Category Archives: Donor Pledges

Forbes Publishes List of U.S. Nonprofits With Most Individual Donations in 2013

cash_handsIf you’re with a small or struggling nonprofit, get ready for some pangs of jealousy: Alth0ugh Forbes calls them the “largest” U.S. charities, its top-50 list for 2013 actually uses “private donations received” as its “main metric” for inclusion.

Together, the listed nonprofits pulled in $30 billion worth of donations this past year.

Not surprisingly, you will have heard of many of these: United Way, Salvation Army, and . . . Task Force for Global Health?

Okay, I hadn’t actually heard of them. But as a newcomer to the list, they’re clearly a group to watch. What are they doing right, to have rocketed to the third spot on the list? It looks like most of their giving (to the tune of $1.7 billion) was not in the form of cash, but donated medicines.

Still, one has to admire a couple of fundraising-related aspects of the Task Force’s website: They post their annual report quite visibly (thus emphasizing financial transparency); and when you click the “Donate” tab on the home page, you’re given interesting background information on where your dollars go before being presented with the form to fill out.

For tips on achieving results with your group’s own website, see Nolo’s article, “Your Nonprofit’s Website as a Fundraising Tool.”

So, Should Donors Check Charities’ Financial Percentages or Not?

brainReading the recent New York Times “Giving” section, I wasn’t sure whether I was watching change in the making or an example of cognitive dissonance. The subject in question was how much weight donors should give a charity’s financial percentages — that supposedly key ratio of expenses spent on programs and services versus overhead (admin and fundraising) — when deciding whether the charity is effectively carrying out its mission.

On the one hand, David Wallis devotes an entire article to Dan Pallotta, founder of the Charity Defense Council, and his argument that nonprofit organizations “worry too much about keeping overhead low and pay too little to attract the most talented executives.” Pallotta describes the dramatic turn of events when “the Better Business Bureau, Charity Navigator and Guidestar issued a joint news release called The Overhead Myth. It’s an aggressive campaign to really backtrack on this history of teaching the general public to ask about overhead. And now they are saying, ‘Charities don’t need low overhead; they need high performance.’”

On the other hand, the title of this article is, “Gadfly Urges a Corporate Model for Charity,” and Wallis takes pains to point out that Pallotta is a controversial figure with some major failures in his fundraising past.

And then there was an article called, “How to Choose a Charity Wisely,” by John Wasik. It lists the various organizations that evaluate charities (mostly using the standard financial ratios), quotes a Charity Navigator spokesperson saying, “a good benchmark for a worthwhile charity is having at least 75 percent of income spent on programs, or the nonprofit’s mission,” and in the section on “Getting Granular,” advises that charities whose accounting practices include “lumping in fund-raising or solicitation with the charity’s program expenses” are “muddy[ing] the waters” when it comes to “gauging how much is really being spent on the charity’s mission.”

Oh, but the article also warns that: “Like GuideStar and Charity Navigator, the [BBB Wise Giving Alliance] cautions against paying too much attention to the percentage spent on nonprogram expenses, also known as the ‘overhead ratio.’”

Okay, so are we supposed to pay attention to these percentages or not? According to Merriam-Webster, the definition of cognitive dissonance is “psychological conflict resulting from incongruous beliefs and attitudes held simultaneously.” I think we’re seeing some of that here.

A few years from now, perhaps everyone will laugh at how attached we once were to those magical fundraising versus overhead percentages. In the meantime, for the sake of clearheadedness, it might help if everyone took a closer look at the assumption that you can divide program expenses and overhead expenses in the first place. Where’s the bright line when a development director meets with a major donor, gets that person excited about the organization’s mission, and invites him or her to participate in the organization’s work more deeply? Or when the Executive Director goes out to speak at a public event, increasing awareness of the issue the organization is concerned with?

The people and tasks that are commonly called “overhead” are, in many cases, integral to the nonprofit’s mission. This isn’t “muddying the waters,” it’s practical reality.

Don’t Promise Thank-You Gifts Unless You’re Able to Send Them!

Old books Used books donated to the poor and drive their growthI’ve heard too many stories like these lately: The environmental group that failed to send the promised calendar (and instead barraged the new member with additional requests for donations); the community radio station that sent the wrong book to an elderly recipient (and on top of that, sent her an anti-capitalist tract that she found politically suspect); the organization that had a major layoff and failed to send any of the promised thank-you gifts to anyone at all.

Perhaps that last situation is impossible to predict and avoid, but what’s up with the other ones? Surely no nonprofit on the planet thinks its okay to stiff donors of their promised gifts. More likely such lapses happen due to a breakdown in organization — a task gets delegated to someone with little experience, perhaps, or part of the work is handled by outside consultants and then the organization somehow fails or forgets to resume its in-house responsibilities.

While such lapses are understandable, they’re not excusable if the organization wants to maintain halfway decent donor relations. I don’t have statistics to back this up, but it’s probably safe to say that donors who don’t receive the thank-you gifts they thought they’d signed up for will not soon forget this apparent snub. (Why else would they tell me stories about it?)

It will damage their sense of relationship with the nonprofit, make them doubt its ability to organize matters with regard to its mission, and in the future, dull their interest in hearing about the latest cool thank-you gifts on offer in return for their pledge of $X!

If you realize that your nonprofit has made such mistakes in the past, it’s time for some serious damage control. Send a follow-up card and gift, make a phone call, do whatever it takes to assauge the donor’s sense of breached trust. You may not win that donor back, but you’ll at least reduce the degree to which he or she is tempted to badmouth your organization to others.

On the bright side, — and this isn’t much of one — a donor who doesn’t get a thank-you gift can take the full tax deduction for the donation! (In fact, this is a good reminder that donors should be able to opt out of receiving thank-you gifts — and the nonprofit should make sure to abide by the opt-outs and not send the gift.) Attorney Stephen Fishman explains these issues further in “Tax Deductions for Charitable Giving – The Nonprofit’s Responsibilities.”

It’s PTA Collection Time as the School Year Begins!

Can you feel the excitement in the air? Kids are finding out who their teachers are, buying their back-to-school wardrobes, and signing up for activities.

Parents, however, may be a little less excited. Whether the kids are attending public or private schools, this is the time when many are asked to write a big check — knowing that without parental support, the school will literally go without an arts or music program, a librarian, after-school tutors, and so on. The “suggested donation” levels can run into the thousands of dollars.

This raises the annual conundrum: Should the PTA or other volunteers organizing these fundraising efforts ask for the full, needed lump-sum up front, or plan to spread out their requests for funding over the school year, sometimes packaged up as special events or fundraising sales?

Two mothers I recently spoke with debated this very point. One said, “I helped with school fundraising last year, and noticed that some people just won’t write a check unless they get something in return — they hold out for the silent auctions and other sales.” The other said, “But I get so sick of having to attend events like that, and I’m sure things like wrapping paper sales don’t net the school more than a few bucks — I’d rather just add that to my check at the beginning of the year. Yes, it hurts to write that big a check, but at least I get it over with.”

FLIBThere’s probably no final answer, though if you’re a PTA fundraiser, it’s worth keeping an eye on whether parents are developing a “mass sentiment” toward fundraising. Here’s an excerpt from my book, The Volunteers’ Guide to Fundraising, that will help illustrate:

[D]onor sentiment has cycled at South Mountain Elementary School in South Orange, New Jersey. PTA copresident Laura Reichgut describes, “We sent out a survey last year to get a sense of how the school community was feeling about fundraising, programming, and so forth. A lot of the feedback suggested that parents had had their fill of the various smaller fundraisers, such as giftwrap sales or walkathons. So the PTA decided to eliminate some of those this year—or at least take a break from them—and replace them with what we call the ‘No Frills Campaign.’ We sent out a simple letter asking
for donations and including a reply envelope. Our pitch was that this is an opportunity to support all the great work of the school with 100% tax-deductible donations. . . . [A] mere week into the campaign, the South Mountain PTA had already reached its minimum monetary goal for the No Frills Campaign, and the donations continued to come in during the following weeks.”

What Can Other Nonprofits Learn From Community Radio Station Pledge Drives?

radio_mikeI don’t know about you, but where I live, it’s been all fund drive, all the time, from virtually every nonprofit, community radio station in the Bay Area. No matter where you turn the dial, there’s someone reminding listeners about the great service the station provides, the costs to run it, and the great thank-you gifts we’ll get in return for pledging particular amounts.

As someone interested in nonprofit fundraising, I perhaps listen to the pitch sessions of the programs longer than is average. (Or maybe it’s just that I’m usually listening in the kitchen, with hands too wet or slimy to touch the radio.)

Since I happen to know a few radio programmers, however, I also know that I’m not the only one who sometimes listens all the way until the end of a show, even when the last 20 minutes are all fundraising. In fact, my programmer friends say that, in general:

  1. most donations come in the last few minutes of the program, and
  2. overall, most donations come in during the last day of the fund drive.

What’s up with that, and what does it mean for other fundraisers?

I haven’t seen any studied analyses of this phenomenon. It actually seems doubly surprising given that experts who have studied on-air fundraising consistently say that urgency, desperation, statement like “We’ve got to meet this goal!” and “The phone lines are empty!” are a turnoff. (See, for example, John Sutton’s “Listener Focused Fundraising” report.) Positive messages about the listener’s part in supporting excellent media work much better.

So, I’ll have to speculate a bit. Here are my best guesses:

  1. Everyone procrastinates. All fundraisers have learned to expect a last-minute rush of donations in late December. But that’s just one of many possible deadlines during the year. Any time potential donors know there’s a deadline ahead, they may perhaps mentally put the item on their “deal with later” list.
  2. Even the people who say they’re turned off by urgency and desperation may eventually be moved by it. I believe the prevailing fundraising wisdom that it’s best to keep the message positive — but I’m starting to suspect that either there are some people who prefer the “S.O.S.” messages, or that no matter how donors respond to surveys, they actually respond to the cries for help more than anyone recognizes. I’m on an email list for a nonprofit that regularly gets into public debates with donors who say, “Cut it out with the strident distress cries, already,” to which the nonprofit invariably answers, “But it’s the only thing that works!” Are they deluded? Is it just their donors? Impossible to know.
  3. The comparison shopping urge takes over. Almost all radio pledge drives involve thank-you gifts. Some people may simply be waiting to hear what all the gift options are! Of course, they then miss out on opportunities to get limited-offer thank-you gifts.

Assuming I’m not totally off base, the first two items on this list may be worthy of any type of nonprofit’s consideration, radio or not. So, for example, if someone’s newsletter is about to run out, you’d want to give them advance notice, but also make abundantly clear, later on, that THE DEADLINE IS COMING. It’s also worth paying attention to the tone of your messages (which may slip into “distress” mode even without your intending it) and how your donors respond.

As for the third item on the list, it’s a useful reminder that, even in the charitable context, people’s consumer side can take over. Whether at an auction, bake sale, or something else, be sure to remind people early and often that the main purpose is to support a nonprofit, not to pick up a goodie.

Fundraising Kudos to: Strike Debt

Okay, let’s just all drop our collective jaws at the success of Strike Debt’s recent telethon, which raised money for a project it calls Rolling Jubilee. The group brought in a whopping $293,000 — enough, it figures, to buy $5.9 million in unpaid medical debt obligations off creditors, and thus save a lot of people from bankruptcy. (Around 62% of bankruptcies are caused by medical debts.) The group is calling it a “bailout for the 99 percent.”

Why did the fundraiser work so well? I’m sure much could be said about the organizing, skills, and determination of those running the telethon, but it also sounds like, in the words of the Village Voice, they “struck a nerve.” With the group’s origins in the Occupy movement, it tapped into Americans’ frustration at the crippling nature of debts that arose for reasons beyond their control.

Being able to point donors to the exact way in which their money would be used is an unusual feature of this fundraiser, as well.

Strike Debt is basically acting as the middleman to a person in need — which should be true of many nonprofits, but the link is often harder to demonstrate.

What’s more, donors are getting a “bargain” — their money doesn’t pay off another’s debt dollar for dollar, but is going to buy bad debts on the secondary market, where the creditors are typically willing to sell them off for pennies on the dollar. No wonder this one’s going viral!

 

Media Points to Lack of Transparency About Donations to Churches

The Wall Street Journal article title says it all: “Trust in the Lord . . . But Check Out the Church.”

It starts with a shocking statistic from the Center for the Study of Global Christianity at Gordon-Conwell Theological Seminary in South Hamilton, Massachusetts: “Of the $569 billion that churchgoers and others are expected to donate to Christian causes this year world-wide, about 6%, $35 billion, will end up in the hands of money launderers, embezzlers, tax evaders or unscrupulous ministers living too high on the hog.”

Yikes. For any non-church nonprofits, the very fact that any group could get away with such malfeasance will come as a shock. The degree of scrutiny of nonprofits seems to increase year by year, as both the IRS and the media amp up their oversight and accountability requirements.

But, as the article points out, churches are not required to file the IRS Form 990 that other 501(c)(3) nonprofits are. The 990 gives the public some basic information with which to check out what’s going on financially and develop further questions.

(For details on what types of groups must fill  out Form 990, see “Nonprofits and the Revised IRS Form 990” on Nolo.com.)

The WSJ article offers various bits of advice to donors about checking out church financial matters before making donations. Turned around, what do those mean for churches that have the good sense not to wait for donors to ask questions, and wish to demonstrate their openness about financial matters from the get-go?

  • Be ready and willing to answer questions. Defensiveness will get you nowhere, or worse, lead to suspicion.
  • Get your financial house in order. Even if your fundraising aims are laudable, bad management practices such as putting all financial control in the hands of one person will lead to problems. Put professional accounting systems into place with regard to collecting, disbursing, and accounting for money.
  • Make donors aware of all the ways to give. For example, if volunteering services could offset the churches need for cash, offer this as an option for those donors who might be financially strapped. Remind church members of the possibility of legacy giving, as well.

By inspiring donor confidence, a church may in turn inspire greater donations.

BIG Fundraising Oops: The Susan B. Komen Debacle

For a foundation that seemed to have so much marketing savvy, the Susan B. Komen foundation can be awfully tone deaf — and send a message that it’s more interested in raising cash than in spending it charitably.

Their current colossal oops, having stopped funding Planned Parenthood despite that agency’s importance in providing mammograms to low-income women, is only the latest example. As I described in January of last year, the Komen Foundation alienated plenty of nonprofit watchers with its hypervigilant efforts to protect its brand: See “Fundraising Oops: The Susan B. Komen Foundation Uses Donor Dollars to Sue Smaller Groups.” (I was going to illustrate this post with something pink, but decided not to take the risk. Did I say “pink?” I meant “that color that is a mix of red and white.”)

And then there was the foundation’s odd choice in 2010 to put its branding on buckets of Kentucky Fried Chicken. Given that junk food and grilled food have been linked to cancer, this inspired plenty of commentary, and one “What the Cluck?” headline by the group Think Before You Pink (“a project of Breast Cancer Action, launched in 2002 in response to the growing concern about the number of pink ribbon products on the market.”)

Clearly there are people who were already shying away from pink products, not to mention supporting anything else but the Komen foundation, before the latest misstep. But at this point — based on all the media attention, not to mention the fact that my Facebook friends seem to be talking of nothing else — I’d say we may start seeing some pink products on the remainder tables. And an increase in donations to Planned Parenthood.

For an excellent summary of the current pink meltdown, analyzed in terms of nonprofit marketing best practices, see Kivi Leroux Miller’s “The Accidental Rebranding of Komen for the Cure.”

How Are Legacy Donors Responding to Recession?

A friend of mine recently mentioned that his father, after reading yet another set of headlines about the Dow taking a nosedive, declared that he was going to change his will to remove each and every gift to charity.

It wasn’t so much that the father worried that there would be no money left for his kids but that, looking ahead into the future, he wondered for how long the stormy economy would damage his children’s  financial security.

I haven’t seen any reports of whether this is a trend. But uncertainty is certainly driving a lot of economic decisions these days.

That, and the knowledge that people can change their wills at any time, create added challenges for any nonprofit’s legacy or planned giving program.

What can you do in response? I would advise:

  • Don’t let up on your messaging about your group’s importance in fulfilling your donor’s fundamental interests, and your group’s ability to help them create a lasting legacy.
  • Never take legacy donors for granted. Find ways to celebrate their commitment and keep them advised about how other legacy gifts are being put to meaningful use.
  • Sign up for a planned giving seminar that will update you on the latest estate tax rules, so that you’ll understand when your donors might have a continued financial interest in reducing their estate through charitable giving.

And of course, batten down the hatches for the ride ahead.

So That’s How Walkathons Got Started!

A good portion of the population has never known a world without walkathons, and probably wouldn’t be able to imagine it. But I was surprised to learn that this now-ubiquitous type of nonprofit fundraiser didn’t even exist until I was in grade school.

Walking for a cause dates back to 1969, according to a recent article  by Anne Kadet in SmartMoney magazine, “Cashathon: The Rise of Charity Races.” That’s when a group of Christians in Bismarck, North Dakota, had the idea of marching in solidarity with the world’s poor (hey look, an actual mission link!) while raising money for food programs. As Kadet explains, it “was half fund-raiser, half protest.”

They should probably take credit for the gift of prophecy, given how their strategy has since taken off.

Kadet’s article does a great job of both outlining the history of the “thon” and looking at what it has morphed into today — with sky’s-the-limit budgets, increased competition between groups, ever-weirder variations on the theme (walking over glass shards, anyone?), and increasing participant expectations for swag. It’s the kind of scenario that might lead to predictions that the whole enterprise is ultimately doomed. I wouldn’t bet on it, though Kadet does point out that some groups are facing reduced income from their walkathons for the simple reason that so many others are going on — sometimes at the very same time.

Basically, you’ve got to read the article. In fact, if you’re planning or developing the budget for a walkathon or charity race, you might want to pick up the print version, if only to see the expanded version of the “Where The Money Goes” chart (the full version of which is not available online). This breaks down all the major expenses, and helps to answer the question of why only 48% of the net proceeds of these events, on average, go to charity. Who knew that you’d have to spend 6% of your income on participant T-shirts, 2% on toilets, 3% on signage, and 8% on permits and security?