exploring fundraising issues, trends &...

What’s the Code: Exploring Fundraising Issues, Trends & Regulations

Michael J. Baker, CFRE

7/13/2011 1www.m3development.net

“To give away money is an easy matter and in anyone’s power. But to decide to whom to give it and how large and when, and for what purpose, is neither in everyone’s power-nor an easy matter. Hence it is that such excellence is raise, praiseworthy and noble.”

» Aristotle


• 1,046,719 Public Charities Registered with IRS in US

• 59% Growth over past 10 Years

• $1.44 Trillion in total Revenues

• $1.34 Trillion in total Expenses

• $2.6 Trillion in total Assets

• 52,121 Public Charities Registered with IRS in Florida

• 69% Growth over past 10 Years

• $54 Billion in total Revenues

• $91 Billion in total Assets

Non-Profits


Source: National Center of Charitable Statistics

Non-Profits

• Charitable Giving was $280.3 in 2009 compared with $303.75 Billion in 2008

• Charitable Giving is 2% of the US Gross Domestic Product (GDP)

• 1,046,719 NPO’s in US 2010

• June 2011, 275,000 NPO’s lost tax exempt status

• Employ 1 in Every 14 American Workers

• 9% of US Workforce

• Volunteers

• 64 million people

• 30% of all Women Volunteer

• 23% of all Men Volunteer

7/13/2011 www.m3development.net 4

Source: National Center of Charitable Statistics & Giving USA 2011

Professionals in Fundraising

• According to U.S. News and World Report,

fundraising is one of the top 25 hottest jobs for

the future.

• Average salary for Development Director

between $66K & $76K.

Source: U.S. News & World Report; AFP & Nonprofit Times


Regulatory Changes

• IRS Form 990 Redesigned effective 2009

returns for 2008 tax year to promote tax

compliance & transparency.

• IRS is currently seeking comments on new 990

by 8.1.2011 for upcoming revision.

• Pension Protection Act of 2006 had provision if

charity did not file 990 in past 3 years the org

automatically lost their tax-exempt status.

Source: IRS


2011 Federal Taxes• Income tax rates from 10% up to

35% (expires end of 2012)

• Long-term capital gains and dividends (expires end of 2012)

– For taxpayers in the 15% income tax bracket and below, the rate is zero.

– For taxpayers in the 25% bracket and above, the rate is 15%.

• Estate tax exemption up to $5,000,000 (expires end of 2012)

Source: IRS


Florida Regulations

• Florida law requires all charities to register

with the Florida Department of Agriculture and

Consumer Services.

• These groups do not file with the Department

of Agriculture and Consumer Services.

– religious or educational institutions, government

agencies or political groups

Source: FL Department of Agriculture & Consumer Services


The Giving PledgePaul G. Allen

Laura and John Arnold

Nicolas Berggruen

Michael R. Bloomberg

Eli and Edythe Broad

Warren Buffett

Jean and Steve Case

Michele Chan & Patrick Soon-Shiong

Lee and Toby Cooperman

Joyce and Bill Cummings

Ray and Barbara Dalio

John Paul DeJoria

Barry Diller & Diane von Furstenberg

Ann and John Doerr

Larry Ellison

Charles F. Feeney

Ted Forstmann

Phillip and Patricia Frost

Bill and Melinda Gates

David and Barbara Green

Jeff Greene

Harold and Sue Ann Hamm

Lyda Hill

Barron Hilton

Jon and Karen Huntsman

Carl Icahn

Joan and Irwin Jacobs

George B. Kaiser

Vinod and Neeru Khosla

Sidney Kimmel

Rich and Nancy Kinder

Elaine and Ken Langone

Gerry and Marguerite Lenfest

Lorry I. Lokey

George Lucas

Duncan and Nancy MacMillan

Alfred E. Mann

Joe and Rika Mansueto

Bernie and Billi Marcus

Michael and Lori Milken

George P. Mitchell

Thomas S. Monaghan

Tashia and John Morgridge

Dustin Moskovitz

Pierre and Pam Omidyar

Bernard and Barbro Osher

Ronald O. Perelman

Peter G. Peterson

T. Boone Pickens

Julian H. Robertson, Jr.

David Rockefeller

Edward W. and Deedie Potter Rose

David M. Rubenstein

Herb and Marion Sandler

Denny Sanford

Vicki and Roger Sant

Lynn Schusterman

Walter Scott, Jr.

Tom and Cindy Secunda

Annette and Harold Simmons

Jim and Marilyn Simons

Jeff Skoll

Tom Steyer and Kat Taylor

Jim and Virginia Stowers

Ted Turner

Sanford and Joan Weill

Shelby White

Charles Zegar and Merryl Snow Zegar

Mark Zuckerberg

Source: The Giving Pledge


Individuals$211.8 B

73%

Foundations$41 B14%

Bequests$22.8 B

8%

Corporations$15.3 B

5%

2010 Charitable Giving

Total = $290.90 Billion


Source: Giving USA 2011

The 2010 Non-profit Fundraising Survey

Funds raised in 2010 compared with 2009

• In 2010 more organizations saw growth (43%) than declines (33%).

2009 46% reported a decline.

• Larger organizations were more likely to see growth than were very

small organizations.

• There were few meaningful differences in the changes in amounts

received when organizations were grouped by region of the United

States.

• Just 45% of organizations received more than 50% of their

contributions from individual donors.


Source: The Nonprofit Research Collaborative 3.2011

The 2010 Non-profit Fundraising Survey

Funds raised in 2010 compared with 2009

• Internet/online giving rose at 58% of the organizations that reported

using it–and more than three‐quarters reported online or Internet

fundraising.

• Major gifts and events proceeds rose at half of the organizations using

them, but for most other fundraising vehicles, the picture was mixed.

• Most organizations held their investment in fundraising steady in 2010.

However, those that increased expenditures, staffing, or volunteer

engagement were more likely to see increases in funds raised. There is

also a relationship between failing to invest in fundraising and failing to

meet goals. That is, investment doesn’t guarantee increases, but

decreased investment is associated with not meeting goals.


Source: The Nonprofit Research Collaborative 3.2011

Most Cost Effective Ways to Raise $

• Email Marketing – $.02 per $1 raised

• Major & Planned Gifts - $.10 to $.20 per $1 raised

• Capital Campaigns - $.10 to $.20 per $1 raised

• Corporations & Foundations - $.20 per $1 raised

• Direct Mail (renewal) - $.20 to $.25 per $1 raised

• Special Events - $.33 to $.50 per $1 raised

• Direct Mail (acquisition) - $1.25 to $1.50 per $1

raised

Source: DMA 2009 & The Nonprofit Handbook 2002


Generational Giving


Source: AFP

Americans Love a Winner


http://scouting.org/

Recent Scandal’s

• Bernie Madoff stole over $18 Billion

– Many losers…….

• Individual investor’s

• Non-profit investor’s

• Foundation investor’s

• Corporate investor’s

• Government investor’s

Source: Wall Street Journal


Madoff’s Victims


Recent News……

The cancer charity Livestrong could face a $5-million to $10-million

loss in donations as investigators probe doping allegations against its

founder, seven-time Tour de France winner Lance Armstrong

Source: Bloomberg 6.7.2011


Some Recent Florida Press

Florida to Navy Veterans charity: Cease fundraising immediately

The activities of the U.S. Navy Veterans Association "constitute

immediate, serious dangers to the public welfare," the state of Florida

says in a new order, and the same order says the group must cease

operations immediately.

“three companies keep 60 to 90 percent of every dollar collected and

account for most of the $4.58 million the Navy Veterans Florida

chapter said it brought in “

Source: St. Petersburg Times


Case Study - Ethics in Action

The September 11th Fund

• Created by The New York Community Trust

and United Way of New York City.

• Leadership of Mayor of NYC; CEO’s of org’s;

& 22 independent directors.

• More than 2 million donors gave $534 million.

• Dissolved in 2004 after 559 grants totaling

$528 million were distributed.


Ethics and accountability: powerful forces in fundraising, ensuring…

• Stakeholder trust and confidence

• Assets are managed and accounted for

• All data are collected/used properly

• Donor privacy and rights are maintained

• Reporting/other requirements are fulfilled

• Programs are executed as promised

• Donors are retained

267/13/2011 www.m3development.net

The Donor Bill of RightsAll Donors Have Theses Rights…

I. To be informed of the organization’s mission, of the way the

organization intends to use donated resources, and of its

capacity to use donations effectively for their intended purposes.

II. To be informed of the identity of those serving on the

organization’s governing board, and to expect the board to

exercise prudent judgement in its stewardship responsibilities.

III. To have access to the organization’s most recent financial

statements.

IV. To be assured their gifts will be used for the purposes for which

they were given.

V. To receive appropriate acknowledgement and recognition.


The Donor Bill of RightsAll Donors Have Theses Rights…

VI. To be assured that information about their donations is handled

with respect and with confidentiality to the extent provided by

law.

VII. To expect that all relationships with individuals representing

organizations of interest to the donor will be professional in

nature.

VIII. To be informed whether those seeking donations are

volunteers, employees of the organization or hired solicitors.

IX. To have the opportunity for their names to be deleted from

mailing lists that an organization may intend to share.

X. To feel free to ask questions when making a donation and to

receive prompt, truthful and forthright answers.


AFP Code of Ethics

Suggests a fundraiser must…

• Seek to inspire others through dedication and

purpose

• Commit to improvement of knowledge and

skills

• Practice integrity, honesty, and full disclosure


What would you do?

• Individual donor works at a company that

matches 2 dollars for every dollar an

employee contributes to a charity up to

$10,000.

• Donor suggests gifts from an event made in

cash be given to him & he’ll write a

personal check for $5,000 getting the

company he works for to match it for

$10,000.7/13/2011 30www.m3development.net

AFP Code of Ethics

The Code consists of two parts:

• A set of Ethical Principles, which state the

general professional values to which AFP

members aspire.

• Ethical Standards, which embody and give

practical measure to the general principles.


AFP Code of Ethics Adherence to the Fundamental Values

• Donor Intent

• Law

• Organizational Mission

• Personal Honest and Integrity

• Philanthropic Purpose


AFP Ethics Guidance Helps Us….

• Have an industry standard of excellence.

• Know that percentage based compensation is

not acceptable.

• Know that fees to process gifts via the internet

are ok.

• Have an understanding to interpret ambiguous

circumstances & lead to the correct decision.


AFP’s Social Media Guidelines

• Is to both Provide fundraising professionals

guidance on social media for their workplace and

to establish guidelines for Organization leaders to

use with their staff, consultants, volunteers,

members, stakeholders and affiliated groups.

• This document also covers the conduct and

expectations of the public when participating in

an organization’s social media or social

networking platforms.


AFP’s Social Media Guidelines• Organization and Affiliate Organization Staff, Consultants,

Volunteers, Members and Stakeholders

1. Follow Appropriate Industry Laws and Guidelines

2. Be Informed and Interesting – and Listen

3. Always Be Respectful, and Be Polite When Disagreeing

4. Make Sure You Properly Attribute All Content

5. Be Responsive

6. Use Discretion At All Times

7. Transparency, Honesty, and Integrity Are Paramount

8. Don't Mix Worlds – Know the Line Between Professional and

Personal

9. Be Authorized and Official

10. Respond to Violations of Standards 7/13/2011 35www.m3development.net

AFP’s Social Media Guidelines• Public (Non- Members/Non-Stakeholders)

By participating in Organization and Affiliate Organization social media (forums,

discussions, blogs, etc.), public users agree they will not do the following:

1. Post material that the Organization or Affiliate Organization determines is threatening,

harassing, illegal, obscene, defamatory, libelous, or hostile towards any individual or

entity.

2. Post phone numbers or email addresses of yourself or any other individual or entity in the

body of your comments.

3. Post material that infringes on the rights of the Organization or any individual or entity,

including privacy, intellectual property or publication rights. This includes the improper

use of (but is not limited to) images, logos, videos, content, documents, white papers, etc.

4. Post material that promotes or advertises a commercial product or solicits business or

membership or financial or other support in any business, group or organization.

5. Post chain letters, post the same comment multiple times, or otherwise distribute SPAM.

6. Allow any other individual or entity to use your identification for posting or viewing

comments.

7. Post comments under multiple names or using another person’s name.


Ethics in Practice


Keeping stewardship in mind

The concept of stewardship includes:

• Managing and protecting funds

• Recording and tracking contributions

• Responding to and thanking donors

• Recognizing donors and reporting results

• Protecting donors’ privacy

• Protecting donors’ rights


Maintaining Donor Records


Accountability and donor records

• How to contact the donor

• Donor’s history of participation

• Proper accounting of each contribution

• Security and confidentiality issues

• Ethical considerations about what data to keep


Proper Basic Thank You’s…..

Goods or Services Provided

Dear [Donor]:

“Thank you for your cash contribution of $150 that [organization’s name] received on [date received]. In exchange for your contribution, we gave you a cookbook worth an estimated fair market value of $25. Therefore, for Federal income tax purposes, your contribution deduction is limited to $125. Thank you again.”

Sincerely,

No Goods or Services Provided

Dear [Donor]:

“Thank you for your cash contribution of $300 that [organization’s name] received on December 21, 2006. No goods or services were provided in exchange for your contribution.”

Sincerely,


AFP Ethics Enforcement

• Submit a query to AFP President & CEO by either mail, email or telephone.

• Request complaint form.

• Fill out complaint form & mail to Office of President & CEO.

– Complaint form must be filled out and signed by the person making the complaint.

– Complaint must be filed within 3 years of the alleged unethical misconduct.


What Would You Do?

You are the vice president for advancement and alumni affairs of a small college. After many months of careful cultivation, you succeed in obtaining a pledge from a famous alum for the largest gift in the college's history. The only catch is, the alum insists that the college put his name on a building that was named for a previous donor (now deceased) as a condition of that alum's gift. You try to persuade the new donor to change his mind, but the donor is insistent.

Should you refuse this gift?

1. Yes

2. No

3. It depends

4. Don’t know


Yes you should refuse the

gift………..but why?• You have a responsibility to vigorously and ethically

raise funds for your college while ensuring that the intent of all donors is honestly fulfilled. Presumably the naming of the building (in perpetuity) was a part of the original gift agreement with the previous donor, and to make any changes would be a violation of Standards #12 and #14.

• You must review the original gift agreement and may wish to get advice from counsel if the gift agreement is complex or if one was not written. Assuming the Board approves significant naming opportunities, you will need to take the matter to your Board with the advice that the original donor’s name remain on the building.


The AFP Ethics Assessment

Inventory™ (EAI) Is Coming Soon!



Inventory™

• New benefit for AFP members.

• Voluntary & confidential.

• Available online in the member’s section in July 2011.

• Provides users a snapshot of their ethical performance along six dimensions of ethical practice.

• Users are compared with AFP peers.

• Designed as developmental tool.

• Funded through the AFP Foundation for Philanthropy with major gifts from numerous Chapters and individuals.



Inventory™

Goal: Build a research‐based ethics assessment tool for use by AFP members and others.

Provides users with three pictures:

• Developmental snapshot of individual AFP member as

compared to normative AFP database.

• Developmental snapshot of the organization in which the user works, as compared to a normative database for organizations.

• Developmental snapshot comparing user and her/his

organization.



Inventory™

• Built on information and insights provided by AFP members.

• Developed by the Center for Ethical Business Cultures® (CEBC) at the University of St. Thomas~Minnesota with the oversight of AFP Ethics Committee.

• Almost 2,000 AFP members participated in design and testing.

• Linked directly to AFP’s mission: AFP ... advances philanthropy by enabling people and organizations to practice ethical and effective fundraising.


Universal Principles as FundraisersHonesty:

Fundraisers shall at all times act honestly and truthfully so that the public trust is

protected and donors and beneficiaries are not misled.

Respect:

Fundraisers shall at all times act with respect for the dignity of their profession and

their organization and with respect for the dignity of donors and beneficiaries.

Integrity:

Fundraisers will act openly and with regard to their responsibility for public trust. They

shall disclose all actual or potential conflicts of interest and avoid any appearance

of personal or professional misconduct.

Empathy:

Fundraisers will work in a way that promotes their purpose and encourage others to use

the same professional standards and engagement. They shall value individual

privacy, freedom of choice, and diversity in all forms.

Transparency:

Fundraisers stimulate clear reports about the work they do, the way donations are

managed and disbursed, and costs and expenses, in an accurate and comprehensible

manner.7/13/2011 49www.m3development.net

YOUR THOUGHTS & QUESTIONS


“How wonderful that no one need wait

a single moment to improve the world.”

Anne Frank


Thank You!!!!

Michael J. Baker, CFRE732-245-9868

[email protected]@mbakercfre


mailto:[email protected]

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