Monday, September 15, 2008

Fully Contributing Boards: An Essential Element of Board Performance

Often times grassroots nonprofits spend time exploring ways to become more effective. The most common areas of evaluation seem to be mission clarity, program development and implementation, staff training, fundraising, and mission based marketing. One area, however, that may not be so deeply investigated is Board performance.

Board leadership is a success factor for organizations seeking to increase organizational capacity and maximize impact. Nonprofits rely on their Board for effective decision making, organizational accountability, donor cultivation, community reputation, and financial and legal oversight. Unfortunately, one essential element of Board leadership that may have been overlooked is full Board financial contribution.

When undertaking fundraising efforts, an organization should be able to demonstrate to the community that each of their leaders are willing to make donations to ensure mission fulfillment. Why should I give to a cause whose own administration does not feel strongly enough to make a personal financial contribution? While not all Board members- especially those in startup nonprofits- are affluent individuals, each should be willing to make a sacrifice in order to lead by example within their community. In addition to making a personal contribution, each member of the Board should be charged with the responsibility of soliciting donations from others with with they have established relationships.

So how do you get your Board to become a fully contributing Board? Asking the Board to give is the job of the President. At the end of each fiscal year, the President should draft a letter to each member requesting their direct donation toward the upcoming budget. If some motivation to give is necessary, remind members to keep in mind that many times other prospective donors, especially foundation grantmakers and major donors, will only make a donation if everyone on the Board has made a capacity gift. Such gifts need not be excessive, they should be to the extent of each individual member’s capacity. By demonstrating that a stretch of your personal budget has been made in an effort to demonstrate dedication to the cause it will influence other members of your community to do the same.

Monday, September 8, 2008

Starting a Nonprofit: Things to Think About

Each year, thousands of people set out to start a nonprofit organization. These individuals are undoubtedly passionate about their cause and truly want to make a difference in their communities. Unfortunately, many start off on the wrong foot because they fail to fully develop their idea through comprehensive planning. Most do not recognize that operating within the nonprofit sector requires a unique set of knowledge, skills, and abilities. To help you identify what area of your plan needs more attention, here are some common things to think about.

What equipment, supplies, and human resources will I need?
Create a realistic budget, and know where you will get funding

How do I make it legal?
• Obtain 501 status
• Make sure you are registered in each state you solicit funding in
• File your taxes to keep from being removed from Publication 78
• Make sure you are exempt from state taxes

Where will I find the following resources?
Articles of Incorporation
501c3 tax exempt services
• State tax exemption & Charity Registrations
Grant writing Services
Fundraising Services
Web development Services
Bookkeeping and Accounting Services

What Financing will I need?
• Salary
• Rent/ Utilities
• Office Supplies
• Program Supplies
• Fundraising Expense
• Incidentals

What’s my Advantage?
• What skills and experience do I bring to the nonprofit business?
• What solution will you offer that other organizations do not?
• What is your Marketing Advantage?

What makes my organization unique?
• Choose methods of service delivery that are unique
• Do not duplicate the services of other organizations in your community
• Discover ways to collaborate with other nonprofits, offering unique partnership abilities

Thursday, September 4, 2008

Church Planting: Beyond Faith and Inspiration

It has been my pleasure over the last couple of years to have the opportunity to work with many passionate, inspired Christians during their journey in church planting. These faithful missionaries have been such an inspiration- demonstrating their devotion to God by working diligently to create a new flock from the unchurched. Reaching out to both believers and non-believers in many areas of the world, those called to plant new churches exude a dedication and zeal that reminds me why I chose a career in the nonprofit sector.

But there is more to strategically planting a new church than simply following God’s call to action. For a new church to be successful in acquiring initial capital, attracting a faithful membership, and expanding outreach ministries to reach all populations in need, church leaders must learn to take on the characteristics of entrepreneurs.

It may seem divergent to view the Church in a commercial sense, however if you think about churches who have achieved extreme success they are operating as a business- a big business. While your goals in church planting most likely have led you to focus on location, congregation, and ways to reach out to disbelievers, you may not have considered the following essential aspects of church administration:

Incorporation- Becoming a legal entity, limiting the liability of those involved, and increasing eligibility for funding and benefits such as tax exemption are of importance. Rules and regulations for incorporation vary by state, so be sure you know the facts in your area.

Bylaws- While I’m sure you’ve developed a Doctrinal Statement and religious hierarchy for your planned church, it is also essential that you develop and affirm Board duties and responsibilities, conflict of interest policy, and checks and balances.

Tax Exemption- Recognition as an exempt organization under section 501(c)(3) provides validation to supporters that your church is legitimate. It provides the opportunity to receive faith-based grants, receive discounted rates on occupancy, and assures the members of your congregation that their tithes are tax deductible.

Marketing- Word of mouth is a great way to develop membership, however other avenues to market your organization are critical, especially if the church you are planting is in an area in which you do not have established personal contacts. Website development is a great start, as about 50% of Americans log onto the web to conduct searches daily. Search engine optimization for your site is also key- if someone is searching for a Christian church in your target area you’d rather your site be at the top of the list of results rather than buried ten pages in.

Grants- There are many established grantmakers out there whose specific mission is to fund religious organizations and churches. Drafting a successful proposal and conducting detailed research into funding agencies may add a much needed source of capital for your organization. While tithes and offering will undoubtedly represent your bulk of funding, think of how many more missions you could undertake if you could generate a few thousand (or more) extra dollars each year via grant funding.

I understand your area of expertise may be in theology and the thought of assuming such administrative responsibilities may seem a daunting task. If that’s the case, you may want to look to outside experts for support. That’s why I’m here.

Wednesday, August 27, 2008

Mission Based Marketing: An Essential for Charities and Churches

When consulting nonprofit administrators, I have found that many individuals involved in nonprofit operations, especially those in small grassroots organizations, carry the belief that their organization is not a business. I suppose the term “business” lends a for-profit connotation, and makes many nonprofit leaders feel that it violates their charitable mission. It has been my goal to make these emerging leaders aware that increased organizational capacity can only be generated if they begin to undertake administrative tasks that were once found only within for-profit entities. With the increased competition that is becoming apparent within the sector, one such critical task is adequate marketing of the organization. Market-driven nonprofit organizations are implementing a variety of market strategies in order to fulfill their mission, meet their programmatic goals, and achieve long-term financial stability.

In the nonprofit sector, marketing incorporates focusing on the needs of your constituents and planning to satisfy those needs over time. Program services to clients are the primary reason that nonprofit organizations exist. Therefore, it is critical to know how to plan and market programs. To become highly effective, begin with understanding your program’s target markets. You’ll need to identify what groups of potential clients exist, what their needs are, what groups you’d prefer to serve, and what programs you might develop to meet their needs.

Plan your market strategy. This, again, may involve “for-profity” (my fave new term) techniques. This strategy may involve undertaking the creation of :

· Business Plans
· Market Research
· SWOT Analysis
· Strategic Plans
· Web Marketing (A must in today’s technology-driven world!)
· Corporate Branding

Keep in mind that an essential aspect of marketing is continuously developing a positive self-image for the organization. The relationship between price and perceived value is nowhere more evident than in the nonprofit sector. Thus every organization must find ways to make clients believe your programs or services have the most value.

Careful market planning allows a nonprofit organization to position itself best to compete for all kinds of support, including funds, by looking systematically at mission, image, constituents, competitors, resources, strengths, and weaknesses, and then devise strategies to gain more favorable position in the competitive marketplace. Ultimately, adequate marketing will help your organization to meet its strategic goals, whether they be to increase revenue, expand your client base, or promote your organization in a new market.

Monday, August 25, 2008

Choosing a Board for Your Nonprofit

You have a mission that you are passionate about fulfilling, and you have decided to start a nonprofit organization to do just that. One of the first measures to undertake toward achieving that goal is the selection of the initial Board of Directors for the organization. While this may be only the first of many steps that must be taken in legally forming the organization, it is arguably the most important and should not be taken lightly. The decision of who to place on the founding Board must be made after careful consideration of each potential candidate’s unique set of knowledge, skills, and abilities.

In my experience, most founders of grassroots nonprofits are compelled to select members of their family as their trustees. At first glance this method makes sense. When thinking of those individuals that can be trusted to control your organization, most would immediately lean on family. Unfortunately, if you’d like the organization to qualify as a public charity under IRC section 501(c)(3) you must look beyond family members and seek out members of the general public to provide governance.

A primary concern in Board selection is avoidance of partiality. Most would assume that members of the same family will vote in accordance with one another, without first taking into consideration the effects on public interest. This is the principal reason why the IRS requires 51% of a nonprofit Board to be comprised of “disinterested” parties. Disinterested individuals are those who have no relationship with any other Board member, and who do not receive compensation from the organization for any reason. (Keep in mind that your Board should be primarily a volunteer group anyway.)

When looking to the public to make your Board selections, there are several things you’ll want to keep in mind:

Ø Knowledge- Each member of the Board should be familiar with appropriate, ethical governance practices. Select individuals who have knowledge and experience in the nonprofit sector and who have demonstrated mindfulness for compliance.

Ø Skills- Members of the Board should be able to contribute something to operations. Select individuals who have skills in accounting, law, or business administration. You’ll also want individuals with experience in your specific activities. For example, if you are an educational program you may want a teacher or school administrator on your Board.

Ø Resources- Individuals who have good resources in the community are essential on your Board. Select individuals who have contacts in local legislature, with large corporations, or who have relationships with private individuals who may be potential donors.

Ø Character- Nonprofits must observe the highest standards in order to retain the trust of the donating public and the confidence of those they seek to help. The board provides the public face of the organization, and its behavior, and that of individual board members must be exemplary.

Ø Passion- The organization’s mission should guide every decision the board makes and thus each member of the Board should be able to articulate and demonstrate a real passion for it and encourage their fellow trustees to show the same commitment.

Establishing a Board who will provide excellent oversight of organizational operations while also representing a cross section of your community is essential. If careful consideration is made before every Board election, your organization will succeed in creating public trust and value.

Wednesday, August 20, 2008

Nonprofit Does Not Mean Tax Exempt

A common misconception in my field of work is the notion that an organization is exempt from paying taxes simply due to the fact that it has been organized as a nonprofit. Unfortunately, this particular misunderstanding could leave an organization facing tax debt with both the IRS and their state franchise tax board.

Nonprofit status is a concept of state law. Choosing to incorporate as a “nonprofit” or “nonstock” organization may, in fact, come with certain privileges, such as eligibility for state and federal tax exemption, however this exemption is far from automatic. I always liken tax exemption to a driver’s license- if you choose to request the privilege, you must apply, pass the test, and then, most importantly, follow the rules. For those organizations that choose not to pursue this privilege, payment of annual corporate taxes is required.

The road to tax exemption, for most nonprofits, is paved with compliance. Organizations must be familiar with all processes and procedures, and be prepared for detailed reporting. In addition to the provision of particular clauses in the organizing document that precedes an extensive application process with the IRS, charities must be mindful of state and local tax exemption and registration requirements. Additionally, organizations that have been granted exemption must be aware that that not all income received is eligible for exemption, and be mindful to pay required taxes on any unrelated business income.

Nonprofit coursework may prove to be essential for the novice director or Board member. For those whose time constraints do not warrant such coursework, the assistance of an expert may be necessary in maintaining compliance with all state and federal regulations.

Friday, August 15, 2008

Fundraisers - To Reward or Not to Reward…the Debate Continues

Once again last evening while perusing the web I stumbled upon arguments for and against percentage based fundraising. With as many times as professional groups such as the Association of Fundraising Professionals and the American Grant Writers Association have denounced the practice I would think it would be a dead issue, however the debate continues. Thus, I will add my thoughts on the topic.

Percentage based fundraising is closely coupled with percentage based grant writing. In both cases the nonprofit being served promises to pay the fundraiser or grant writer a “commission” on all donations or grant awards received. Many argue that this greatly reduces the chance that the organization will expend funds for which they will receive no return on their investment. This argument is understandable on the surface, but to get a clear idea of just why this practice has been condemned you must fully analyze the potential ramifications. Some simple examples should suffice.

Think about this. A grant writer is promised a 10% commission on any awards received from their proposal. The grant writer then spends 20 hours working diligently to prepare the proposal, hoping for success. The proposal is submitted to a small community foundation with a request for $25,000. Had the proposal been funded as written, the grant writer would then receive $2,500 for their 20 hours of work. Not bad. But what if the community foundation happens to have a donor advised fund that was established specifically for the purposes outlined in that proposal and that donor recommends a donation of $250,000?? The grant writer would then get $25,000 for the same 20 hours of work. That’s a bonanza for the writer, but is that really in the best interest of the organization’s constituents? In my opinion, the excess $22,500 should be used to feed the hungry, clothe the homeless, educate the children-whatever the organization’s mission may be.