The 16 Ways Your 990 Informs on You

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February 19, 2017; Denver Post

Every year, nonprofit organizations must submit their informational returns to the IRS in the form of a 990 or 990-EZ. Although these forms are sent to the IRS, they are also available to the public on a number of websites, including GuideStar. Additionally, nonprofits are required to provide them upon request. Given the competitive funding environment, philanthropic organizations should see the 990 as an opportunity to promote their work to potential donors.

Recently, the Nonprofit Quarterly offered a webinar identifying pitfalls and red flags nonprofit organizations can avoid when filling out their returns. In that webinar, Chuck McLean of GuideStar discussed the areas within the form where the IRS, reporters, and donors tend to look to determine whether or not a nonprofit is on the up-and-up. McLean also explained that the facility all interested parties have in interpreting these reports and red-flagging them in terms of potential problems should be a wakeup call to nonprofits. Quite simply, he said, these are arguably your most public-facing documents and they grow ever more accessible—so why aren’t you paying much attention to them?

The webinar was meant to serve as a guide to improving both the reporting and the actual behavior of the nonprofit. In some cases, problems lie in the substantive issues you are accurately reporting, in which case the form can act as a reminder to the board to make changes. In others, it’s the sloppiness and the disregard of the form itself that are at issue.

Bruce DeBoskey, a philanthropic strategist with the DeBoskey Group, recently described the Form 990 in the Denver Post as a “treasure trove” of information for potential donors. This is particularly true when donors examine it over multiple years. In his excellent article, DeBoskey identified 16 areas of interest:

  • Current tax status
  • Mission statement
  • Revenue received and from what sources
  • Internal expenses, including program, accounting, management and fundraising expenses
  • External fundraising expenses
  • Legal and accounting expenses
  • Net assets and cash reserves
  • Investments
  • Use of program-related investments
  • Identity (and salaries) of board members
  • Salaries of key employees
  • Key programs as well as expenses associated with each program
  • Significant changes in financial condition
  • Conflicts of interest among professional and staff leadership
  • Important governance policies and practices that demonstrate use of best practices in nonprofit management
  • Lobbying activities

Many of these areas are financial in nature, but others, as you will note, describe the management processes and the heart of the organization and its work. Yet, these sections in particular are rarely utilized to their full potential.

One of the first sections of the 990 has a place for the nonprofit to provide its mission. Although the form offers adequate space, many nonprofits provide only a cursory mission statement. Taking the time to provide a more accurate and complete mission educates potential donors on how the organization’s overall services remedy a critical need. Additionally, a strong mission statement sets the tone and encourages donors to continue their examination instead of flipping to the next return.

The 990 also has a section where nonprofits can describe their major programs. The webinar outlined the IRS’s expectations for this section, including numerical outcomes and short- and long-term goals. Using this space to its full potential is particularly important for nonprofits with more complicated programs and services, but few make the effort to provide this type of information.

Another area that rarely receives attention from nonprofit leaders is the board and key staff listing. It is not uncommon for nonprofit leaders to forget to give their tax preparer an updated list of board members. Without an updated list, donors comparing multiple years may be apprehensive over the lack of transition or overly concerned if the board list on the website differs substantially from the one in the last available 990.

In many instances, the picture shown by the financial sections of the 990s is incomplete. For example, consider organizations receiving multiyear grant disbursements, transactions with related or “interested persons,” or the case of embezzlement. The 990 provides specific sections to comprehensively explain these situations to the IRS and potential donors.

Finally, the 990 asks if the nonprofit has policies related to whistleblowers, conflicts of interest, and document retention and destruction. Although they are not required, these are best practices. Not taking the time to develop and execute these policies can be a signal of a looming catastrophe, or at minimum a lack of attention to good governance.

By the way, foundations, too, are required to fill out a Form 990, one which includes a complete list of grants—critical information for nonprofits seeking funding.—Gayle Nelson

Original Cite: https://nonprofitquarterly.org/2017/02/23/sweet-16-990-return-says/

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Get SMART: The 4-Step Science of the Viral Fundraising Campaign

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February 13, 2017; Phys.org and Nature: Human Behaviour

Creating an effective social media plan is essential for nonprofits and for profits alike. One question leadership often asks is how an organization can engage supporters on the different platforms and, more importantly, translate this engagement into increased financial support. Recently, we have watched the fire-building and war-chest-building effects of the efforts launched on behalf of the ACLU and Planned Parenthood. Ambassadors and advocates often start these on behalf of a trusted organization.

New research from the University of Cambridge studied successful campaigns like the Ice Bucket Challenge. Back in 2014, millions of people were dumping buckets of ice water over their heads. The campaign, known as the Ice Bucket Challenge, gained media attention and increased awareness of ALS, or Lou Gehrig’s disease. In just eight weeks, it raised $220 million worldwide—13 times the amount raised throughout 2013—thanks to videos of President Obama, Bill Gates, Leonardo DiCaprio, and many more celebrities and ordinary people. All of these efforts raised public familiarity of the disease and led to it becoming the fifth-most-popular Google search for all of 2014.

Clearly, this was a short-term success that produced some great medical advances, but the long-term financial impact was not as significant. The majority of ice bucket donors did not renew their donation the following year, although donations remained around 25 percent higher than the year before the challenge took place. Equally important, the average age of the organization’s donors dropped from 50 to 35—an exciting outcome, since gaining the attention of millennials is challenging but essential for long-term viability.

Efforts to renew and duplicate the campaign have largely failed, leading to research by Dr. Sander van der Linden from the University of Cambridge to explore and attempt to pinpoint a recipe for success. Dr. van der Linden, writing in the journal Nature: Human Behaviour, refers to these campaigns as viral altruism or the “altruistic act of one individual directly inspires another, spreading rapidly like a contagion across a network of interconnected individuals.”

Through his research, Dr. van der Linden identifies four principles, or SMART criteria, of a successful campaign. People engaged in the campaign use social media to reach out to their social networks; that’s the S of SMART. The viral campaign captures people’s attention and makes them feel good. The M represents the moral imperative to act. A successful campaign develops from a story displaying need rather than dry statistics. The person receiving this message is captured by the story or image and compelled to act and share it within their network to receive affective reactions (AR). The clearer, simpler, and more emotional the act, the more likely it will be shared. The more involved the act is, the greater and more lasting the impact, but it lessens the likelihood people will participate.

The T of successful campaigns is the final and most challenging criterion. To realize change, the social media campaign must transform the act from a quick click-and-share to a social movement. Indeed, many campaigns encourage people to compete and win rather than support the cause. These flashy campaigns create interest because of the number of people participating but soon bust since the campaign only lasts as long as the person is acting. Instead, campaigns are often more successful if their growth develops rather than explodes.

Campaigns turn into movements if the act or campaign is connected to the mission. To create lasting engagement, a successful campaign internalizes a new personal deeper action or norm within the people sharing. In the case of The Ice Bucket Challenge, it is estimated that only one out of four videos mentioned ALS, and even fewer (one in five) said they made a donation. But, those that mentioned the organization were five times more likely to give. Additionally, when the organization attempted to restart the challenge in 2015, the donations garnered from it were less than one percent of 2014’s levels.

Deliberately building successful campaigns is rare. Instead, most viral campaigns stem from a single act outside of the organization. Successful nonprofits use their communications plan to connect and build on these campaigns to create lasting change.—Gayle Nelson

Original Cite: https://nonprofitquarterly.org/2017/02/16/get-smart-4-step-science-viral-fundraising-campaign/