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Five things learned from a year of INNovation Fund grants

By Feature, Programming

By Kevin Davis, CEO, Investigative News Network |

Last winter was the third round of the INNovation Fund, a micro-grant program managed by the Investigative News Network to help with business experimentation in nonprofit and public-media newsrooms across the country.

Unlike for-profit organizations, nonprofit news organizations do not have equity to leverage when seeking capital for business investment. Furthermore, most grantmaking puts limitations on the amount of overhead allowed on any given grant.

Yet nonprofit newsrooms are expected to iterate and innovate to increase the amount of engagement with their target audiences, reduce their dependence on existing funders and diversify their revenue streams to become sustainable.

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Think like an auditor to get revenue picture

By Sponsor Insight

By Lori L. Robertson, CPA, VonLehman |

When auditors examine a nonprofit’s financial statements, they spend a lot of time on the revenue figures. They look at the accounting methods used to record revenues and perform a detailed income analysis to gain a true understanding of the organization’s revenue profile. All of this helps them get up to speed on the nonprofit’s financial health.

Whether or not you employ external auditors, you can use auditors’ techniques, including year-to-year trends and benchmarking to other nonprofits, to get a better understanding of your organization’s revenue. In particular, consider the following:

  1. Individual contributions. To some degree, almost all nonprofits rely on contributions from supporters. Compare the dollars raised to past years and see if you can pinpoint any trends. For example, have individual contributions increased since the peak of the recession? What campaigns have you implemented during that period? Go beyond the totals and determine, for instance, if the number of major donors — say, those who give $1,000 or more a year — has been rising.

You get more bang for your fundraising buck when you’re able to add major donors to your roster of supporters. In most cases, it takes the same amount of time, effort and money for your organization to solicit a large donation as it does a smaller donation.

Also estimate what portions of contributions are restricted by the donor as to how or when they can be used. If your organization has a large percentage of its donations tied up in restricted funds, you might want to re-evaluate your gift acceptance policy or fundraising materials to make sure you’re pursuing contributions that give your organization the most flexibility.

  1. Grants. Grants should include funding from corporate, foundation and government sources. They can vary dramatically in size and purpose, from grants that cover your operational costs, to monies for launching a program or payment for services to clients. For example, a state agency may pay you $500 for each low-income, unemployed individual who receives your organization’s job training.

Pay attention to trends here, too. For instance, did a particular funder supply 50 percent of your total revenue in 2013, 75 percent in 2014, and 80 percent last year? A growing reliance on a single funding source — an example of a “concentration” that will increase your risk — is a red flag to auditors and it should be to you, too. In this case, if this funding stopped, your organization might be forced to close its doors.

  1. Fees for services. Fees from clients, nonprofits in a joint venture or other third parties can be similar to fees for-profit organizations earn. Fees are generally considered exchange transactions because the client receives a product or service of value in exchange for its payment. Some nonprofits charge fees on a sliding scale based on income or ability to pay. In other cases, fees (such as rent paid by low-income individuals) are subject to legal limitations set by government funding agencies.

On an ongoing basis, your nonprofit will need to assess if these services are paying for themselves. For example, fees set five years ago for a medical procedure may no longer be sufficient to cover costs. A decision to raise fees or discontinue the service will probably need to be made.

  1. Membership dues. If your nonprofit is a membership organization, you likely charge membership dues. Has membership grown or declined in recent years, and how does this compare with similar groups? Make informed predictions about the future of membership dues, especially if you relied on for substantially for revenue. If you suspect that dues income will continue to decline, your organization might consider dropping dues altogether and restructuring. If so, examine other income sources for growth potential.
  2. Apply what you’ve learned
    Once you’ve gained a deeper understanding of your revenue picture, you can apply that knowledge to various aspects of managing your organization. For example, you can implement additional controls where financial exposure is identified and educate your management team on how to make pricing decisions.

You also will likely acquire information that can help you set annual goals and prepare your budget. For example, if your organization is too dependent on a single government funder, make boosting individual contributions one of your nonprofit’s strategic objectives. Be sure to commit staff hours and dollars to achieving that goal.

You’re certain to find many other applications based on the information you’ve learned. Remember to look for concentration risks and upward and downward income trends.

  1. Score with auditing techniques
    Auditors use income analysis methods, such as year-over-year trends and ratio analysis, to gain assurance that the revenue reported on your financial statements is accurate. You can use these tools to do so much more. Income analysis can reveal whether you rely on too few revenue sources or too many restricted donations, and enable you to compete more effectively with others in your field.

Reviewing the same information with an auditor’s eye won’t only help you pinpoint your nonprofit’s strengths and weaknesses, it will also enable you to initiate sensible changes.


lori-robertson Lori L. Robertson is a manager at VonLehman and has 29 years of accounting experience. She joined the firm in 2013, having been with Dunbar, Cook & Shepard, P.C. for seven years. She received her B.S. from Indiana University.

 

For more information on this topic or many other tax, accounting or business topics, contact your CPA, Business Advisor, or Lori Robertson, CPA, at lrobertson@vlcpa.com.

About VonLehman

Founded in 1946 and with offices in Kentucky, Ohio and Indiana, VonLehman is a leading full-service Certified Public Accounting, business advisory and business turnaround firm.

VonLehman provides forward-thinking accounting, tax, and strategic business advice to closely-held businesses, not-for-profits and governmental entities throughout the Kentucky, Ohio and Indiana region. See http://www.vlcpa.com for more information.

Food nonprofits making a difference

By Feature, Programming

By Tove K. Danovich, founding editor, Food Politic |

As the Good Food Movement has grown over the last decade so too have the number of organizations dedicated to helping more sustainable food find its way to as many people as possible. Though many individuals have worked to raise awareness, numerous victories have been made from collections of people volunteering their time and donations to fund food projects they hope will make a difference.

Though I wish this could be a thoroughly scientific best-of list, there are simply too many great nonprofits around – national and local. (This is a great problem to have!) The purpose of this list is to share some great organizations that you might not have heard of. They appear in alphabetical order within categories.

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Indy Hunger Network: Fighting hunger together

By Feature

By Lynn Sygiel, editor, Charitable Advisors |

In 2009, food activists planted the seed of change for hunger relief programs across the country. They said the national system, developed largely in the 1960s and consisted largely of soup kitchens and food pantries, needed to change its delivery systems and get food to people where they live and work.

That same year, Indianapolis-area hunger relief programs banded together as a volunteer coalition and formed the Indy Hunger Network (IHN). Its goal was to find ways to make the system more efficient and effective, while dramatically reducing hunger. One of its efforts was to connect the more than 200 small food pantries in the city run primarily by churches. Through IHN’s work, the number of meals provided in Marion County grew by 40 million.

Today, IHN is still volunteer-led and works to ensure that anyone who is hungry can access nutritious food. It has continued its work with representatives from leading anti-hunger organizations, both public and private, as well as community volunteers.

Its partners include: Connect2Help, CICOA, Department of Education, Elders at the Table (EAT), Elanco, FSSA (SNAP), Gleaners Food Bank, Interfaith Hunger Initiative, the Indianapolis mayor’s office, Meals on Wheels, Midwest Food Bank, Second Helpings, St. Vincent de Paul and WIC.

In 2014, the Indy Hunger Network did a study to better understand the city and its food distribution systems. The group knew that there were many meals being served, but focused its efforts on sustaining the system and improving access to nutrition. They also recognized that this collective effort was key to fighting food insecurity in Indianapolis, but together they could make systemic change.

According to Betsy Whitmore, communications manager from Second Helpings, this collective effort and multiple approaches are helping tackle the community’s hunger.

The network works together in other ways to ensure better use and learning from each other. For example, when a provider gets too much of a type of food, and it is able to redirect or share.

“We work with Gleaners and trade all the time. They’re like, ‘We got a whole bunch of this, can you use it?’ There are things that are canned goods, nonperishables, things that they need. When they show up with their truck, we switch. Some of our re-directed food goes to St. Vincent de Paul,” said Whitmore.

“What I find interesting is that the Indy Hunger Network is people who come at hunger from so many different directions,” said Whitmore. “If there were a silver bullet one way to feed people who were hungry, I think we’d as a society have found it by now. But it takes all of these people to make sure that food banks and food pantries are getting to people.”

And its work hasn’t gone unnoticed. In December, Jim Morris, an Indianapolis civic and business leader, was awarded the 2015 Daniels Prize for his lifetime efforts to push against the status quo to improve the lives of Hoosiers.  Morris served as executive director of the United Nations World Food Programme from 2002 to 2007. As the recipient, Morris was able to select a $100,000 grant recipient.

Morris’ choice was the Indy Hunger Network to address the hunger issues involved in infant health.

To learn more about IHN, visit: http://www.indyhunger.org/who-we-are/community-partners

 

Second Helpings’ approach to food insecurity

By Feature, Programming

By Lynn Sygiel, editor, Charitable Advisors |

The problem was an old one: hunger in America. Or more specifically, hunger in Indianapolis. What was needed was a new solution, and with that forward thinking, Second Helpings was born.

In 1998, three area chefs – Kristen Cordoza, Bob Koch and Jean Paison — saw tremendous waste in the food service industry. At the same time, they could see that local nonprofit food service programs were struggling to provide nutritional meals. Surely, there had to be a way to channel the excess in one area to fill a need in another.

The trio took their chef’s hats off for a moment and put their business minds to work. Their creation — Second Helpings – was launched as a food rescue and hunger relief organization. And in doing so, Second Helpings had yet another mission: to train young chefs.

Second Helpings spokeswoman Betsy Whitmore wasn’t involved with Second Helpings when it began, but she has seen it grow to the successful organization it is today.

The Second Helpings formula works like this: the community kitchen accepts donated perishable and overstocked food and in turn daily prepares nutritious meals, and distributes them free of charge through local social service agencies. Second Helpings also trains unemployed and underemployed adults for meaningful careers in the culinary industry. The food comes from wholesalers, retailers and restaurants.

“The first 60 meals went to Holy Cross Family Shelter, and it was salad and a stew. The model — taking rescue food and making sure it’s prepared for nutrition and balance – hasn’t changed. The chefs were very smart about knowing, ‘Here’s this overage, here’s this need, how do we connect this?’” said Whitmore, the communications manager, who keeps the organization’s first meal ticket on her desk as a reminder.

Whitmore said Second Helpings was just something the chefs knew they had to do. One chef said it was not a project she found, it was a project that found her. Because they worked in the food industry, hunger was a problem they couldn’t understand.

What Whitmore believes has changed in 17 years is the face of hunger.

“What people don’t understand is what hunger really looks. Most of them are working families. They’re people who may have had major life changes, change in jobs, things like that. She said most of the people who receive food from Second Helpings, food pantries or feeding programs are from working families.

On a daily basis, Second Helpings volunteers prepare and deliver 4,000 meals. Last year, the nonprofit prepared and delivered 955,869 meals to 80 social service agencies. Forty-seven percent went to children, 31 percent to adults, 17 percent to families and 6 percent to seniors.

From a food standpoint, it adds up to about 2.3 million pounds of food. Kroger, Trader Joe’s, US Foods, Dr. Pepper Snapple group, Fresh Thyme Farmers Market and Sysco, are the top retail contributors, each contributing more than 100,000 pounds.

People who run food drives, for the nonprofit are typically asked to collect pasta and rice because those are not perishables. Weekly the organization goes through 70 pounds of rice and 350 pounds of pasta, which they incorporate into the meals. And while technology has been used by some operations, Second Helpings uses people to gauge what’s coming in and what’s going out, typically taking inventory by sight.

“We do everything by weight. Everything’s by weight because from a tax standpoint, whether it’s a can of beans or a rack of lamb, it’s pound for pound,” she said.

Whitmore also mentions the savings to the local nonprofits on the receiving end of the food. “Those agencies don’t have to spend that money on food, so they can use their dollars and resources to help people better,” she said. Whenever Second Helpings on boards a new agency, it makes sure the organization and nonprofit are ready.

Whitmore mentions, another food source in the community, St. Vincent DePaul at 30th and Rural. One unique element is its grocery store set-up.

“There is a lot of dignity that is put into it,” she said. “I think that awareness and education has changed. I think that people are starting to get a better understanding of what hunger really looks like in a community. There will always be some who don’t understand. But I think the more we educate people, so that people realize that it’s not just soup kitchens. Hungry people are your neighbors.”

There are also sites that serve meals provided by Second Helpings, which have food pantries. Families get a meal and have food for tomorrow. Some of the stigma, too, is reduced at the community-feeding sites.

“Nobody wants to show up and say, ‘I’m here because I’m hungry.’ I think it’s nice to know that it’s not just one way that we’re feeding people. One model that may work for one family may not work for the other.”

At these sites, besides getting a hot, nutritious meal, people get introduced to foods. Vegetables are often added to mac and cheese or a curry dish will be distributed.

“In a lot of ways, hunger is something people deal with very privately. It’s a dignity thing. But if it’s a community meal where my neighbors can just sit down and eat, it’s OK. I like to think of it as the extended family table because you don’t sit next to someone at a communal table and not eventually talk to them,” she said.

Whitmore said she sees the need increasing, and Second Helpings has seen a 12 percent growth in meal production annually.

“The model that we have here is always poised for growth, and we’re always reassessing what does our future look like, and what is our plan for the future if growth happens. It’s something you have to do, because especially when you’re dealing with hunger relief, it is tied to so many other problems in the community,” she said.

Living the dream

By Sponsor Insight

By Patrick M. Rooney, associate dean for academic affairs and research, IU Lilly Family School of Philanthropy at IUPUI |

In sports terms, Wes Boone is lighting ‘em up.

The Indiana University Lilly Family School of Philanthropy sophomore won a $100,000 scholarship in the Dr. Pepper Tuition Giveaway last month. The 19-year-old won the award during halftime of the ACC Football Championship game last month.

His win is also a victory for sports-minded youth around the world who lack the most basic athletic equipment. To date, the nonprofit Boone founded in 2013 and leads, Gear Going Global, has provided sports gear to impoverished and orphaned kids in 15 countries around the globe, including Cameroon, Haiti, Nicaragua, Nigeria and the Philippines.

“For many of them, the ability to play some semblance of sports is food for their souls,” he said.

When Boone was a high school junior at North Montgomery High School, his mother showed the family a documentary, “Power to the People”, about life in Guatemala and Hoosier REMC linemen who brought electricity to three remote villages in Guatemala. Beyond the overall poor standard of living for many Guatemalans, what stood out to this teen was video of kids playing soccer with an empty water bottle — playing with trash because they didn’t have a ball.

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Wes Boone, a sophomore at the IU Lilly Family School of Philanthropy, has already racked up an impressive list of accomplishments, including:

  • Creating a nonprofit organization, Gear Going Global, while still a high school junior.
  • Providing sports gear to impoverished kids in 15 countries around the world.
  • Receiving a $5,000 national scholarship from org.
  • Earning the Jefferson Award for Public Service.
  • Won the 2015 Outstanding Young Adult Indiana Philanthropy Award from the Association of Fundraising Professionals-Indiana Chapter.
  • Is half way to a goal of collecting 500,000 pieces of sports gear in partnership with the Jefferson Awards’ Lead 360
  • Won a $100,000 scholarship in the Dr. Pepper Tuition Giveaway in December 2015.
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“I’d been playing soccer since I was four or five years old, and I’d always had easy access to sports equipment,” Boone said. “I was awestruck that other kids didn’t have that. I asked my parents what I could do, and they told me I could make a difference.”

Boone set out to do just that. Beginning by asking family and friends to donate sports gear, he soon created a 501(c)3 organization. Three years later, it’s a global enterprise. “It’s just amazing how fast this has all gotten so big. I’ve been able to travel, speak and raise awareness for the needs Gear Going Global is working to meet.”

The Dr. Pepper award, which Boone won on live-national television during the Atlantic Coast Conference’s football championship game, follows other impressive accolades. In recent months he’s received a $5,000 national scholarship from DoSomething.org (an organization encouraging youth to engage in social change), the Jefferson Award for Public Service and the 2015 Outstanding Young Adult Indiana Philanthropy Award from the Association of Fundraising Professionals-Indiana Chapter.

The Jefferson Awards’ Lead 360 program has now partnered with Gear Going Global to help the nonprofit reach a goal of 500,000 pieces of donated equipment. In the first nine months, the organization is halfway to the goal. The tally is tracked publicly online.

Many of the youth international organizations, which receive this sports equipment, send back photos of these local children using the donated gear.

“The most rewarding part of what we do is the look on the kids’ faces in those pictures. They work so hard just to try to have what they need to play sports. In some places, the coolest kid is the one who has a long-sleeved shirt they can stuff with newspaper and tie into a ball so they can play soccer,” Boone said.

This past fall, Boone got to see that look first hand, making his first international trip to deliver gear to kids at the Minmahaw School in Thailand.

“It’s a small school and the kids travel hours to get there. They’re creating a soccer team and this new equipment will help a lot. I even got to play a game of soccer with them, which was really fun.”

His experiences have inspired him to make leading the nonprofit, based in Darlington, Ind., his full-time job after commencement.

“Winning the $100,000 will allow me to graduate with a philanthropic studies degree from the Lilly Family School of Philanthropy without any debt, which will help me grow Gear Going Global faster, and ultimately give the gift of play to more children in developing countries around the world,” Boone said.


patrick-rooneyPatrick M. Rooney, Ph.D., is associate dean for academic affairs and research at the Indiana University Lilly Family School of Philanthropy at IUPUI.

Nonprofits assail IRS rule

By Feature, Fundraising

By Tim Devaney, staff writer, The Hill |

Nonprofit groups are assailing a proposed rule from the Internal Revenue Service, warning the regulations could dry up donations and leave them vulnerable to hacking.

The IRS is proposing new requirements for nonprofits to collect the Social Security numbers of their donors.

Currently, nonprofits send donors a form verifying their contributions, which they use for tax purposes. However, the IRS is proposing changes that would require these nonprofits to collect their donors’ SSNs to provide directly to the agency.

But this could put a bull’s-eye on nonprofits, critics say.

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Congress passes bill to make charitable IRA rollover, other tax incentives permanent

By Feature, Fundraising

By Sherri Welch, senior reporter, Crain’s Detroit Business |

The U.S. Congress has approved a bill that would make three charitable tax incentives permanent, according to Washington, D.C.-based Independent Sector, which called the move “a monumental victory on Capital Hill” in an open letter to its members.

Independent Sector and the nonprofit sector as a whole have been advocating to make the charitable incentives a permanent part of the tax code for a decade. During that time, the incentives have repeatedly expired before, in some cases, being retroactively renewed, confounding and frustrating donors and advisers alike.

Part of the Protecting Americans from Tax Hikes Act of 2015, the charitable tax incentives set to become permanent include:

  • the IRA charitable rollover, which allows donors age 70½ and older to give to charities up to $100,000 tax-free annually from their IRAs
  • enhanced deductions for gifts of excess food inventories and conservation easement provisions under which private owners promise not to develop land in exchange for the deduction while still retaining ownership of the land.

The act also includes provisions to make the child tax credit and the earned income tax credit permanent, according to Independent Sector.

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Making big bets for social change

By Feature

By William Foster, Gail Perreault, Alison Powell and Chris Addy, Bridgespan, for SSIR |

When Don Fisher stepped down as chief executive of the Gap in the late 1990s, he and his wife, Doris, decided that they wanted to tackle one of the most difficult social challenges in the United States: improving public education.

Through an expert advisor, they learned about the Knowledge Is Power Program (KIPP), which at the time consisted of just two charter middle schools — one in Houston and one in New York City. And after lengthy due diligence, the Fishers committed to giving $15 million over three years (roughly three times the organization’s annual revenue at the time) to bring KIPP’s results- oriented methods to many more communities and students.

The Fishers bet big, and they bet smart.

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Evaluating the right income strategies for your nonprofit

By Sponsor Insight

By Jamie Levine Daniel, assistant professor of nonprofit management, SPEA IUPUI |

Nonprofits often engage in earned revenue activities to generate revenue to fund their mission-driven programs and services. These market-based income activities can take many forms — some directly related to the organization’s mission, some not.

For example to generate funds, an art museum can charge admission to an exhibit, which is directly related to mission or the organization can sell food in a café, which does not have a direct connection to mission. Both generate income, but each may not ultimately affect the organization’s program/service delivery in the same way.

Certain revenue activities may, indeed, ultimately support the organization’s mission. However, these other activities may draw organizational attention and resources away from the mission-related activities. The connection between the earned-revenue activity and the mission matters, and the following embeddedness framework offers a way to assess whether an earned revenue activity will have the desired effect for an organization.

The embeddedness framework looks at two aspects of an earned revenue activity to evaluate its connection to an organization’s mission. The first is organizational technology or the resources (human, physical, capital, etc.) used to delivery both the earned revenue activity and the organization’s core mission-related services. The second aspect is the target audience(s) for both the earned revenue activity and the mission-related service.

If the organizational technology and target market for both the earned revenue and core mission activity are the same, or an organization monetizing what it already does related to its mission, the earned revenue activity is considered to be fully connected or embedded within the organization.

Consider the art museum selling admission tickets. The core service and earned revenue activities are not differentiated. The organizational technology required is the same, and the target audience is the same.

On the other hand, that same museum’s café would be considered external (or unconnected) to the mission. The resources needed to run a café differ from those needed to mount an exhibit. A customer can eat in the café without entering into an exhibit hall, further differentiating the earned revenue activity from the core mission activities.

If the earned revenue activity and the mission activities share only one aspect in common – either the necessary inputs or the target audience — then the earned revenue activity is considered integrated. It is not fully connected or embedded, nor is it external to the core.

The museum taking a traveling exhibit to a nontraditional audience — an elementary school, or a civic festival — could be using existing resources/processes to target new audiences.

Using revenue and program consumption data from the Cultural Data Project from 2007-2010, my initial research shows that embeddedness matters. Both embedded and external activities are positively connected to program attendance, a signal of core mission activity. In embedded case of admission tickets, the organization makes money on what it already does. In the external case of the cafe, since the activities are separate or external and that activity that does not make money for the organization, it would be easy to shut it down, without detriment to core activities.

However, integrated revenue activity show mixed results. These types of activities show a negative relationship to both access and attendance. The negative effect is especially visible when looking at earned revenue activities that use the same organizational resources used by mission activities. This is noteworthy given conversations many nonprofits may have about maximizing resources.

My findings are that earned revenue can serve as an important element of organizational strategy and sustainability, but the nature of the activity is important. By considering the connections between the earned-revenue activity and the mission activity, organizations can use the embeddedness framework to determine the best use of resources that ultimately best serve program outcomes and client interests.


jamie-levine-daniel Jamie Levine Daniel is an assistant professor at the IU School of Public and Environmental Affairs at IUPUI. She has a Ph.D. in Public Policy and Management from Ohio State University and studies nonprofit management and nonprofit revenue trends.