Planning and implementing change is necessary for the nonprofit to evolve and adjust to the market place.  While it may be hard emotionally to implement, inaction can lead to failure.  A severe recession is what it took to show which nonprofits were prepared to make decisions and which ones were not.  It also showed nonprofits where their true strengths and commitments were.  The advice is to make strategic planning an annual event.  A nonprofit will never know when its importance will be paramount to its survival. 

Strategic planning is something that many nonprofits talk about doing but never do.  Part of the problem is too many people doing the talking and no one strong enough to take the leadership.  This results in many actions related to government filings to not be completed.  Recently the IRS has stated that “Exempt Organizations:  Status Revoked for Not Filing Annual Return or Notice.”
 
Most tax-exempt organizations, other than churches, must file a yearly return or notice with the IRS.  If an organization does not file as required for three consecutive years, the law provides that it automatically loses its tax-exempt status.  Loss of exempt status means an organization must file income tax returns and pay income tax, and its contributors will not be able to deduct their donations.

What must be filed this year depends on the organization’s financial activity:

Financial activity filing requirement
 
Gross receipts normally?  $25,000
Note:  Organizations eligible to file the e-Postcard may choose to file a full return.  990-N (e-Postcard)
Gross receipts < $ 500,000 and
Total assets < $1.25 million 990-EZ or 990
Gross receipts?  $500,000, or
Total assets?  $1.25 million 990
Private foundation (regardless of financial activity) 990-PF

Additional information

So at a minimum check to make sure your IRS filings are in order and compliance with your state is in order.

The lack of filings has created tax liabilities and penalities for many nonprofits.  

pic from hiking artist

Donors should request from the nonprofit the goals, objectives and outcomes expected of the funds from the donor.

Donors should request from the nonprofit the outcomes expected of the use of the funds.

Donors should require nonprofit outcomes of the funding to be measurable and clearly defined.

Donors should require a nonprofit to be able to report an accounting of the donated funds.

Nonprofits should be willing to publicly post outcomes and track the use of funds, especially if the donor has given thousands of dollars. 

However, nonprofits should by nature be more public in their detail to adequately promote their successes and needs.

pic from Hiking Artist

Donors and nonprofits each day are doing the heavy lifting to build the bridges to connect their mutual interests to resolve the problems of today. 

Would donors advocate sending their donation to nonprofits of less than 3.5 million dollars in revenues? 

Would donors advocate sending their donation to nonprofits with reserves or endowments of less than 5 million dollars?

Would donors advocate sending their donation to nonprofit educational institutions with the goal toward free education or a living wage debt?

Would donors advocate not sending their donation to nonprofits who forward the donations to another related organization? 

Would donors advocate not sending their donation to nonprofits who spend only just over 5% of their revenues and increase investment net worth?

Would donors advocate sending their donation to nonprofits of less than 3.5 million dollars in revenues? 

Would donors be willing to challenge the norm and mandate changes in the market place for nonprofits?

Would donors be willing to advocate for nonprofits and their funding needs in the financial markets and be willing to be guarantors of funding loans and lines of credit?

As a donor making nonprofits make the grade has not been standardized because giving is personal regardless of whether it is an individual or an organization giving the funds.  People have feelings, beliefs and objectives.  Nonprofits need to better understand human nature to better understand the donor.  The same can be said of nonprofits.  People run nonprofits and each has their own personality.  Matching the donor and nonprofit will continue to be a psychological endeavor for each of us.  

Pic from JC Colie

A donor should expect a nonprofit to maximize the return on their donated funds.  A donation should not be treated by a nonprofit as funds that are a commodity to be used once.  It is easy for any organization to spend funds and obtain no long term impact.  The action to make zero impact with donor funds takes no energy, no action.

It is not supposed to be easy to maximize the impact of donated funds.  A funding strategy plan is just as important to a nonprofit as a strategic plan and business plan.  The act of balancing a nonprofit’s priorities and control growth is the same for any business.

Impacting the level of success toward a nonprofit’s goals, objectives and outcomes lies with a donor’s choices.  A donor chooses among the 1.4 million nonprofits most times with little information.  A donor’s donation whether by an individual, a corporation or foundation is still made by people with preferences, likes and dislikes.

A donor can strategically choose to donate to a nonprofit that stands out in their community.  What makes the nonprofit chosen stand out?  What does the donor consider their community?  What natural ties does the donor have to a specific nonprofit?

Some aspects of nonprofits that donors have begun to look at is the true nature of what a nonprofit stands for.  Is the larger nonprofit management more or less likely to interact with programs?  This is less likely since most large nonprofits do not locate their administrative functions in the same location as a program.  Out of site out of mind is all too familiar and often the truth. 

The other aspect of larger nonprofits is the fallacy that they must pay large salaries to recruit the right talent to compete with the for-profit businesses.  This argument is false; it is just a way to justify management’s larger salaries than the general population. 

Nonprofit means giving and that includes employees.  Thousands of government workers manage and make decisions every day on hundreds of millions of dollars effecting thousands of people and thousands of nonprofits and they do not make near some of the salaries in the large nonprofits.  Voters mandate and expect checks and balances on the salaries of government workers.  The same oversight is expected to be extended by government on behalf of voters in allocating funds to nonprofits.

pic from radio active girl

Each nonprofit wants you to think of them.  How to decide?

What is the market penetration that the donor wishes to achieve?  Currently, half of the non-profit organizations belong to various trade associations.  Because the providers view each other as competitors, the trade associations have been unable to compel the providers to pool their resources.  However, a donor who recognizes and understand the competitive nature of the non-profit world can take the leadership in an area.  For this reason, we do not expect our nonprofits to “pool” their money, but the donor can indirectly pool it.  The donor invites a selected group of nonprofits and/or government agencies to participate in their choice for an initiative.  

It is the intent of the donor to fund a cause where there will be a return to society.  The success ultimately depends on the success of the nonprofits and/or government entities for the most impact.  Nonprofits automatically think of making the most cash available for direct services.  It is important to convey the outcome to the nonprofits and what amount of cash return will the nonprofit see from joining the funding choices the donor made and when will they begin to see that return. 

The first risk factor is to look at whether to set up your organization, use a fiscal intermediary, or a project manager with funding going to the nonprofits as they reach certain outcomes.  The idea is somewhat more like the construction industry.  In order to distinguish the initiative a web presence helps in managing a project if the donor is going to be less dependent with on-site project management.

The second major risk identified is people’s inherent reluctance to relinquish control of a project to another entity, especially if it requires any of their funds.   It is certainly understandable why some nonprofits will hesitate to jump at a donor’s funding choice.  However, there are so many nonprofits and government type entities in any state that reaching the level of projected change the donor initiative wants to make should be doable.  Once the market is determined the donor can assume the penetration rate for each targeted market.  The penetration rates for each market are assumed to change each year, in response to the increase in available products, the increasing popularity of the service and economies of scale due to increases in infrastructure and staffing. 

Pic from Hiking Artist

Below are my top six areas for Donors to consider to fund.  Relax and dream a little.  Rushing the decision does not necessarily create the best results.

Education:  Choose a local public or charter school.  Require parent involvement and matching programs for funds.  Let volunteer time equal the same matching as funds.  Even incentives and make the volunteer hours worth more.  Make sure the match is at least the living wage of a family in the area being served.  Student enrichment programs are shown to increase the success of students. 

Environment:  Choose to become Carbon imprint neutral.  “A Penny A Mile” is a new nonprofit established to have an individual or company reduce their impact by funding the conversion of government and nonprofit facilities to green environments.  Use their roofs for solar electrical and heating and geothermal for cooling. 

Choose to adopt a Park:  Reduce the use of government funds and its inconsistency to private funding and endowments to make a difference.  Once endowment is reached for ongoing maintenance then capital campaigns could be next. 

Food:  Choose the creation of programs that show individuals how to meet their nutrition needs that are healthy, and teach individuals skills to maximize their budget and preservation of foodstuffs.  One said manner is the skill of preparing foods in a manner that allows them to be canned, jarred, or stored in the environment where a person lives.  Very few programs process food to preserve it.  Thereby, the shelf life of many items is deteriorating as the food nonprofit waits to distribute it.  Looks good on paper that they distributed so much in food stuffs, but was the person able to use it before it perished? 

Affordable Housing:  Choose environmentally sound choices to use the environment to cool the house from heat.  For instance, build a house where the cooler part built under ground is cool all summer such as finished walkout basements.  Make affordable housing based on a living wage of the geographic area the funding initiative choice.

Transportation:  Choose the reduction of gasoline costs and increase the use of inefficient vehicles.  These increased costs adversely hurt those just making the living wage than those above the living wage.
 
Utilities:  Choose the reduction of fuel costs for heating or electrical costs for staying cool.  Family day care providers are a good place to start since they are self employed and many serve government funded childcare recipients especially in poverty based areas.  The utility costs are a factor that any donor has the choice to affect many lives and improve the environment.  

In the selection of a nonprofit for the funding initiative you as the donor have chosen, plan on completing a full financial assessment of any non-profit before approaching them.  From the public records of a nonprofit you can already determine the nonprofit’s financial well-being and how you wish to have the nonprofit participate.  This helps the donor in two ways.  First, the donor choices avoid potential pitfalls, those being agreements with organizations that could not possibly succeed under any possible scenario.  Secondly, the donor focuses their energy into developing a specialized plan geared toward each nonprofit. 

pic from Spear

Nonprofits or a business at times are in a moment of excitement or caught up in the excitement of others or the reaction of others and make choices based on external influences.  A nonprofit should always wait a day before jumping into a decision that has not been vented internally with the pros and cons.  The organization may be excited today about a decision and everyone feels good but tomorrow will always come.  Tomorrow ultimately brings the reality of the decision to make everyone feel good as a having been the right or wrong choice for the strength of the organization. 

Nonprofits in the last two years have struggled between using cash reserves, furloughing people or laying people off.  I remind nonprofits that using cash means that the organization is deciding to reduce their ability to have a back up plan if things get worse.  While reducing staff hours or laying staff off is a hard emotional action, an organization’s viability has to be decided first.  It is better to be able to increase hours or hire people back or hire new employees than to go out of business.

In the moment of government cutting or donors reducing their giving there is the clamor that there are too many small nonprofits.  I promote the opposite should happen to really obtain the biggest impact of each dollar.  I think there are too many large nonprofits. 

Small for profit businesses are the strength of the US economy and the thousands of small nonprofits I place under the same umbrella.  The $100,000 plus salaries of larger nonprofits reduces the impact they have on the economy.  Each $100,000 can employ at least three individuals to provide much needed services and bring the money directly back into the economy. 

 pic from Spear

The one thing I hope nonprofits have begun to take away from the recession of 2008-2009 is that diverse funding sources are critical to their long term viability.  Nonprofits that have taken the long term view evolve their business model in ways to be more efficient and measurable, to be able to self-finance a base amount of programming.  The nonprofit industry has reached an evolutionary milestone in the business model.  History shows that a particular model of business must evolve beginning around its 30th year in order to stay viable.  I would state that the current models of 501 c 3’s are celebrating their 35th year.  As the original team retires from these nonprofits, the board should take a very logical long view of the future of the organization.  Where does the organization want to be 5 years from now or 10 years from now?  If the board wants a new leader to figure that out that is fine too, but it needs to be clear when making that critical hire.

pic from Spear.  Check out his pics.

The beginning of a nonprofit starts with a grassroots effort to build adequate support or an overwhelming amount of support that needs to be organized.  It is the same for creating any business model.  The biggest mistake is not taking the time to develop a business plan and a strategic plan to implement the business plan. 

There are many benefits to starting the effort of a business out of one’s home, but eventually there is a need to balance the success of the business and one’s personal life.  It also takes a well-organized, disciplined individual to accomplish work at home. 

The creation of a nonprofit board that is involved in providing priorities and direction can help in the measuring of whether the individual is disciplined enough to balance a work at home effort and the goals of the organization.