Friday I received an interesting question by email. I thought other nonprofits may be in a similiar situation and would benefit from this Q&A and/or have some feedback to add.

Hi, Sandra,

Recently, there has been an explosion of discussion among nonprofits in our local area around soliciting clients for a donation who are recipients of social services that are offered free of charge from their respective nonprofit.

My question to you is – is it best practices and ethical to solicit a client for a donation, regardless of the type of service they have received from the respective nonprofit?

Just to clarify, when I refer to the word “solicit”, I mean even something as simple as leaving them a remittance envelope or letter, offering them the opportunity to support the nonprofit with no expectations.

I work for a local aging agency and some of our programs are based upon income level and need.  Since we have a federal obligation to deliver some of our services free of charge or on a sliding fee scale, there is hesitancy by some staff members, questioning the ethical nature of our intent to solicit.

In addition, there is another agency in the area that offers services to those with mental health issues.  Soliciting clients with mental health or addictions issues is  perceived as taking advantage of their situation.

There are others as well, but, again, there seems to be a general concern about this issue.

Any advice or input you can provide would be most appreciative!  Thank you in advance.

Ken Grunke

Ken,

In general I have to agree that there is an ethical issue with charging low-income clients for services that the nonprofit was created to provide for free.  There would be certain instances where charging a small fee would be appropriate, for example, a GED prep or other class or meals at a reduced price.

If the motivation for asking for money from clients is because funds are low, this may be barking up the wrong tree.  What would the total funds raised be from a group that does not have the capacity to give?  If charging a small fee helps clients feel like they have a stake in the services they receive from the nonprofit then that is a different motivation all together.

Charging for usual services would be a major shift in the way the nonprofit operates.  So it would have to be something that the board, staff and stakeholders all agree is appropriate and right for the organization.

What do you think?  Add your comments below:

Do you ask more than one donor for the same thing? We are in the beginning stages of grant proposal writing, but we got a reply back recently that said the foundation would make a decision in November. So, do we wait, or send the same proposal to others?

If we get a positive response in November, and the project has been funded by someone else, I would think that would be good all the way around. But would it? Would it look bad for us for future funding from that foundation? I hope I am making sense! There are limited funds for Christian schools, and I don’t want to do anything to hurt our chances with any of these foundations!

~ Kelly Stilwell

Remember the old saying “don’t put all your eggs in one basket?”

When it comes to programmatic or capital expenses, I’ve usually approached more than one foundation, depending upon the amount needed.

Say I needed $40,000 to buy a vehicle or $100,000 to get a new program off the ground, I’d ask anywhere from 2-4 funders, depending upon the relationship. Only a portion of your grant applications will be funded – and unless you have already established a strong relationship with them, foundations rarely fund all costs associated with a new program.

I am, as you know, a strong proponent of seeking out foundations who will fund general operating expenses.

If you’ve gone after programmatic expenses in your request and you’ve requested a grant for the entire project start-up costs, you’ll want to wait until you learn their decision before approaching other foundations.

Always remember that foundations look to fund organizations with diversified funding sources – and will often ask you to note other foundations you have approached in your proposal.

So, the short answer is: Get busy applying to additional foundations.

Awhile back I got a great question by email about the tax benefits for charitable giving:

Are you aware of any data or where one might find data, on comparing how much people donate when tax deduction is and isn’t available….that is, data that would quantify the impact tax incentives have on giving?

~ Jane Bowers

A research study from the Urban Institute examines the impact of tax credits (which is different from tax deductions) using data from 1998-2000: Charitable Tax Credits Boon or Bust for Nonprofits?

The most recent data available from the Arizona Department of Revenue show that the tax credit seems to have added some new money to the nonprofit sector, although the downtrend in the economy confounds the picture . In 1998, 2,856 filers claimed $475,438 in tax credits. One year later, the numbers increased (6,712 filers claimed $1,161,162 in tax credits).

For the wealthy, tax benefits seem to be a significant factor in giving. This quote comes from a Portfolio.com article, Tax-Avoidance Trifecta:

For high-income taxpayers seeking to shelter income, philanthropy can be the gift that keeps on giving. Instead of writing checks, though, savvy investors are signing over appreciated securities.

In my experience the majority of donors, those not in high income brackets, give to causes they believe in and tax benefits are secondary. Telling someone that a donation is tax deductible doesn’t go very far in convincing them to make a donation.  Most charities offer this benefit so never think that this alone will convince someone.

Many 501c4 organizations, such as those that participate in lobbying activities, do not offer tax benefits to donors and they still manage to raise money for their causes.

What do you think about tax benefits for charitable giving? Do you know of other research papers on this topic? Post a comment below.

I sent out a special email on Monday to those who are signed up for the Step by Step Fundraising newsletter.  It included some of the tips that I also posted here:  Annual Fund Drive, End-of-year Fundraising Success Strategies.

I got an email back from Tony with some great comments that maybe you can relate to.

Hi Sandra,

Thank you for this special edition and especially for the three step plan “It’s Fundraising Time Again“.  You made a very important point in step 2 and I hope everyone who gets to read the publication will pick it out and always remember to apply it.  A detailed planning meeting does not necessary need too many people.

From personal experience, the more people you invite to such meetings, the more rowdy, less focused and unnecessarily prolonged the meeting becomes, and at the end of the day you achieve very little in terms of planning and strategizing.

Thank you once again for all your effort.

Tony Onyema
Abuja, Nigeria

The expression ”too many cooks spoil the soup” comes to mind!  I can sure remember being trapped in a room with too many people, resulting in a long and unproductive meeting.

What are some of the struggles you’ve had with meetings?  What are some ways that you’ve overcome them?  Leave a comment below…

Have you ever thought about a live auction as being like a circus?  It’s true!  During the auction all eyes are focused on the stage to your ringmaster, the auctioneer.  Any great circus has many other performers to make the event a success.  Your auction also needs “ring people” to help the person on stage perform at his or her best.  (That is, to get the most bids on live auction items and ultimately the most funds raised as possible!)

This concept was one of the biggest take-away lessons from my interview with Dawn Rose-Sohnly. She has been serving as an auctioneer and auction assistant (or “ring person”) for more than 15 years.  Along with her sister Karen, she has helped raise millions of dollars for charitable organizations.

Here’s a short (2 min.) excerpt from our interview:

Sandra Sims: What can a non profit do to actually make the auctioneer’s job easier?

Dawn Rose-Sohnly: I think communication is key. If the auctioneer is new to the non-profit. Definitely point out key bidders. Explain the room set up. Are there key bidders that are sitting in the front versus sitting in the back?

The non-profit organization should always hire a professional bid assistant to encourage bidding and excitement to the prospective bidders. I think ring people are a key component to an auction.

Sandra Sims: You’ve mentioned “ring people” and “auction assistants.” What are those positions and what do they do?

Dawn Rose-Sohnly: Basically, it’s the same term. Ring people are the individuals that you see in the audience that are encouraging bidders to bid. They use a lot of enthusiasm. They’re very hard workers at what they do. They’re trained, they’re professionals and I have seen people that say I’m not going to bid anymore and that ring person will get in front of them and that person will bid five times after that. It adds the excitement and enthusiasm to an auction. On all of our charity auctions we always use ring people.

Sandra Sims: Give me an example if you can of what a ring person might do to encourage that bidding?

Dawn Rose-Sohnly: A ring person might go up to him and you’re working with the public so you’ve got to realize your space in between that bidder and it’s really reading the public, but you might get in front of that person and say you may want to bid one more time. This is a great cause, it’s going to a great non-profit organization; if you bid one more time, the other person may not stop bidding and you could be the high bidder. That might be one technique of how they do it.

Sandra Sims: A lot of it like you said is reading the audience?

Dawn Rose-Sohnly: Yes, definitely. Over the years I have been able to tell which bidders are going to bid and which ones do not. It’s body language, it’s looking at their eyes. I don’t know, I guess I’ve just got that knack because I can tell when somebody is going to bid or when somebody is going to hesitate and I can have somebody tell me even as a ring person on the benefits that I’ve worked, they’re not going to bid one more time, but I know that doesn’t mean no. I can always get them to bid additionally.

Dawn went on to describe the benefits of having ring people and several successful auctions where assistants were key to driving up the fund total of the event.

During our one hour interview Dawn also shared:

How to choose a great leader for the auction committee chairperson

A success story of an auction that raised $78,000 with only 40 items!

How to divide up item acquisition & other event planning tasks amongst committee members

How to set minimum bids and bid increments

How to determine which items go in the live auction vs. the silent auction

How to add revenue to your event with a “bidding frenzy” and a special appeal

What to look for when hiring an auctioneer so that your auction is as successful as possible

Success tips from Dawn’s favorite charity auction that raises more than $100,000 every year

The complete one hour audio interview and transcript are included in the Secrets of the Charity Auction Experts seminar series.

The Chronicle of Philanthropy is hosting two online chat events this week.  You can submit questions ahead of time, whether you can attend the chat live or not.  Grant writing and international philanthropy will be discussed:

The first is a live discussion this Tuesday, April 14, at noon Eastern time about grant writing strategies. We’ve invited three experts to take questions from Chronicle readers on this topic — and we expect the session to produce some excellent ideas for those who are competing for grants in this difficult economy. You can join the discussion or submit a question here.

The other event focuses on international philanthropy and it takes place this Thursday April 16th at noon Eastern time. Experts will be taking questions on how overseas organizations are dealing with the recession. You can get the details here.

We’ll offer free transcripts of both discussions at http://philanthropy.com/live once they are complete. And I invite you to spread the word to others who might be interested in participating in either event.

Thanks to Peter Panepento, The Chronicle’s Web editor for making these opportunities available!

Last week I was excited to attend the national Association of Fundraising Professionals (AFP) conference.  There were a lot of great seminars. What I really enjoy most about going to conferences though is meeting others who work in the nonprofit world.

At the first morning opening session I struck up a conversation with someone who does an auction each year.  While she really enjoys planning it she’s concerned about the level of participation this year.  Some of the other conversations I’ve had recently have been along some of the same lines.   When I got home I picked up the The Nonprofit Times March 15th issue and saw the front page article was titled Unhappy Galas. This is beyond Deja vu.

I believe the first action to take to address a problem is to confront it.    Then work toward a solution. Perhaps we can find some best practices and creative ideas (like I mentioned yesterday) and all benefit.

So what is your biggest challenge with special events, especially dinners (formal or not) and auctions?

Leave a comment below... Feel free to vent a litte!  Get it off your chest.   I’ll bet there are a lot of others with some similar concerns.  Let’s discuss…

There are many fundraising events where business and/or individual sponsors play an important role.  Here is a great question that we recently received on this topic:

What is the role of sponsors? Is the money raised through sponsors only used to help reach the goal or can some funds be used to help with running the event?

Thanks you for your time,
Claudia Booker

First let’s clarify that by “sponsors” we are referring to companies who are recognized in an event program or other advertising. In that case companies will put the donation into the “advertising” category of their accounting. Because you are offering them advertising in exchange for the money, they generally cannot claim it as a charitable donation for tax & accounting purposes.  It would be best to consult with an accountant regarding more specifics about tax receipts.

Unless the donor specifies otherwise, all money that comes in for an event can be used for planning and running of the event.  Most people will assume that some of their money must go toward planning and overhead. However, many supporters also want assurance that the bulk of their gift goes toward your cause, and its programs, not administrative costs.

This is another way that corporate sponsors can help out.  If you can get a company to “underwrite” the cost of a certain aspect of the event, then individuals can make donations to the charity and know their gift is going toward mission.  For example, if you were hosting a walk-a-thon, the cost of the sound and timing equipment could be paid for by a particular company.  Your organization would recognize them through banners, recognition in flyers and publicity, as having donated this specifically.  Then when walkers get pledges or make personal donations, their gift goes toward the cause more directly.

There are so many aspects to planning a fundraising event. Determining the ticket price and what portion of the ticket is tax deductible for attendees is one of those many details.

Your article about determining the tax deductible portion of fundraising event tickets was very helpful. However, I’m wondering if any of the information you provided changes when everything for the fundraiser is donated?

For example, we have a big fundraiser with food and wine, but all of this is donated to the event at no cost to our organization. Does that make any difference as far as determining value?

Any help you have or could refer me to would be appreciated. Everyone I’ve asked doesn’t seem to know for certain!! As you said, this is a vague area it seems.

Amy Lehman
Lincoln Children’s Museum

Hi Amy,

This is a good question. The guideline goes by the fair market value of the event compared to something similar that someone would have to pay for.  So if someone went out to eat at a nice restaurant in your area, with dinner and wine what would it cost them? The fact that the items for your fundraiser were donated don’t play into the equation as far as ticket value. Though is is certainly a big benefit for your group that they were donated!

As of this writing, for tickets less than $75 you are not required to provide the fair market value, although some NPOs do as a courtesy to their supporters. Anytime you are planning an event it’s good to double check the IRS website to make sure you have the most current information.

Best of luck to you on your event!

Recently The American Institute of Certified Public Accountants (AICPA) released additional guidelines regarding how charitable organizations report expenses related to fundraising efforts. These new guidelines cover three specific situations:

1. Nonprofit organizations (NPOs) reporting no fundraising expenses.
2. Should an NPO report amounts charged to the NPO by a professional fundraiser gross (as fundraising expenses) or net (as a reduction of contributions)?
3. Situation that the reporting NPO undertakes a transaction in which another NPO (fundraising NPO) raises contributions on behalf of the reporting NPO.

For more information see the Association of Fundraising Professionals news release on this topic and the AICPA Section 6140 Document