Under promise and over deliver? Managing donor expectations?

March 22, 2013 erik Fundraising

Welcome to O.D. Fridays at DonorDreams blog. Every Friday for the foreseeable future we will be looking at posts from John Greco’s blog called “johnponders ~ about life at work, mostly” and applying his organizational development messages to the non-profit community.

In a post titled “Squeeze Out the Doubt,” John looks at both sides of the “Under promise . . . Over deliver“. Yes, there is a debate surrounding this concept. One side says, this approach is the key to producing win-win business outcomes. The other side says, managing expectations will lead to inflated expectations and the need to always over deliver in order to attain a win-win outcome (e.g. unsustainable vicious cycle).

As someone who saw “Under promise . . . Over deliver” as a basic truism, I find this debate interesting and something I mentally chewed on for the last few days. While masticating on this concept, my mind turned to the relationship that non-profit organizations have with their donors (aka investors).

As I thought about it more, I think this debate is at the center of every agency’s fundraising program. Here are a few questions that I’ve heard clients and colleagues ask themselves:

Should we tell our donors how close we are to closing our doors? Or will it set the fundraising bar higher next time we solicit them for funds?
Do we share our mediocre program outcomes data with our donors? Or should we cherry pick the data and make them feel good about ROI?
When writing our case for support, should we under state our goals for program outputs and outcomes?
When talking about our fundraising campaign goals, should we talk about the stretch goal as if it is what we’ve budgeted?

It would be easy for me to come out and proclaim that honesty and transparency are always the best policies; however, I think it is much more complicated than a black-and-white proclamation.

For example, I am not a big fan of non-profits who run around their community screaming from every mountaintop that they are running out of money and weeks away from closing their doors. On one hand, I’ve talked to some non-profit professionals who see this as a way of low-balling expectations. If they keep the doors open, then they win. It also creates a heightened sense of urgency among donors. Right? On the other hand, donors don’t like to throw good money after bad money. So, the next time your agency asks for money, donors will set the bar higher than they might have otherwise done because they want to make sure they aren’t investing in the S.S. Titanic.

OK . . . this might not be the best example, but the point that I’ve driving at is that employing an “Under promise . . . Over deliver” strategy takes careful thought and application.

Please use the comment box and share examples of where you successfully employed this strategy with your board members, donors, volunteers, or staff. Did it result in a win-win? Or do you subscribe to another school of thought entirely (e.g. honesty is always the best policy, never promise anything and just deliver, etc)? If so, please tell us how that has worked for you.

Here’s to your health!

Erik Anderson
Founder & President, The Healthy Non-Profit LLC
www.thehealthynonprofit.com
erik@thehealthynonprofit.com
http://twitter.com/#!/eanderson847
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http://www.linkedin.com/in/erikanderson847

Congratulations on the new Pope and all of your ‘Good Works’

March 21, 2013 erik volunteers

I was Baptized in a United Church of Christ congregation in Park Ridge, Illinois where my parents both grew up. I was raised in a Lutheran Church in Mount Prospect, Illinois where I took my first communion and got confirmed. In recent years, my religion has faded and it seems as if none of my religious training stuck. (Note to self: I wonder if I can get a refund? I should check into that.) However, in recent weeks I’ve been bombarded by all things Catholic thanks in large part to our news media who is stuck in overdrive. All of this coverage compels me to write a little something about our Catholic brothers and sisters, who work by our sides in the non-profit trenches.

Pope Francis: A sight for sore eyes

This Pope’s namesake is Francis of Assisi, who is one of the better known saints. He is the patron saint of animals and the environment, and is synonymous with the concepts of poverty and humility. In taking the name “Francis,” it is widely believed the Pope is sending a message to the world. Many have speculated this message is that one of the church’s major initiatives will be its focus on social justice and its work with the poor.

As someone who has spent almost his entire life in the non-profit sector working in the social services/human services sub-sector, this is welcome news.

You don’t need to be a Catholic to appreciate this development. I am excited about the future and can’t wait to see where this all leads. I hope you are, too.

Beware of false prophets

As I confessed in the opening paragraph of this post, my Baptismal water didn’t take and the church that I now attend on Sunday morning is Meet The Press on NBC. David Gregory is my pastor (which is kinda funny since he is Jewish). Go figure!

This last Sunday one of the roundtable participants was former Oklahoma Governor Frank Keating, who is a Catholic and served on one of the church’s child abuse task forces. During my hour-long mass, I heard Keating saying something that really caught my attention:

“In the United States, 50 percent of social services are provided by the Catholic church.”

This declaration stuck with me for days until I couldn’t resist Googling around in my free time in an effort to fact check this statement. I guess I wasn’t the only person who was bothered by this statement because PolitiFact has already done the research and posted an article titled “Does the Catholic Church provide half of social services in the U.S.”

If you have a minute or two to spare in your busy schedule today, I strongly recommend that you read the PolitiFact post. It is super interesting and a quick read. It drives home the point that we all need to beware of false prophets. Damn politicians . . . you can’t believe a word of what comes out of their mouths! LOL

Here is the long and the short of what PolitiFact found out:

“So by our estimate, Catholic-affiliated charity amounts to 17 percent of the funds spent by nonprofits on social services — well short of the 50 percent Keating cited. Even doubling this share to create a generous margin of error brings it to 34 percent — still well short of half. But even this may overestimate the footprint of Catholic-supported charities, since it doesn’t include social-service expenditures by the government. In his comment, Keating didn’t specify that he was only talking about social services funded by private groups.”

Truth be told . . . I knew that Catholic-affiliated charities did a lot of work, but I never understood how much work it does. I am still impressed with 17 percent! I think you should be, too.

Celebrating ‘Good Works’

One of the core tenets of the Catholic faith is that “good works are done to glorify God and are done in honor of him.”

There is a lot of confusion around this concept and what it means to Catholics. I found a really good blog post that explains it really well. Click here if you want to learn more.

As a non-profit professional, I really appreciate the fact that there is a network of 1.2 billion people who dedicate their lives to doing good things for other people.

With the media in overdrive about all things Catholic, I encourage all non-profit professionals to take a moment out of their busy day to appreciate the good works of the church and its members. When you’re in the car commuting, simply ask yourself the following questions:

I wonder how many of our board members and volunteers are Catholic?
I wonder how many of our donors are Catholic?
I wonder how many of our clients have been impacted by other Catholic-affiliated charities?

After scratching your head and contemplating these questions, simply end your thought with a simple “Thank goodness for good works!”

Did the “Festival of All Things Catholic” by our news media inspire other non-profit related thoughts for you? If so, please share those thoughts in the comment box below.

Here’s to your health!

Charlie Brown would’ve been a great non-profit executive director

March 19, 2013 erik Fundraising, Uncategorized

As many of you know, I spent last week in California visiting friends and a whole lot of wineries in Sonoma County. During my adventures, we stopped at the Charles M. Schultz museum in Santa Rose, CA. It was one of the highlights of my trip. Not only did I get to walk down memory lane (because Snoopy and his friends were a big part of my childhood), but I was reminded of why I loved this cartoon/comic strip so much.

As I passed through one of the many exhibits on Charles Schultz’ amazing career, I was reminded of this very famous quotation by William Hickson:

“If at first you don’t succeed, try, try again.”

How many times as a child did you see Lucy pull that football away from Charlie Brown as he flew through the air and crash to the ground?

It is an image burned in my head as I am sure it is for countless numbers of people around the world.

Charles Schultz drew this image over and over and over again because he wanted kids to understand:

Failure is part of life.
It is OK to fail.
When you fail, you simply pick yourself off the ground.
You never stop trying.

What an incredibly important lesson to learn!

On my first day back from vacation, I had the privilege of having lunch with a friend who is the executive director of a non-profit organization. While breaking bread and catching up on things, my friend reflected on his career path as a non-profit professional and he said something that made me think of Charlie Brown. He said people who strive to be an executive director need to understand that they will fail, and they will do a lot of it.

Wise words from a very wise man.

The following is just a short list of failures that I’ve seen in my years from executive directors and fundraising professionals:

Recruiting the wrong volunteer to do the wrong job.
Pairing the wrong fundraising volunteer to solicit the wrong donor.
Pursuing the wrong strategies at the wrong time.
Not adhering to best practices when they are so desperately called for.
Cutting corners and thinking the ends justify the means.

We’ve all been there. We’ve all failed. And we’ve all picked ourselves off the ground and pushed forward.

Do you have the soul of Charlie Brown? Do you look for this quality in the people you hire? What about in the people you recruit as volunteers? Please scroll down and share a story in the comment box about a time you missed the football and how it made you a better non-profit professional.

Here’s to your health!

Fundraising is like a fine wine

March 18, 2013 erik Fundraising

As you know, last week I re-ran five of the most viewed DonorDreams blog posts because I needed to take a break. What I didn’t tell readers is that the break was really a week-long vacation to see old friends and visit California’s Sonoma County wine country for the second time in my life. If you haven’t had the opportunity to visit California wine country, then you have to add it to your “bucket list”. It was spectacular!

So, here I am . . . sitting at my desk . . . first day back . . . struggling with the idea of getting back in the saddle again.

As I reflect back on the last week, I can honestly say that visiting wineries invoked lots of thought about fundraising such as:

Cultivation
Stewardship
Patience
Aging

So, I’ve decided that on my first day back at my desk, I will share a few vacation pictures with you as well as a few links from a Google search focused on the terms “wine” and “fundraising”. Cheers!

Jus a few results from Google search

“Like a Fine Wine, Fundraising Should be Savored” by Lisa Krueger at Step By Step Fundraising
“Wine Fundraising Ideas” at Giving Vines
“Wine Tasting Fundraising Ideas” at Fundable.org
“2 Types of Wine Fundraising” at Articlesbase
“Ehlers Estate Winery” (aka non-profit winery) atNapa Valley Wine Blog
Wine to Water

Mmmmm . . . all this talk about wine and fundraising is making me thirsty and it is only 8:00 am. Come to think of it, I also need to start making a few phone calls to set-up meetings with area donors to talk about this year’s annual campaign. Hmmmmm? I wonder if I can combine these two lovely tasks? 🙂

As they say in wine country . . . CHEERS! I’ll see you tomorrow where we’ll talk about the Charles M. Schultz Museum and how it inspired a few thoughts by which fundraising professionals should live their professional lives.

Here’s to your health!

Non-profit fees for service and the smell test

March 15, 2013 erik Fundraising

It has been an exhausting whirlwind of work the last few months. While I would never dare complain about work so as not to upset the consulting gods, I need to take a short break. So, this week I will re-run some of the most viewed DonorDreams blog posts on fundraising and leadership. I hope you enjoy today’s post on fees for service. Enjoy the flashback! ~Erik

Non-profit fees for service and the smell test

Originally published on February 17, 2012

In a previous post, I blogged about the idea of non-profit organizations looking in some non-traditional places to generate revenue such as “selling things” through unrelated business income efforts. Of course, I see non-profits also looking at “related” business income opportunities. Today, I’m turning my attention from external opportunities to “sell stuff” (e.g. thrift stores, eBay, amazon.com, etc) in an effort to create revenue streams and looking inward at internal opportunities to sell your services by charging fees.

It would be too easy for me to take the position that instituting fees to sell your non-profit services to your clients amounts to nothing more than selling your soul. However, as we discovered in Tuesday’s post titled “Should the new non-profit mantra be: Sell! Sell! Sell!” many non-profits are generating a lot of revenue from fees for service — 45 percent of the approximate $1.5 trillion in non-profit revenue comes from fees and services.

I think my blogger friend, Joanne Fritz of about.com, got it right in her post titled “Can a Nonprofit Charge Fees for Its Services?” when she suggested there is a “smell test” that needs to be passed before a non-profit should ask its clients to pay fees for the services it offers. Let’s have some fun with this smell test idea:

<<sniff>> I don’t think domestic violence victims should be asked to pay for a place to spend the night safe from their abuser.
<<sniff>> It seems reasonable to ask students at publicly subsidized universities to pay some tuition.
<<sniff>> It don’t think hungry people should be asked to pay for the food they’re given at a food bank.
<<sniff>> It seems reasonable to ask patients at a non-profit hospital to pay for care and medical attention

Well, that was easy wasn’t it? Hmmmmmm . . . not so fast! The reality is that this issue can put your agency on the proverbial “slippery slope”. Let’s take a closer look:

Why should YMCA’s be able to charge fees to access their fitness programs? Doesn’t their non-profit tax-exempt status give them an unfair competitive advantage over for-profit companies doing the exact same thing? If you ask Bally’s Total Fitness and the fitness center industry, they’d likely say YES . . . the trail of lawsuits throughout the years would seem to support this assertion.
Why should public universities continue to charge more and more for a college education when they can also fundraise and access other funding streams that for-profit institutions of higher education can’t touch? Doesn’t their non-profit tax-exempt status give them an unfair competitive advantage?

In this “New Normal” economic environment, I do think non-profit professionals are eyeing opportunities to “sell stuff” to enhance their revenue streams. However, discretion is the better part of valor when it comes to giving in to this emerging trend because it is one thing to look at the for-profit marketplace to sell stuff, but it can be a completely different issue when you start selling your services (and your soul).

Take the Boys & Girls Club movement as a great example. It is the mission of Boys & Girls Clubs to help “those kids who need us most,” which in most cases translates into providing services to kids from “economically disadvantaged circumstances”. There are a number of Clubs doing the math on charging fees for their services.

While it is true that Clubs have charged membership fees for more than a century, it has always been nominal . . . $1.00, $5.00, $25.00 . . . for a one year membership to the Club. This was done to create a “sense of ownership” because the value associated with something given away for free is NOTHING.

However, what happens to this organization’s soul when fees go from being a program tool to a revenue stream . . . $50.00, $100.00, $250.00, $500.00 per year? At what point are you soulless? At what point do your clients walk away? At what point does your mission collapse under the weight of fee for service”? At what point does the IRS enter the picture and revoke your non-profit status?

I’m not suggesting that fee for service isn’t an acceptable model for some non-profit organizations. What I am suggesting is that passing the smell test is more difficult than you may think, and it requires serious board room consideration.

So, here are a few questions I recommend board members ask themselves:

Are there for-profit corporations in your community providing similar services? If so, then why should you have a competitive tax advantage over them?
If your fees for comparable services are similar to other for-profit competitors, what differentiates you and makes you special enough to have a tax advantage?
What is stopping you (and I mean really stopping you) from doing a better job with more traditional revenue streams that are unique remedies to non-profit corporations (e.g. fundraising, foundation grant writing, and various other philanthropic opportunities)?
What will your donors think? And at what point will fees damage your philanthropic business model? (e.g. donors balking at giving you a charitable gift because they think you can just hike fees or go sell some more stuff)

So, before you leap I suggest you look. You might not have a revenue problem that needs to be fixed with a fee for service solution. You may have a human resources and staffing issue. You may have board development or volunteer issue. Of course, you may have a revenue model issue that needs to be tweaked with the addition of some fees for service.

Here is some unsolicited advice . . . If you want to “sell stuff” to generate revenue, it is far safer to open a store and weave your mission throughout its operation (e.g. Wednesday’s blog post about thrift stores or Thursday’s post about eBay and Amazon.com) than it is to look internally at selling your services and raising revenue on the backs of those you serve.

What is the going price for a soul today? I think is it PRICELESS.

Here’s to your health!

Fundraising questions to ask of donors and anticipate from them

March 14, 2013 erik Fundraising

Fundraising questions to ask donors and anticipate from them

Originally published on June 21, 2012

Last week we started a series of blog posts focused on the art of asking questions, and this theme has carried over into this week. So far, we’ve looked at questions that executive directors should be asking themselves and their boards. We’ve also looked at questions board members should be ask of themselves and their fellow board volunteers. Yesterday, we looked at various questions you need to ask prospective board members before asking them to join your board. Today, we’re ending this series of posts by looking at 1) powerful questions that donors should be asking the non-profit agencies they support and 2) questions non-profits should be asking their supporters.

Questions that donors have of you

Over the last 15 years, I have been part of countless solicitation teams and answered more questions than I care to recall at this time of the morning. While those questions tend to be all over the place thanks in part to “unique circumstances,” there are commonly asked questions that many donors seem to ask after they’ve been asked to consider making a charitable contribution.

What will my contribution help accomplish?
Specifically, how will my contribution make a difference in your clients’ lives?
How financial stable is your organization?
There are so many worthy causes that keep asking for support. Why should I support you?
How much of my contribution directly supports programming and how much will underwrite administrative and fundraising expenses?
Tell me more about your fee structure and why are you charging your clients what you’re charging them? How do you know that is the right amount? Why not more?

The list of FAQs is much larger, but these are just questions that I recall answering over and over again. If you want a more comprehensive list of questions, you may want to read Harvey McKinnon’s book “The 11 Questions Every Donor Asks: And the Answers All Donors Crave“.

Why is it important to know what burning questions to expect? I think there are two HUGEreasons:

If you do a better job “anticipating” these questions and build those answers into your case for support and solicitation presentation, I predict that your annual campaign numbers will start climbing.
There is a long list of fears that get in the way of people volunteering to help your agency with fundraising. One of the top reasons is their fear of not being able to answer questions. Addressing FAQs as part of your annual campaign training program will improve volunteer confidence, reduce the amount of avoidance behavior during the campaign, and result in better solicitations (and hopeful result in better fundraising numbers).

Questions that you should have of donors

As I said earlier, I’ve been on many fundraising solicitation teams, and I’ve seen many things throughout the years. Too often, I’ve seen volunteers rush through the solicitation, get a commitment, and quickly downshift into chit-chat of a personal nature. It is almost as if the volunteer solicitor is non-verbally saying “Phew! Thank goodness that is over.”

I don’t believe there is anything wrong with chit-chat after the solicitation is completed. In fact, there is all sorts of important personal information that could and should be harvested from that conversation, captured on a contact report form, and entered into the donor database. However, most volunteer solicitors don’t receive training on what those conversations should look like.

While it would be easy to use that post-solicitation time to talk about family and personal things, it think the following questions might be more useful in developing a deeper philanthropic relationship with your donors:

If you only had one year to live, what would be most important to you to accomplish?
What are the issues, injustices, principles or causes in this world that get you riled up?
If you could change one thing in the world, what would it be?
What accomplishment or legacy would have ultimate significance to you?
In philanthropic terms, if you had unlimited resources, what would you set out to do?

While it is important to know the names of a donor’s spouse and children as well as where they went to school or go to church, I think it is far more important to understand a donor’s passions, dreams, and desires. Knowing and understanding these things puts you in a position of helping them achieve big things. I believe this is one of the biggest differences between transactional fundraising and donor-centered fundraising™.

I believe these types of questions can transform how a donor views you and your organization . . . FROM fundraising vulture TO philanthropic dream-maker.

Please take a minute this morning to share a commonly asked question that you hear donors asking your volunteer solicitors in the comment box below. Or share with this online community one or two questions that you like to ask donors that helps you better understand their philanthropic hopes and dreams. We can all learn from each other and it is just 60 seconds out of your day. Please?

Here’s to your health!

Questions every non-profit executive director should be asking

March 13, 2013 erik Fundraising

Questions every non-profit executive director should be asking

Originally published on June 14, 2012

Tony Stoltzfus explains in his book “Coaching Questions: A Coach’s Guide to Powerful Asking Questions” that there are many reasons why asking questions is important. I highlighted the following three reasons:

Asking empowers
Asking develops leadership capacity
Asking creates authenticity

I believe the very first reason in this list explains why non-profit executive directors need to get better at asking questions of their board members. The following is what Tony says about “asking empowers”:

. . . roughly 80% of the time, I find that they already know what to do: they just don’t have the confidence to step out and do it. Self-confidence is a huge factor in change. When you ask for people’s opinions and take them seriously, you are sending a powerful message: “You have great ideas. I believe in you. You can do this.” Just asking can empower people to do things they couldn’t do on their own.

Sure, Tony is talking about executive coaching in that passage, but in some regards executive directors serve as a coach to the board of directors. At least sometimes . . . right? (Yes, that job involves a weird little dance and sometimes the board leads and other times the executive director leads. Sigh!)

I cannot tell you how many non-profit executive directors tell me that their board members are disengaged. While there can be many reasons for this phenomenon, one reason could be that the executive director is doing too much talking and not enough asking. Think about it for a moment.

When I decided to open The Healthy Non-Profit LLC last year, I saw a blog post from Seth Godin titled “Questions for a new entrepreneur“. After reading it, I posted it to the bulletin board in my office. I periodically go back and re-read it because the questions he suggests a new business owner ask are right on target. Here are a few of those questions that I think are applicable to non-profit executive directors:

Are you aware of your cash flow? What’s your zero point? What are you doing to ensure you get to keep swimming?
What’s your role?
Are you trying to build a team?
Why are you doing this at all?

Circling back around to the idea of engaging board members, here are a few questions I found in Tony Stoltzfus’ book “Coaching Questions: A Coach’s Guide to Powerful Asking Questions” that I believe non-profit executive directors should be asking of their board members in committee meetings and in the boardroom:

Where do you see this going?
How do you want things to turn out? What’s the best possible outcome?
What do you think this looks like from the other person’s point of view? (e.g. donor, client, staff, etc)
How do you feel about that?
What are the real issues here?
How should we make this decision?
What do you need to know to make a great decision?
What would a great decision look like?

I believe the following Ralph Waldo Emerson quotation can best summarize how important a good executive directors can be to their board of directors, especially if that executive director knows how to ask really powerful questions:

“Our chief want is someone who will inspire us to be what we know we could be.”

What questions do you hear being asked by executive directors? Are they powerful and engaging questions? Please use the comment box below to share a few examples.

Here’s to your health!

Non-Profit Trends and Predictions: Volunteerism

March 12, 2013 erik Fundraising, volunteers

2012 Non-Profit Trends and Predictions: Volunteerism

Originally published on December 29, 2011

This week I’m looking back upon 2011 for major trends, and then looking forward to 2012 with an eye towards making a few predictions. Today, we are looking at non-profit volunteer recruitment, retention and management.

Throughout the course of 2011, I had the opportunity to write about non-profit organizations and volunteerism. I’ve kept my eyes open for signs of what non-profits are doing with volunteers, and I see indicators everywhere pointing to:

2012 continuing non-profit agencies’ focus on volunteerism.

Here is what I’ve seen that leads me to this conclusion:

My fellow Generation Xers continue to increase the amount of time they spend volunteering. (I personally suspect this has less to do with their charitable outlook on life and a lot more to do with the fact that they’re in the heart of their child rearing years)
I see my parents’ Baby Boom Generation starting to retire, and they just don’t know what to do with themselves when they wake up in the morning. They are volunteering because they don’t see themselves as being old and they want to keep busy.
I see my Millennial generation friends standing in the unemployment line, and then turning around in search of volunteer opportunities that they hope might just turn into a job opportunity (or at the very least turn into a great reference or a referral).
I see my former employer — Boys & Girls Clubs of America — partnering with one of their major corporate supporters to fund a volunteer management pilot project in an effort to develop a program to teach their local affiliates to become better with volunteer recruitment, retention and management.
I see corporations demanding volunteer opportunities and projects from their philanthropic partners in an effort to drive down their employee turnover rates and grab onto what marketing professionals call “the halo effect”.
Let’s not forget about the research out there on the Millennial generation that shows this emerging generation is very much into volunteerism unlike any other recent generation.
According to a recent Guidestar survey, many non-profit agencies are trimming staff or putting a cap on hiring plans in 2012. Not surprisingly, the same survey showed that 65-percent of all non-profit respondents are looking for volunteers for program work and 54-percent are looking for volunteers for administrative work.

The reality is literally this simple . . . donors are saying they want to see non-profits do more with less . . . volunteer recruitment and management helps accomplish exactly this . . . and in the final analysis volunteers turn into new donors a lot easier than cultivating new prospects from scratch.

Investing in volunteerism could just turn out to be the non-profit sector’s version of an economic stimulus plan that pulls agencies out of their economic doldrums.

Volunteer recruitment, retention and management isn’t as easy as just putting out a call for volunteers. As with everything in life, it is science that requires planning and careful management.

Since the economic collapse four years ago, this trend has been taking form and the non-profits who are leading the way have been experimenting with such things as: volunteer databases, volunteer coordinators, various recruitment strategies, strategic alliances with agencies that specialize in volunteerism, recognition programs, orientation and training programs, placing value volunteer hours, and much much more.

As budgets get even tighter in 2012, the flood of non-profits who commit themselves to figuring all of this out will continue to propel this long-term trend.

Is your agency recruiting more volunteers? How has it gone about doing so? What challenges have you experienced along the way? How important is it to have a volunteer coordinator on your payroll to orchestrate recruitment, orientation, training, volunteer opportunity assignment, evaluation, retention, etc? How successful have you been at turning volunteers into new donors?

Please scroll down and use the comment box to weigh-in with your thoughts and experiences. We can all learn from each other.

Here’s to your health!

Gift acknowledgement letters, quid pro quo and the IRS

March 11, 2013 erik Fundraising

Gift acknowledgement letters, quid pro quo and the IRS

Originally posted on March 27, 2012

I cannot count the number of times that I’ve attended a non-profit organization’s special event fundraiser and walked away with a gift acknowledgement letter that was not compliant with “IRS Publication 1771, Charitable Contributions–Substantiation and Disclosure Requirements”.

Rather than use the language of accountants and tax professionals to explain, I’ll let the following hypothetically example speak for itself.

My first contribution to “Agency X” is the purchase of two dinner tickets for what I am hoping will be the best rubber chicken of my life. My out-of-pocket expenses to get in the room is $120.
When I show up, I am assaulted by happy volunteers selling 50-50 raffle tickets. My out-of-pocket expenses to get these intensely happy people who are blocking my path to the bar is $20.
With a nice glass of wine in my hand, I am finally able to mingle with old friends, but I end distracted by all of the shiny objects in the silent auction. <<Sigh>> At the end of the evening, I discover that “Agency X” is deeper into my wallet for another $250 in out-of-pocket expenses.
The final blow came many glasses of wine into the evening during the live auction (ahhhh, of course it is always the booze and the live auction that sinks most donors). Those Opening Day Chicago Cubs tickets had my name written all of them and only cost $1,000.

So, the next morning usually comes with a hangover and regret (even though “Agency X” is an amazing charity and you’re always happy to have supported their awesome mission). A few days later in the mail comes a gift acknowledgement letter. It tells me how wonderful I am and contains some nice “return on investment” and stewardship verbiage. Ahhhh, gotta love that warm fuzzy feeling.

You’re probably wondering “What’s wrong with all that?”

Well, the gift acknowledgement letter thanked me for my charitable contribution of $1,390.

Sure, if you do the math $120 + $20 + $250 + $1,000 does add up to $1,390, but this was not size of my “charitable contribution” according to the Internal Revenue Service, and now I need to take time out of my busy day to chase down the executive director or fundraising professional at “Agency X” for a correct letter. To help clarify the math, here is exactly what the IRS has to say on the subject:

“A donor may only take a contribution deduction to the extent that his/her contribution exceeds the fair market value of the goods or services the donor receives in return for the contribution; therefore, donors need to know the value of the goods or services.”

Let’s circle back and do the math one more time:

The event tickets cost $120, but the food I received in exchange for the ticket purchase was valued at $20 per plate. So, $120 minus $40 means that the charitable contribution only amounted to $80.
The $20 in raffle tickets got me four chances at a cash prize. The “value” I received for those chances was twenty bucks. So, $20 minus $20 means that I didn’t make a charitable contribution in the eyes of the IRS.
The silent auction was a huge benefit to me because I got some amazing bargains. Woo Hoo! Move over Wal-Mart! So, I might have spent $250, but the items I won totaled $500 in value. So, $250 minus $500 means that I didn’t make a charitable contribution in the eyes of the IRS.
And last but certainly not least, there was the booze fueled live auction. The bad news . . . it was $1,000. The good news . . . I finally got something to write off on my taxes. Opening Day tickets to see another woeful season of the Chicago Cubs are valued at $500 (of course, White Sox fans would argue that they are worth nothing). So, $1,000 minus $500 means that I can deduct $500 from my taxes next year.

The IRS tells us that it is legitimate to acknowledge my overall gift of $1,390 as long as somewhere (usually at the bottom of the letter in a footnote) there is language that explains that the fair market value of the items I purchased was $810 and only $580 of my $1,390 contribution is tax-deductible.

In my experience as a donor, this rarely happens and I end up wasting my time chasing after a new gift acknowledgement letter. The harm to “Agency X” is twofold:

It is counterproductive to annoy the donor. This is not good stewardship and doesn’t help “Agency X” in its efforts to secure the next contribution from me.
It can result in fines to “Agency X” if the IRS ever found out.

What is the potential penalty? Here is what the code says:

“A penalty is imposed on charities that do not meet the written disclosure requirement. The penalty is $10 per contribution, not to exceed $5,000 per fundraising event or mailing.”

If you want to learn more, Joanne Fritz at about.com does a nice job explaining it. You can also click here to get it directly from the IRS.

Note: “Agency X” does not exist. I am not calling out any one particular non-profit organization in my philanthropy portfolio. The aforementioned examples are a “compilation” of things I’ve purchased over the last 10 years. Please don’t add me to you special event mailing list. :-)

Please scroll down and use the comment box below to share the “boilerplate language” that your agency uses at the bottom of its special event gift acknowledgement letters. Please trust me that 30 seconds of your time will benefit countless smaller non-profit agencies. If I had a nickel for every time I was asked for sample boilerplate language, I’d be rich! We can all learn from each other.

Here’s to your health!

Fundraising, stonecutters and ignoring best practices

March 8, 2013 erik Fundraising, organizational development, volunteers

In a post titled “All That Had Gone Before,” John gets philosophical. He points out how a stonecutter’s success is attributed to a series of chips just like your successes in the workplace is the result of the people who came before you. He says, “Our results today; our performance today; our effectiveness today; is not from what we have done today; but all that we’ve done before.”

I read this and immediate think of a recent fundraising training that I facilitated for a bunch of volunteer solicitors.

In my training, I talk about the 12 steps to making a successful face-to-face solicitation. If followed exactly without any corner cutting, each step is designed to quiet our “inner saboteur’s voice,” which is rooted in fear and the mistaken belief that we are “begging for money.”

I’ve conducted this training almost 100 times in my life (if not more), and it never ceases to amaze me how many people don’t want to slowly and methodically chisel away at their solicitations by following the 12 step process. Here are some of the most recent things I’ve heard people say in the wake of this training:

“I don’t need to make my own pledge before going out to solicit my friends. I know that it is the first step in the 12 step process, but I give my time and that should be enough.“
“If the donor indicates that they don’t want to meet with me, I’ll just solicit them over the phone. I know these people well enough so there won’t be a difference between a phone and in-person solicitation.“
“I know that I shouldn’t leave the pledge card behind with the donor, but I know this donor very well and they will send it in and everything will be fine.“

These people used to frustrate me. After all, they don’t seem to understand these best practices were developed by countless numbers of volunteers and professionals before them. Ugh! However, after reading John’s blog post, I’m going to attempt to change my perspective.

From this point forward, I will simply look at these folks as inexperienced stonecutters who are trying to split that big rock in half with just one or two swings of the hammer. They choose to ignore all of the progress made by everyone who preceded them because they are simply apprentice stonecutters. Right?

As a non-profit and fundraising professional, how do you channel your inner stonecutter when working with donors? When working with fundraising volunteers? When working with your board? Please scroll down and share your thoughts in the comment box below. We can all learn from each other.

Here’s to your health!