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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.

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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 Graela

Just like the seriousness one takes in selecting a job applicant, information is key to decision making.   

I would like to convey to donors to fund and support smaller nonprofits because it is better.  I would even advocate further that any nonprofits that outsource would increase this impact even more.  The more that the administrative functions such as accounting, human resources, and grant writing are outsourced, the more likely that administrative costs can be controlled and capped.  The use of funds can be better spent on the mission of the nonprofit.  Smaller nonprofits tend to be more passionate about reaching outcomes and utilizing volunteers.  Smaller nonprofits are more able to provide for a more equitable system of impacting more geographic locations, more people, more causes and creating more self-sustaining networks at lower costs.  The concept that bigger is better is only best when it comes to standardization.  Government and donors can set the standard for all nonprofits.  Setting the bar higher as in the case of requiring audits that are extremely costly and then knocking the small nonprofit for a high administrative cost is one disconnect.  Most small organizations make a real difference in their community and reporting on the 990 and to state regulators is completed appropriately.  Costs of audits have gone up tremendously and have harmed the bottom line of all nonprofits who must do them. 

Why depend upon others to give away your money? 

Umbrella organizations and Donor Advisor funds are not always your best choice. 

There is a fact that donors need to understand when they give their donation to organizations such as the United Way, Community Foundations or use Donor Advisor Funds.  The donor is immediately making the following decisions:  pay an administrative cost beyond their control; management of the donation is made by others; decision making on the amount of the donation is made by others; decision making on who receives the donation is made by others; how the funds are given when distributed is made by others; and giving others the right to keep part of the donation, since the nonprofit is a 501 c 3, to build a larger reserve/endowment using part of the donation.

The donor is selecting to pay administrative costs twice.  The organization that receives the initial funds uses a portion and then the nonprofit who receives an award usually uses a minimum of 10% for administrative purposes.  Said portion is not always the sum of the whole donation since the holding organization is not required to disburse 100%.  Most organizations keep a portion of the donation to increase their reserve/endowment including a portion of the return made from investing the donation. 

A fact not published or stated is that as these organizations build their staff, their salaries and infrastructures their assets grow.  There is a conflicting aspect to these organizations as a donor mission.  Is the donor acting to support the organization or to support a cause in the nonprofit community? 

As a donor specify and restrict your donation for the intent you want, including its growing investment return if you wish it to grow.  If you wish all of it to be spent then you should expect a bottom line accounting of what the money was spent on. 

Give directly as an individual, corporate foundation or outsource the foundation or giving campaign to a firm, but cap the expenses.  You may even use a fiscal intermediary to help a new cause.  You should set the parameters. 

How to choose a nonprofit to support?   

As a non-profit organization undertakes a fund raising campaign, the cash balances should be managed to provide reasonable returns with capital preservation the key component.  Short-term money management advice should be provided, based on both the risk and return profile of the nonprofit as well as the horizon of the funds.  The wealth management company should be independent custodians who are used to both holding the securities of the organization and being the clearing house for all trades.  The wealth management company custodian should provide the relevant accounting of performance and value.  Be proactive in checking the monthly statements and asking questions. 

Most states require nonprofits to be in compliance with their charitable giving or donor solicitation regulations.  It is important for the nonprofit organization to be responsible to procure a nonprofit’s auditor and to coordinate tax reporting to the state and federal tax agency and pertinent regulatory agency such as the Attorney General.  The 990 is most often the minimum financial record required by a government entity.  Therefore, make sure the organization is timely in filing the 990 each year. 

Remember that the more the nonprofit provides as avenues to learn about the organization and have the donors know the organization, the more likely the donor will give.

pic by Hiking Artist

In the struggle to compete for a donor’s dollars, some nonprofits think that they deserve the money without the hard work of providing the proof that the organization deserves it.  There are over 1.6 million nonprofits in competition for the billions donated each year - the majority going to religious organizations.  Therefore, what passion or motivation does your nonprofit generate in the donor?  Yes, you’re marketing what your organization does and creating that draw is an important component to your success in gaining donors, but do not stop there.  The nonprofit must also provide the support to keep the donor coming back each year.  Copy what the colleges do to keep their Alumni coming back year after year. 

The race to the finish is about to end for the calendar year if your organization only focuses on December for the largest segment of its donors. Charitable statistics will be evaluated on the calendar year as well to show the winners and losers. A clear effect of recession was the decreased amount of mailing solicitations and that cutting of development units of organizations.

I wish to remind organizations that without a 12 month plan for raising money the organization has left donations more to chance than strategic.