Tag Archive for Donors

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.

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.

Other:

  • 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.