Tips for Nonprofits during Giving Season

Thanksgiving is the traditional start of Giving Season. To mark the date, I blogged a couple of weeks ago about “Which, Who, What, and How” individuals can deduct charitable donations. Nonprofits receive a large portion of their total donations in the last few weeks of the year. Large donation volumes require protections to prevent some of those funds from “disappearing”.

 

Nonprofits work hard to raise funds. Plus, they have fiduciary responsibility for donor funds, starting when they are received. So, in the spirit of equal time, this week’s blog gives some tips to nonprofits, similar to tips that I gave in November to taxpayers planning to make year-end donations.

 

Four best practices for nonprofits to protect their donations:

 

  1. Segregate Duties

Separate tasks to ensure that funds are protected at all times, and nothing “falls through the cracks”. For example, separate the tasks for receiving and depositing funds. Bank account reconciliations and other verification procedures should be performed by someone who is not involved in receiving or depositing funds.

 

  1. Standardize and Automate

Establish and follow a routine process for each donation method. Define non-routine activity, how to detect it, and how to address it. Investing in automation generally reduces overall cost through efficiency and cost-effective controls. Automation facilitates reporting to track activity and detect/address issues and anomalies.

 

  1. Verify and Reconcile

Independent and regular donation verification is one of the most important protections for your donations. Automated tools are available for bank account and credit card reconciliations. Up-front technology investments generally pay for themselves quickly. Donations that are restricted by the donor for a specific purpose should be verified separately.

 

  1. Manage Donation Channels

All donations should be protected. Priority should be given to donation channels that bring in the largest dollar amounts. Identify your donation channels, such as direct mail, online, events, or walk-ins. Determine the dollar amount and donation volume from each channel. Prioritize protection activities on donation channels that bring in the larger percentages of total dollars. Encourage donors to use less expensive, well-protected donation channels.

 

Following these best practices is not everything nonprofits should do to protect donations, but it’s a start.  What is your nonprofit doing to make sure that your donations are protected?

The “Overhead Myth” Starves Nonprofits

Last week, a Tweet I saw really grabbed me – “Underinvesting is expensive! Starving nonprofits leads to inefficient systems.” It was from The Bridgespan Group, a global nonprofit that helps other nonprofits in the hard work of developing strategies.

 

Working with less means you get less.

 

For some reason, non-profits are expected to run on a shoestring. Starving nonprofits limits investments in the necessary people and systems to perform effectively.

 

GuideStar USA, Inc., used the nonprofit data they collect and report to form a business case to help break the “overhead myth” about limiting overhead costs. They offered steps to debunk the myth and shift the conversation from overhead to the need to invest in people and systems.

 

Five Steps to Debunk the “Overhead Myth”:

 

  1. Clearly document objectives and the intended impact of meeting those objectives. This informs donors about your mission and community, and sets the framework for measuring impact.

 

  1. Describe the strategies employed to achieve stated objectives and impacts. Donors are more inclined to support nonprofits that connect strategic goals with action plans and expected results.

 

  1. Discuss the capacity to deliver the programs and services to meet stated objectives. Describe capacity investments needed to establish and sustain the necessary infrastructure to support programs.

 

  1. Tell donors how you measure progress. This communicates that you are monitoring the achievement of your organization’s goals and helps donors trace the impact of their gift.

 

  1. Share results from recent work and describe additional results that you want to achieve. Highlighting successful projects illustrates how goals are achieved and helps donors visualize their gift in action.

 

Charting your non-profit’s objectives and impact, and the investment needed to deliver effective programs debunks the overhead myth. Helping donors understand infrastructure needs will compel them to give.

 

More tools and information to help non-profits to re-direct donor conversations from the “overhead myth” to performance and results are found at www.overheadmyth.com.

Nonprofit Board Treasurer Duties

A few weeks ago, I blogged about nonprofit Board duties required to fulfill the financial stewardship and oversight role. This legally-defined role is known as “Fiduciary Responsibility.” This week, I provide more details about the Board Treasurer’s important financial oversight role.

 

The Treasurer is the primary financial officer of the organization. As such, she or he should have the experience and background to be knowledgeable about financial policies and functions necessary effectively manage and understand nonprofit finances. Some professions that make good Board Treasurers were described in another previous blog post.

 

Four important Treasurer Duties and Responsibilities are to:

 

  1. Assure that the organization is following appropriate financial policies and that qualified individuals perform financial functions. The right policies and people are more likely to provide the desired results, such as reliable and complete financial information.
  2. Understand regulatory and legal requirements for financial accounting and standards of practice for nonprofit organizations and assist other Board members in understanding and fulfilling their oversight and fiduciary responsibilities.
  3. Assure that accurate financial records are being kept, monitored, and used to take necessary action to sustain and protect the organization’s finances. Regularly provide the Board Chair and the Board with an accounting of the organization’s financial condition.
  4. Assist in preparing the annual budget and presenting the budget to the Board for approval, and in selecting an independent auditor, reviewing the annual audit results, and answering Board members’ questions about the audit.

 

Nonprofits with Treasurers who fulfill these four fiduciary duties are more likely to make appropriate financial decisions, meet donor expectations to protect and preserve financial assets, and ensure that regulatory and legal requirements are addressed.

 

Are Those Year-end Donations Deductible?

This late in the year, you might think it’s too late to lower your 2016 tax bill. Maybe not!

 

Lower your taxes and warm your heart at the same time by making charitable contributions before year-end. Taxpayers may be able to deduct contributions to qualified charities. How do you know that a charity is qualified and your donation is deductible?

 

Answers to three common questions determine whether a donation is tax deductible:

 

Is the Charity Qualified?

 

Only donations to qualified charities with an IRS exemption designation are tax deductible. Qualified charities include humanitarian, religious, educational, scientific, and cruelty-prevention organizations. A list of qualified charities is posted in the IRS’ “Exempt Organizations Select Check” tool at http://bit.ly/1g0xhkc.

 

Who Can Take a Deduction?

 

Charitable donations are only deductible for taxpayers who itemize their deductions using IRS Schedule A. Donations must be acknowledged in writing by the charity. Donations of $250 or more must be supported by a letter from the charity stating the date and amount of the donation, reduced by the value of anything in received by the donor in return, such as a fundraising dinner.

 

What about Non-Cash Donations?

 

Donations don’t have to be financial. Items such as clothing, household goods, vehicles, stock, or real estate, can also be donated. In general, clothing and household items can only be deducted if they are in good usable condition. The deduction per items is based on the “thrift shop” value. Donated vehicles valued at more than $500 and donated property valued at over $5,000 are subject to more rules and limits.

 

Space limits the information presented here. Need more details? Consult a qualified tax professional or check out IRS Publication 526, Charitable Contributions, at http://bit.ly/1ep31yt.