Nonprofit Stewardship Requires Good Processes

Stewardship is a promise to engage in responsible planning and management of resources. The stewardship concept can be applied to nature, economics, health, property, and information. For nonprofits, stewardship usually means the responsibility to make sure that the organization spends donations cost-effectively in support of the mission.

 

Nonprofits need to have good processes and systems to fulfill their stewardship role. Nonprofit Board members and management each have roles and responsibilities to implement and manage the processes needed to fulfill the promise to spent donations wisely and sustain the organization.

 

Nonprofits need to have good processes in three important areas to manage donations and make sure they are spent effectively:

 

  1. Verification – Collecting financial information and verifying that it is complete and accurate sounds basic, sure, but it’s so important! Capture donation information from all sources, like credit cards, checks and third parties. Reconcile deposits to donation reports. Confirm that all donor restrictions are documented so that promises to use funds for a specific purpose can be fulfilled.

 

  1. Anomaly Management – Identifying and following-up on occurrences that shouldn’t happen, or anomalies, helps nonprofits correct issues. Managing anomalies early in the process helps people work more efficiently and saves time researching issues. This approach can also help to identify the root causes that cause anomalies so they can be corrected to avoid recurrences.

 

  1. Independent Oversight – An important role of nonprofit Boards is to perform independent reviews of the organization’s financial performance and to take remedial action to address any issues. The Board is also tasked with assuring that financial accounting and standards of practice for nonprofits are followed and that financial functions are performed by qualified staff or consultants.

 

Nonprofits have a stewardship responsibility to use donations effectively to support their mission. By focusing on three important areas to manage donations and make sure they are spent effectively, the Board and management can fulfill those stewardship responsibilities.

 

What’s Your Nonprofit’s ROI?

The tough job of nonprofit fundraising just got tougher. The 2017 Tax Cuts and Jobs Act doubles the standard deduction for individual taxpayers. That change is anticipated to slash the number of taxpayers who itemize their deductions because the standard deduction will be higher for them. One itemized deduction those folks won’t be taking is the one for charitable contributions.

 

Not getting a tax incentive in the form of a deduction means that many taxpayers will donate less to charity. That will be quite a blow to nonprofits that depend on smaller individual gifts that add up to a significant portion of total income. Fundraisers will have to change their strategies.

 

With competition for contributions getter fiercer all the time, it’s more important than ever to make a convincing case that funds donated to your nonprofit will achieve results. Donating to a nonprofit is just like making an investment – return on investment (ROI) attracts investors. Nonprofits need to “market” their ROI, or program results, so donors are attracted to “invest”.

 

In a recent episode of With Good Reason on NPR, best-selling business writer Jim Collins discussed the special factors that make for the most successful organizations in the non-profit world. Those organizations are poised to get results. Listen to his reasoning here.

 

Collins posits that a commitment to excellence in nonprofits results in outcomes beyond measure. That starts with hiring qualified people who are working for more than their paycheck. No matter their role in the organization, they are passionate about the mission and the effective use of donations. It makes sense – professionals collaborating to serve the community within a clear mission and established practices are positioned to achieve a higher ROI.

 

If a high ROI on donations isn’t compelling enough, Collins presents his case in another very impactful way. He points out that when for-profit organizations have bad financial results or a product failure, they lose money. Sure, that’s bad; but the overall cost to society when nonprofits fall on hard times is immense – homeless citizens whose children do not have a childhood; formerly incarcerated men and women who cannot get re-entry services for support when they come home; working families who have no money for groceries the last week of each month.

 

We don’t know exactly what taxpayers will do after losing the income tax deduction for charitable contributions. But no matter what, it’s fair to say that nonprofits with a higher ROI on their program results will attract more contributions from taxpayers who keep donating to charity after the tax law change.

 

Volunteering Pays Off during Giving Season (and All Year)

I’ve blogged recently about the huge percentage of total annual charitable donations that are made during Giving Season, the few weeks between Thanksgiving and New Year’s Day. My blogs were from the perspective of both the donors and the nonprofits. With Christmas just a few days away, the deadline for 2017 donations ends soon.

 

But the spirit of giving doesn’t have to end on December 31st. And it doesn’t have to drain your bank account, either. Giving some of your time by volunteering for a nonprofit can happen any time of the year. Volunteering is an investment that not only pays off for the nonprofit and its clients, it can really pay off for your business.

 

There is plenty of evidence that volunteering is good for business. My business is a great example. This month, it was recognized at the Arlington Chamber of Commerce 93rd Annual Meeting with the President’s Award for volunteering. The recognition is an honor, plus it’s a terrific promotion for my business!

 

Three big pay-offs for businesses that volunteer in their community are:

 

  1. Visibility

Community service is one way to get the name of your business in front of more potential customers. Whether you are sponsoring an event or connecting your team with on-site volunteer projects, the name of your business is getting in front of more eyes, such as in the event program or signage at the volunteer site. Sure, volunteering is not free, but if you’re paying to get your business name out there, it may as well be linked with a good cause.

 

  1. Credibility

When you are doing good, people will assume that you are good. Establishing your credibility as an honorable and trusted business through volunteering will make potential customers look at your business first when making a purchasing decision. Why should they go elsewhere, to a business that has not demonstrated its commitment to service?

 

  1. Employee Enrichment

Now, more than ever, employees want a job where they can feel good about what they are doing. They want to contribute to a better future. While workers can certainly volunteer on their own time, businesses that give employees opportunities to volunteer as a team increase engagement, satisfaction, and retention.

Everyone strives for Win-Win situations. Volunteering some of your business time and energy in your community is the ultimate Win-Win-Win for the nonprofit, its clients, and your business. What better way to keep the spirit of giving all year long?

 

Year-end Donation Time is Here!

Tomorrow is Thanksgiving, the beginning of Giving Season and that annual scurry to make charitable tax deductions before year-end. Non-profit organizations typically receive a large percentage of their donations in November and December. So now is a great time to remember four important facts about charitable tax deductions, before you write that check or click “Donate” on that website.

 

Whatever charity your heart tells you to support, you also expect to save some tax money. But how can be sure that your donation is deductible? Just in time for Giving Season, here are answers to four common questions about charitable donations – Which, Who, What, and How:

 

Which Donations are Deductible?

You can only deduct donations to qualified charities that meet IRS non-profit status requirements. Qualified charities include humanitarian, religious, educational, scientific, and cruelty-prevention organizations. A list of qualified charities is posted on the IRS’ “Exempt Organizations Select Check” tool.

 

Who Can Take a Deduction?

Under current tax law, donations to qualified charities can only be deducted by taxpayers who itemize their deductions using IRS Schedule A. Donation deductions could be limited if your adjusted gross income exceeds a specified amount, based on your filing status.

 

What Documentation is Needed?

You must maintain a bank record or other written communication from the charity. Documentation must contain the name of the organization, the date of the donation and the amount. Donations of $250 or more must be acknowledged in writing by the charity stating the date and amount of the donation. Your deduction could be reduced by the value of anything you received in return, such as the cost of a fundraising dinner.

 

How about Property Donations?

Donations don’t have to be monetary. You can also donate items such as clothing, household goods, vehicles, stock, or real estate. Property donations are subject to more reporting rules than monetary donations. Donated vehicles valued at more than $500 and donated real property and other items valued over $5,000 are subject to even more rules and documentation requirements.

 

Want more information? Consult a qualified tax professional or check out the IRS website at here.