donor.
  • Non-cash donations with claimed fair market value greater than $5,000 generally require a qualified appraisal, which is the responsibility of the donor, not the charity.

Jeanne Pagnozzi Boston AccountantJeanne Pagnozzi is a manager in BlumShapiro’s Accounting and Auditing Department, based in Quincy, Massachusetts, Jeanne oversees attest and tax engagements and is responsible for engagement planning, staff supervision and coordination with client personnel to ensure successful completion of projects.