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In its second edition of the World Giving Index, the Charities Aid Foundation has determined that the United States is the most charitable country in the world.

The study found that out of the 153 countries evaluated, the people in the United States were the most generous with their donation and volunteering for charities and other nonprofit organizations.

The study also showed that giving globally has increased by 2% and that volunteering has increased by 1%.

The report also has a great picture showing how giving has been distributed (originally found at http://taxprof.typepad.com/taxprof_blog/2011/12/world-giving-index-2011.html ) shown below:

Map of Giving

Charities Aid Foundation

 

For more information read the report at https://www.cafonline.org/publications/2011-publications/world-giving-index-2011.aspx

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Bell Ringers

Akron Kiwanis

During the ‘Season of Giving,’ most of us are aware that churches and nonprofit organization rely upon the generosity of others for their operations.

Lest we forget, we often receive several letters, emails, phone calls, and of course we will see the Salvation Army bell ringers. However, while most of us are on the receiving end of soliciation… very few of us are aware of the great amount of detail and effort that larger nonprofit organizations use to research and track our giving habits.

Just like retailers and credit companies, many larger nonprofit organizations rely upon market research and public information to learn about our philanthropic passions and wealth. In a recenet NYT article, “Taking Fundraising to the Next Level, author Rob Lieber highlights just how a larger nonprofit organization like a hospital, college, or major foundation will likely track your information.

For most small nonprofit leaders, and most donors, this article will likely be the first time that you see how professional fundraising is done, and like the author, I would say that I support their efforts- even if it seems a little unsettling.

As I read this article, I thought it would also be a great way to help leaders of smaller nonprofit organizations see the bigger picture and learn how some of the biggest and best fundraisers in America support their causes and philanthropy organizations.

Enjoy the reading and have a Merry Christmas.

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Reviewing Financial Reports

s_falkow

Recently, I was asked, “What are some basic steps we can do to improve our financial management?”

I was visiting a local congregation and the leaders were in the process of reviewing their financial history, operations, and current accounting controls. In the meeting I listed off about five items, but in reflection, I thought I would create an official list of financial basics for nonprofit management.

Financial Basics for Nonprofit Management:

  • Tracking of Data- by tracking data, you can determine benchmarks for growth or decline. Be sure to track participation, income, expenses, donations (and levels of giving), and long term goals (and to communicate these to leaders, donors, and members).
  • Accounting Controls-many small nonprofits rely upon 1 or 2 people to handle all of their bookkeeping. This leaves them vulnerable to fraud and usually limits financial communications. Be sure to have monthly review of finances, independent reviews of bookkeeping, limits on spending, and requirements for approval of spending.
  • 6 Months of Emergency Savings- every organization should have 6 months of cash savings available to cover expenses in an emergency.
  • Line of Credit- as organizations grow, they can improve their cash flow by taking out a line of credit or operating loan. LOC should be capped at around 3 months of expenses, and often operate similar to a credit card for an organization.
  • Multiple Income Streams-no organization should only have one line of income. By creating multiple revenue streams, nonprofits increase their stability.
  • Endowment & Net Assets– Gone are the days when a nonprofit organization should operate at a net zero. By creating endowments and net assets, nonprofits can cover the cost of their operations, allowing more of their donations to immediately  go into outreach.
  • Facility Management– Buildings cost a lot to maintain and operate. If you own a facility, be sure keep up with facility maintenance, use it as resource, and improve it as building code and mission needs change- otherwise it can become black-hole that sucks money away from your mission focus.
  • Board Development- Board members are ultimately responsible for organizations- be sure board members understand their roles and that they are giving proper oversight of staff and operations.
  • Insurance- Be sure that your organization has enough insurance to cover its liabilities for its staff, operations, facilities, and to protect the organization from lawsuits and emergencies.
  • Management & Gift Policies-smaller nonprofits often lack staff, organizational management (by laws), and gift policies which help organize and outline how nonprofit organizations operate and how donations should be accepted and used.
  • Financial Relationships– this may seem like an odd item for this list, but knowing your bank manager, accountant, insurance broker, and financial advisers personally can be critical in emergencies and/or when you need additional help.

There are many other items that could be added to this list (brand management, communications, mission focus, etc), but these are some highlights to help you review how your church or nonprofit organization manages its financial operations.

 

 

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Earlier this week Guidestar posted the results of a survey that asked nonprofits about their fundraising and operations for 2011.  Here are some of the highlights:

  • 41% of Charities saw an Increase in Giving for the first 9 months of 2011 over 2010 (28% had less income & 31% no change)
  • 65% of nonprofits saw an increased need for their services– over the past 9 months compared to 2010
  • Approximately 50% of charities have some financial stress – income, cash flow, # of donors, non-donor income

For more information, visit Guidestar’s website

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group of people

laubarnes

If you follow trends in fundraising (most people don’t), then you may remember that America saw a shift in how organizations approach small donors during the 2008 election campaign.

Prior to 2008, most organizations had mainly focused on reaching major donors- and many still do. However, in 2008, there was a major shift in how organizations began to reach out to donors who made many small and medium sized gifts.  The two reasons being:

  1. Most potential major donors have already been targeted
  2. Technology has allowed better access and communication via email, internet, and mobile communciation

Together these two shifts have allowed more and more organizations to expand their base, and thus, improve the stability and size of their fundraising work. But when we look at this trend, however, we see that it has largely been adopted by larger nonprofit organizations, and not small nonprofits or churches.

So beyond the shift, what is the big deal as it relates to fundraising for churches?

Well the main reason is that churches have often been the envy of other nonprofit organizations, for the following reasons:

  • Churches usually have a loyal base that donates weekly, monthly, etc
  • Churches make a regular ask each week, most nonprofits only get 3-5 a year
  • Religious people tend donate 3 times more than non-religious people
  • Religion accounts for the largest segment of fundraising each year
  • People who attend church are usually versed in donating habits and believe in serving other

So with the shift of other nonprofits into expanding their base of small and middle donors… churches, and other small nonprofits, will now be competing more and more for the same donors and money. This competition will not really matter for donors who are over the age of 60 and who physically give in the offering plate each week. But it will matter for donors under the age of 60, who now want more and more access to online giving and better transparency of how their gifts are used.

Thus, if you are a church leader, I would strongly encourage you to work with your financial leadership team to start reviewing how members and participates are currently donating to your church, and how you can make donating more accessible via electronic transfers and online giving. By being aware of people’s financial habits, churches can better offer ways for members to support the mission, ministry, and operations of the church.

For more information about this trend, check out a recent article in the WSJ entitled, “Strength in Numbers

 

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If you have read the book Freakonomics, or listened to Marketplace on NPR, then you probably are familiar with Stephen J. Dubner’s use of statistics to explain common behaviors in economics and society.

As a stats junkie myself, I love their work, and on Tuesday’s Marketplace radio program- Dubner reported on some truths and myths about fundraising (to listen to the program, click the NPR link above). Dubner’s report included an interview with John List, who is a professor at the Univ of Chicago. Professor List studies the economics of charities

So here is a taste from the interview:

  • Seed Money helps– The more seed money that you have induces more people to give, and those people tend to give more money.
  • Matching Gifts– only work up to a 1-1 match.  People will not usually give more than the original match amount (this is contrary to most expert advice)
  • Raffles are a Big Deal– Research shows that by offering someone a prize will increase their gift by almost 100%
  • One & Done- This is new, but it gives control to the donor. Donors who are offered the “give us one gift and you can tell use never to contact you again” option, tend to give more money and more often. Few actually choose to not be contacted again.
  • Guilt Pleas Don’t Work– You may get a 1 time gift from guilt or shame tactics, but in the long run you are only burning bridges.

As you think about how to raise money for your organization and its operations, I would encourage you to consider this information. Take a moment to think about how you raise money for your annual fundraising, and take a second to listen to the full interview.

Blog Notes- the above bullets are paraphrases from the interview found in the Freakonomics & Marketplace Report for Nov. 29, 2011.

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White Chapel

photo: edgeplot

Unlike most commercial businesses, which have a common standard by which to rate their financial operations and health, churches struggle to identify healthy financial norms.

Part of the reason for this struggle has to do with the following reasons:

  • Churches are faith based organizations
  • Church are contextual
  • Churches are organized by mixed polity (denomination or independent)
  • Churches are exempt from many IRS and government reporting requirements
  • Churches vary in size, financial support, and ministry
  • Churches don’t usually follow GAAP (General Accepted Accounting Principles)
  • Churches are run by volunteers

However, while all of these factors cause incongruity, there are a number of common ratios and principles that many churches share related to income, expense, debt, membership and worship attendance. I have highlighted a few of these in some of my earlier posts (please see: Financial Rules: Ministry Distribution), but another resource is a new financial database that was created by Capin and Crouse, CPA. (more…)

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