Resource Directory | Nonprofit Genie (FAQs)

Are there special things I should look for when completing a Form 990?

01-16-2006

Federal Form 990 is the main document nonprofits are required to disclose to the public, and any member of the public can request a copy, so you want to make sure that what it says is not only accurate, but reflects what you want to communicate to the public. Form 990, required by the IRS for all nonprofit organizations except those with annual revenues of less than $25,000 and religious organizations, is frequently requested by donors and grantmakers, and increasingly available on the web. But sometimes boards and executive directors don't pay much attention to what's on their 990s, and you could have an unpleasant surprise if you haven't made sure you feel comfortable with the "story" the 990 tells about your organization.

Your organization's 990 is due on May 15 if your fiscal year ended on December 31 (990s are due on November 15 for organizations with fiscal years ending June 30--in other words, 4 and 1/2 months after the close of the fiscal year). 990s are often prepared by the organization's CPA auditor, but can be prepared by the staff or board as well. Take 15 minutes to review the 990 for the following common problems:

Statement of Functional Expenses (Part II): In this section the organization must classify all expenses as one of three types: Program Services, Management & General, or Fundraising. We know one organization that put almost all expenses into "Management & General" because their work was done by management-level staff; in fact, such work was more appropriately classified as "Program Services." If the percentages for either Fundraising or Management & General appear too high, go back and make sure that your organization used appropriate guidelines when classifying expenses.

Addresses of board members: Part V of the 990 asks for a "list of names and addresses of officers, directors, trustees, and key employees." It is NOT necessary to list home addresses, and many board members and staff members feel that doing so encourages invasion of privacy. It IS appropriate to use the organization's business address in this section for all board and staff members.

Let your work show your mission. In Part III, "Statement of Program Service Accomplishments," the 990 asks for a statement of the organization's purpose and a list of program activities (examples: public awareness campaign, medical research work, home meal delivery, youth training, forest trail construction). Take the time to be sure that what you say here is what you would say to the press or the public or the IRS . . . after all, that IS the audience for the 990.

Check the math. (Especially if you're an education organization!) In one study of 990s, 67% had significant arithmetic errors.

Remind staff and other board members that Section 1D of Schedule A need NOT be disclosed to the public. Schedule A (an attachment to the 990) lists the names of major donors and the amounts given. If someone asks for your organization's 990 and Schedule A, you are required by law to give it to them, but you do NOT need to give them Section 1D of Schedule A that has this information.

Make sure it's filed on time. Failure to file on time results in rapidly accruing penalties, and board members could be held individually liable for those penalties (even if you have Directors & Officers liability insurance). The board president should check to be sure it is filed on or before the due date (again, 4 and 1/2 months after the close of the fiscal year).

Are we required to file the 990 with our state government as well?

01-16-2006

State requirements vary from state to state. You should talk with your auditor or another financial advisor about the requirements for your state, or contact the appropriate state government departments.

Besides the 990, are there other federal reporting requirements for nonprofits?

01-16-2006

In addition, nonprofits that have expended $300,000 or more in federal funds must have an A-133 audit (see FAQ #19).

The Unrelated Business Income Tax (UBIT) was enacted to prevent unfair competition from nonprofit organizations using their tax-free monies to expand their businesses. Briefly, unrelated business income results from an activity that is 1) a trade or business, 2) regularly carried on, and 3) is not substantially related to the organization's tax-exempt purpose. Certain activities such as work performed by volunteers, activities for the convenience of members, etc., are among the many activities specifically excluded from this broad definition.

An organization with unrelated business income is subject to tax based on corporate income tax rates. Generally, if an organization receives more than 5% of its total income from unrelated business income, it may endanger its tax-exempt status.

Can we post our 990 on the Internet?

01-16-2006

Yes, although you are not required to do so. If you do make your documents available on the web, you are not required to respond to requests for your 990 as above. Keep in mind that whether or not YOU post your 990 on the Internet, anyone else could choose to publish it on their own site.

Do all nonprofits have to file Form 990 each year?

01-16-2006

All nonprofit organizations with total annual receipts "normally" over $25,000 must file this federal form annually (churches and government agencies do not file). If gross annual receipts are between $25,000 and $100,000, AND if your assets are less than $250,000, Form 990EZ may be filed instead.

Do we have to give a complete copy of the 990 to requestors?

01-16-2006

Yes, but you CAN omit the section of Schedule A which lists the names and addresses of contributors. You can also omit Form 990-T (which not all nonprofits are required to file).

One way to manage this process is to make a special version of "Form 990 for 1999-public disclosure copy" which omits the above information. Keep copies at your front desk that can be provided to those who request them in person. If you are charging for copies of your 990, it's convenient to make up an "order form" which shows the amount you are charging, so that this order form can be mailed to requestors or given to requestors in person.

How much can we charge for copies of our 990?

01-16-2006

You can charge a maximum of $1 for the first page and 15 cents for each additional page. Permission to charge for copies was intended in part to compensate the organization for costs in reproducing the documents, and in part to prevent harassment by a group of people who, for example, asks for thousands of copies of your 990.

If someone asks for a copy of our 990, what are we required to provide?

01-16-2006

On request, you must provide copies of the following:

• Your three most recent Form 990s. However, you are NOT required to provide one section of Schedule A-the one which contains the names and amounts of all donors-this section may be deleted when copies of the 990 and Schedule A are provided to the public.
• Form 1023, which is the original application for nonprofit corporate status (filed at the time your organization was formed), UNLESS your 1023 was filed prior to July 15, 1987 and you have not been in possession of a copy since that time
• All schedules, attachments, and other supporting documents that were filed with any of the above forms, EXCEPT the names and addresses of contributors AND Form 990-T (if you filed it, which is the Exempt Organization Business Tax Return).

Once we've completed the 990, where must it be filed?

01-16-2006

Form 990 is filed with the Internal Revenue Service. In addition, as of June 1999, there are new laws in effect on public disclosure of the 990. A summary follows, and you can also read the regulations directly at www.access.gpo.gov/su_docs/aces/aces140.html. In the "Search Terms" section, type "Form 990" and "Public Disclosure" with quotation marks around each phrase.

We think there is a campaign out to harass us by making complicated and demanding requests for our 990. Is there anything we can do?

01-16-2006

Yes. You can apply to the IRS to investigate whether a harassment campaign is going on. During the investigative period you do not have to provide copies of your 990 to the public. Organizations can ignore multiple requests from a single individual or address without seeking a determination of harassment from the IRS and may disregard requests beyond the first two within any 30-day period or the first four within any one-year period that come from the same person or same address.

What are the rules for HOW to provide copies of Form 990 and Form 1023?

01-16-2006

Requests made in person: If an individual comes to an office that has three or more employees located at the same site, and a request is made in person, the organization must provide a copy on the same business day.

Requests made in writing: Requests received by mail must be provided within 30 days of receiving the request. If you charge for copies of your 990 (see FAQ #14), you can choose to require advance payment. In that case, the copy must be made available within 30 days of receiving the payment.

What are the rules for posting our 990 on the Internet?

01-16-2006

You can post your 990 on your own website, or as part of a database of similar documents (such as the one at http://www.guidestar.org). The documents must be available for downloading at no cost. Software such as Adobe Acrobat must be used that reproduces a "graphic image" of the 990 in exactly the way it was filed with the IRS, and in such a way that someone cannot download your 990 and easily make changes to it. If you choose to post your 990s on the Internet instead of making them available on request, you must tell anyone who requests your 990 the website at which your 990 is located.

The California Attorney General's Office plans to post 990s for California nonprofits on its website in the fall of 1999. This will meet the IRS requirement for disclosure.

What if we won't be able to get our forms done on time?

01-16-2006

IF you think you're going to be late getting your forms in, apply for an Extension of Time to File. The application for extension must be submitted on or before the due date of the required forms, and must be submitted in duplicate. In most cases requests for extensions are granted for 90 days (requests for longer than 90 days must be supported with evidence of need; no extensions are granted for more than six months). This form is called "Application for Extension of Time to File," IRS Form 2758. The Form can be found online at www.irs.gov.

What is IRS Form 990, and how is it used to evaluate nonprofits?

01-16-2006

IRS Form 990 is the tax return required by the federal government of organizations exempt from income tax. When a nonprofit organization is granted tax-exempt status, Form 990 becomes its annual responsibility. The form is due each year 4 ½ months after the close of the organization's fiscal year.

Some tax-exempt organizations do not have to file Form 990 including: churches, religious schools below college level, and organizations whose annual gross receipts are normally (over past three years) $25,000 or less. Form 990-EZ can be filed by organizations with annual receipts between $25,000-$100,000 and with total assets of less than $250,000.

Form 990 is increasingly recognized as a primary accountability tool for nonprofit organizations. This is because nearly all nonprofits have to complete it, and because it's widely available to the public at large. Consider that Guidestar.org is scanning Form 990s into its online searchable database, and the California Attorney General's Office is also scanning Form 990s into a searchable database to help citizens assess nonprofits that may solicit funds from them. Moreover, nonprofit organizations are required to provide Form 990 to anyone who asks for it including staff members, clients, donors and patrons, and the press.

Given the public nature of the Form 990, it is a board and senior management responsibility that it be completed on time and accurately. The form tells the IRS and the public at large important things about a nonprofit including: its financial condition, the sources and uses of the money raised, compensation of key staff, contractors, and board members, and how much the organization spends on non-program activities (administration and fundraising).

For more information see "990 Handbook: A Line-by-Line Approach," by Jody Blazek, which is available at CompassPoint's online bookstore.

The following workshop also provides more information on this topic:

Required Reports for Nonprofit Organizations

What is Schedule A?

01-16-2006

Schedule A is a component of Form 990, and requests your sources of financial support, the salaries of your highest-paid employees, and other information. Form 990 is a public document, and members of the public can obtain copies from the IRS, or by sending a written request to a nonprofit organization. One section of Schedule A-the one which contains the names and amounts of all donors-can be deleted when copies of the 990 and Schedule A are provided to the public.

What is the penalty if we're late in filing our Form 990?

01-16-2006

The fine for filing a late or incomplete form is $20/day up to the lesser of $10,000 or 5% of gross receipts. For organizations with gross receipts of more than $1 million in the year, the penalty is increased to $100/day to a maximum of $50,000. If, however, you've filed an Application for Extension of Time to File (see FAQ #6), you won't be penalized if you file within the 90-day extension period (if your application is approved), or between the time you file the Application and the date it is rejected (if it is rejected). In other words: be safe and if there's even a possibility you'll be late, file the Application for Extension of Time to File. It takes only a few minutes to complete, and you'll have the time to be sure your 990 is accurate.

What other resources are available involving Form 990?

01-16-2006

Increasingly, Form 990 is viewed as an important instrument of accountability. Members of the press are beginning to ask for 990s when doing stories on nonprofits, and in a few cases, individuals who want to criticize a nonprofit are taking that nonprofit's 990 and posting it on the web.

It's always good to get the official word on resources and changes from the IRS. Contact your nearest federal office, or by phone (call 1-800-829-3676) or by downloading them via the Internet (go to http://www.irs.ustreas.gov, click on "Forms & Pubs," and then "Forms & Instructions.") You should obtain the following documents:

• Form 990
• Instructions for Form 990
• Schedule A
• Instructions for Schedule A
• "Application for Extension of Time to File," IRS Form 2758

Here are a few additional resources:

990 in 2000 Project
Russy Sumariwalla, Project Director
c/o CompassPoint Nonprofit Services
706 Mission St., 5th Floor
San Francisco, CA 94103
415-541-9000
990in2000@compasspoint.org

Cyber-Accountability Archives
http://www.bway.net/~hbograd/cyb-acc.html

Center on Nonprofits and Philanthropy
Linda Lampkin, Manager
The Urban Institute
2100 M Street, NW
Washington, DC 20037
202-261-5806
http://www.urbaninstitute.org

GUIDESTAR
http://www.guidestar.org

Nonprofit Coordinating Committee of New York
Peter Swords, Executive Director
1350 Broadway, Suite 1801
New York, NY 10018
212-502-4191
http://www.npccny.org

Quality 990 Website
http://www.qual990.org

California Quality Reporting project
Gale Case, Project Director
c/o California Association of Nonprofits
315 West Ninth St., Suite 705
Los Angeles, CA 90015
213-347-2070
http://www.canonprofits.org

When is Form 990 due?

01-16-2006

Form 990 is due 4 1/2 months after the close of your fiscal year. For example, if your fiscal year ends on June 30, Form 990 is due on November 15. If your fiscal year ends on December 31, Form 990 is due on May 15. Schedule A is due on the same date as Form 990 is due. (A Form 990 that has been postmarked on the due date will be accepted as having been filed on time.)

Where can I get a blank 990?

01-16-2006

The form 990 and the 990 EZ are available on-line: http://www.irs.ustreas.gov, click on "Forms & Pubs," and then "Forms & Instructions."

Where can I read more about the 990?

01-16-2006

There are several books expected to be published in the fall of 1999. One is being written by Peter Swords of the New York Nonprofit Coordinating Committee, and will be an overview of 990 regulations and uses. Another, by Russy Sumariwalla, is part of a national effort called 990 in 2000, and will be published by Jossey-Bass Publishers in 2000. This book focuses on the nitty-gritty of 990 preparation, with an eye towards reconciling the different (and often contradictory) accounting guidelines of the IRS, the AICPA (American Institute of Certified Public Accountants) and FASB (Financial Accounting Standards Board). A book by Colburn Wilbur and Barbara Kibbe of The David and Lucile Packard Foundation, to be published in the fall of 1999 by the Foundation Center, includes a chapter guiding foundation program officers in analyzing the 990 for grantmaking purposes (the book's working title is A Field Guide for Foundation Program Officers).

Board Café - FAQs

05-01-2006

Love the newsletter?  You can order the book Best of the Board Cafe, a compilation of ideas, information, opinions, and resources to give nonprofit board members just-in-time guidance to real-life demands. For more information and to order today!

What questions should I ask a prospective consultant?

01-16-2006

1. What strengths do you possess that will prove particularly helpful in connection with this project?
2. How have you worked on similar projects or consulted with other groups facing problems similar to ours? What were some of the results of that work?
3. How does your consulting work in this area come out of any particular philosophy or assumptions about how not-for-profits conduct their work?
4. How long have you been doing consulting in the not-for-profit arena?
5. Can you tell us about one of your favorite clients? Why was that? Tell us about one of your most challenging clients and why?
6. How many clients do you work with at any one time? How do you manage multiple projects?
7. How would you describe the challenges we face from the limited amount you now know about us?
8. Describe your work process. How would you work with our staff, board, and executive director?
9. Are there other members of your consulting team who would be working with you? Who are they? How would you propose to divide up the tasks among your team members? When can we interview them? Do you anticipate using any sub-contractors, if so, how do you manage that relationship?
10. What problems do you anticipate as we begin to work together? How can we best address these problems early on?
11. Talk about the responsibilities we must assume in order to make our work together successful.
12. Are you available to complete this work during the time we've specified? Are you available if the time becomes extended?
    

How should I check a consultant's references?

01-13-2006

Checking your consultant's references is absolutely essential. It's the only way you can distinguish between an accomplished professional with a track record of genuine success and somebody who merely excels at interviews.

Ask your prospective consultant for a recent, complete client list. Pick from this list rather than the two or three names the consultant might otherwise give you. You should look for at least three organizations similar to yours -- or groups that have worked with the consultant on problems related to the ones you now face.

In each case, call the person who supervised the consultant's work directly-- in most cases, the executive director or a board member. Begin your talk with an open-ended question. For example: "We're thinking about hiring Joanne Expert to train our board in fundraising. I understand she did some similar work for you. How did that work out?"

In the best case, you'll have a brief conversation covering the nature of consultant's duties, her strengths, any problems that may have arisen during the collaboration, and the palpable results of the consultant's efforts. But, you might run into somebody who's reluctant to talk. Today many managers will not comment about the performance of their former employees -- or consultants -- because they fear a law suit if their negative recommendation results in a loss of work.

If you meet resistance, ask the reference to simply verify the basics: 1.) the kind of problem that the consultant addressed; 2.) her duties; and 3.) the duration of the work. Then prod gently with another question to gain more subjective insight, such as: "Would you hire this person again?" or "Would you recommend this consultant to a colleague?'

Whether the reference is forthcoming or reserved, you should pay attention to what's not being said. If the reference talks only about the consultant's punctuality, good attitude, and pleasing manner, be sure to ask if her intervention actually achieved the desired results. Ask as well if the job was accomplished at the negotiated price -- or whether any troubling cost overruns occurred.

At some point, you may find it helpful to express your own theories. ("I have this sense that Joanne Expert may not be completely comfortable working with a large board. What was your experience?)

Finally, you should end with another open-ended question that gives the reference one last chance to expand on their previous comments. "What else you tell me about Joanne Expert?" or, "If you had it to do over again, are there any aspects of the project or of working with Joanne Expert that you would approach differently?"

How should I interview a consultant?

01-13-2006

The interview process isn't mysterious. Essentially, you'll be conducting your interviews with prospective consultants in the same spirit and format that has successfully served you in the past to fill staff positions.

Nevertheless, there are some crucial differences. Given the broad impact that the consultant can have on your organization, you may want to assemble a more diverse interview team -- including the executive director, senior staff, a board member, and other people whose working relationship with the consultant will have a direct impact on the success of the project.

You should interview at least two prospective consultants -- even if you have already identified a probable candidate for the job. Talking in depth with consultants from different backgrounds who may have different approaches or techniques will help you refine your own understanding of your organizational dilemma, while simultaneously allowing you to compare the candidates' respective merits. During the interviews, make certain that you ask each candidate the same questions so that you can establish a fair standard for comparison.

As with most evaluative tasks, your ability to gauge the consultant's skills will be informed by your own degree of organizational self-knowledge. In the best of all possible worlds, you would be able to define your group's problem, stipulate the background, expertise, and services you're seeking, and characterize the kind of relationship you want to cultivate with the consultant for a prescribed period of time. In reality, you may find that you need to hire a consultant initially to help articulate the problems you face. Indeed, this is inevitably the first step in solving them.

As you interview your candidates, pay attention not only to their answers -- but also their personal manner and professional style.

GOOD LISTENING
Does the consultant pay attention to what you're saying and respond appropriately -- or does he only talk about his own accomplishments?

PRACTICAL DISENGAGEMENT
Does it seem that this candidate will be able to provide the objectivity you need in an outside expert?

BROAD EXPERIENCE
Does your candidate have relevant experience to draw on in helping put your issues in perspective?

INSIDE INFORMATION
Does the consultant grasp your mission and organizational style? Has he bothered to learn anything about your group prior to the interview?

CULTURAL COMPETENCY
Does the consultant exhibit an understanding of the cultures that are present within your organization. Is there an awareness of ethnic traditions, social dynamics and world perspectives that come out of who staff, clients, board members and other stakeholders. In other words, does the consultant understand how WHO is in the organization might impact and influence how the agency functions, what are its challenges (and successes)?

What are some tips on database design and use?

01-13-2006

Databases can be a great tool to organize information, track statistics and generate reports. Like any tool, however, they must be used correctly. A badly designed or improperly used database will end up creating problems rather than solving them. Here are some tips to facilitate proper database design and use:

Don't Do

Create one flat file:

A flat file means that all your data goes on one data table. Flat files make it difficult to create statistical reports.

Create relational data tables:

Unless you are doing only one very simple task, such as entering a list of names and addresses, you will need more than one table of data to track your information correctly.

Create repeating fields:

If you have fields like Date1, Date2, Date3, you should look at your data table design. Repeating fields are usually the sign of a flat file design, and will make reporting difficult.

Put like data in a single field:

Create separate relational tables and you will eliminate the need for most repeating fields.

Create repeating fields:

If you have fields like Date1, Date2, Date3, you should look at your data table design. Repeating fields are usually the sign of a flat file design, and will make reporting difficult.

Put only 1 piece of data in a field:

Relational databases are set up so that the user doesn't need to put more than 1 piece of data in a field.

Use a range instead of a number:

When entering data such as income levels, set up the database so that you are entering numbers, not a range such as $10,000 - $15,000. Ranges are not very flexible should the categories change later on.

Use a number instead of a range:

If you enter a number in an income field, you will be able to generate reports that can easily be changed if the categories change.

Enter data inconsistently:

If some users enter "donor" and others enter "contributor," database queries will be hard to run accurately.

Decide on consistent rules for data entry:

The organization should make decisions about data entry consistency. Then the database designer can build in ways to enforce consistency at the user level.

Create too many address-oriented fields:

Some databases include so many fields connected to addresses, that creating labels is impossible.

Create only necessary address fields:

Keep address-oriented fields to a number that will fit on mailing labels.

Use too many Yes/No fields:

If you are using a large number of yes/no fields, you may need to re-examine the design of your database.

Create only necessary address fields:

Keep address-oriented fields to a number that will fit on mailing labels.

Enter the wrong type of data in a field:

Sometimes users cannot find the proper field for a piece of data, so they enter it into another field, such as typing a client's ethnicity in an empty Address2 field.

Enter information in the proper field:

If the data entry person cannot find the right place for a piece of data, perhaps the database needs some work. The answer is not to enter information randomly in an empty field.

Which database application should I use, Microsoft Access or FileMaker Pro?

01-13-2006

Microsoft Access and FileMaker Pro are the most popular database creation tools used by nonprofits. They are not custom applications, pre-designed to do specific tasks such as fundraising or tracking client demographics. Rather, they are database kits that give the user the tools to create his or her own database application. If you have decided to create a custom database but cannot decide which program to use, this quick overview of the differences between Access and FileMaker may help:

Are there organizations that are "in the business" of fiscal sponsorship?

01-17-2006

Do we need an attorney to work out a fiscal sponsorship agreement?

01-17-2006

Do you have an example of a fiscal sponsorship agreement between a professional fiscal sponsor and its projects?

01-17-2006

Do you have an example of a fiscal sponsorship agreement between two nonprofits?

01-17-2006

How can a new nonprofit get started right away without waiting to file all its papers and obtain tax-exempt status?

01-17-2006

How do I go about looking for a fiscal sponsor?

01-17-2006

How much do fiscal sponsors charge?

01-17-2006

If my group is operating under a fiscal sponsor, and we’ve decided to become an independent nonprofit, what are the steps we should take?

01-17-2006

If you have decided to separate from your current sponsor and don't want to affiliate with another the process to become independent begins with informing your current sponsor of your decision. Most often you will next create public benefit corporation that will file applications with both the IRS and state taxing authority asking to be exempt from income tax. From the time the applications are submitted it usually takes four to six months to receive your determination letters (notice that exemption has been granted). When you receive your notice it is retroactive to the date of your original application. While you are waiting for you letter you will need to do all those things that any new business does (open bank accounts, hire employees obtain insurance, etc.). The final step is arranging to have your sponsor transfer the project's assets and liabilities to the new nonprofit.

In what situations do groups use fiscal sponsors? What types of groups find them the most useful?

01-17-2006

Here\'s an example. In the hours immediately following the shootings in San Francisco at the 101 California office building, many people wanted to donate funds to help the families of the victims (many of whom worked for a law firm) and to educate the public about gun violence and gun control. A group of attorneys contacted a fiscal sponsor and were able immediately to begin collecting donations and conducting an educational campaign on the subject. Later, the group decided to become permanent and incorporated separately as the Legal Community Against Violence.

Sample: Fiscal Sponsorship Agreement

01-17-2006

FISCAL SPONSORSHIP AGREEMENT

This Agreement is made by and between the Fiscal Sponsor (FS), and [name of supervisory body] (Committee). FS is a California nonprofit public benefit corporation located in San Francisco, California, qualified as exempt from federal income tax under Section 501(c)(3) of the Internal Revenue Code (IRC) and classified as a public charity under IRC Sections 509(a)(1) and 170(b)(1)(A)(vi).

RECITALS

A. The FS Board of Directors has approved the establishment of a restricted fund to receive donations of cash and other property earmarked for support of the Project known as ______________________ (the Project) and to make disbursements in furtherance of the Project's mission. The Committee [choose applicable language: is the Advisory Board/Committee, an unincorporated association, established to … is expected to be the individual employee of FS with authority to … is the individual volunteer who is expected to … ] manage the affairs of the Project. Currently, the principal office of the Project is located at ________________________________________________.

B. FS desires to act as the fiscal sponsor of the Project, by receiving assets and incurring liabilities identified with the Project beginning on the effective date, and using them to pursue the objectives for which the Project is being established, which FS's Board has determined will further the charitable and educational goals of FS. The Committee desires to manage the Project under the sponsorship of FS.

NOW, THEREFORE, THE PARTIES HEREBY AGREE AS FOLLOWS:

1.Term of Agreement. On __________________, 1999 (the effective date), FS shall assume operation of the Project, which operation shall continue in effect unless and until terminated under Paragraph 5 below.

2.Project Activities and Sponsorship Policies. All community programs, public information work, fundraising events, processing and acknowledgment of cash and non-cash revenue items, accounts payable and receivable, negotiation of leases and contracts, disbursement of Project funds (including grants), and other activities planned by the Project shall be the ultimate responsibility of FS and shall be conducted in the name of FS, beginning on the effective date. Unless otherwise agreed, and subject to their consent, all personnel to be compensated for working on the Project shall become at-will employees of FS on the effective date and shall be subject to the same personnel policies and benefits as are required by law to apply to all employees of FS. Unless otherwise agreed, any tangible or intangible property, including copyrights, obtained or created in connection with the Project shall be the property of FS while this Agreement is in effect. Authority to manage the program activities of the Project is delegated to the Committee, subject at all times to the ultimate direction and control of the FS Board of Directors. The Committee shall abide by the Sponsorship Policies of FS set forth on the attached Exhibit 1, which may be amended from time to time with the consent of the Committee and which include administrative fees to be paid to the general fund of FS from the restricted fund described in Paragraphs 3 and 4 below.

3.Restricted Fund/Variance Power. Beginning on the effective date, FS shall place all gifts, grants, contributions, and other revenues received by FS and identified with the Project into a restricted fund to be used for the sole benefit of the Project's mission as that mission may be defined by the Committee from time to time with the approval of FS. FS retains the unilateral right to spend such funds so as to accomplish the purposes of the Project as nearly as possible within FS's sole judgment, subject to any donor-imposed restrictions, as to purpose, on the charitable use of such assets. The parties agree that all money, and the fair market value of all property, in the restricted fund be reported as the income of FS, for both tax purposes and for purposes of FS's financial statements. It is the intent of the parties that this Agreement be interpreted to provide FS with variance powers necessary to enable FS to treat the restricted fund as FS's asset in accordance with Interpretation No. 42 of Statement No. 116 issued by the Financial Accounting Standards Board, while this Agreement is in effect.

4.Restricted Fund Management / Performance of Charitable Purposes. All of the assets received by FS under the terms of this Agreement shall be devoted to the purposes of the Project, within the tax-exempt purposes of FS. No item of revenue shall be earmarked to be used in any attempt to influence legislation within the meaning of IRC Section 501(c)(3); no agreement, oral or written, to that effect shall be made between FS and any revenue source. FS shall not use any portion of the assets to participate or intervene in any political campaign on behalf of or in opposition to any candidate for public office, to induce or encourage violations of law or public policy, to cause any private inurnment or improper private benefit to occur, nor to take any other action inconsistent with IRC Section 501(c)(3).

5.Termination. This Agreement shall terminate when the objectives of the Project can no longer reasonably be accomplished by FS. If the objectives of the Project can still be accomplished but either the Committee or FS desires to terminate FS's fiscal sponsorship of the Project, the following understandings shall apply. Either FS or the Committee may terminate this Agreement on 60 days' written notice to the other party, so long as another nonprofit corporation which is tax-exempt under IRC Section 501(c)(3), and is not classified as a private foundation under Section 509(a) (a Successor), is willing and able to sponsor the Project and is approved in writing by both parties by the end of the 60-day period. If the parties cannot agree on a Successor to sponsor the Project, the Committee shall have an additional 60 days to find a Successor willing and able to sponsor the Project. If a Successor is found, the balance of assets in FS's restricted fund for the Project, together with any other assets held or liabilities incurred by FS in connection with the Project, shall be transferred to the Successor at the end of the notice period or any extension thereof, subject to the approval of any third parties that may be required. If the Committee has formed a new organization qualified to be a Successor as set forth in this Paragraph, such organization shall be eligible to receive all such assets and liabilities so long as such organization has received a determination letter from the Internal Revenue Service, indicating that such qualifications have been met, no later than the end of the notice period or any extension thereof. If no Successor is found, FS may dispose of the Project assets and liabilities in any manner consistent with applicable tax and charitable trust laws. Either party to this Agreement may terminate this Agreement, based upon a material breach of this Agreement by the other party, by giving 30 days' written notice to the other party.

6.Miscellaneous. In the event of any controversy, claim, or dispute between the parties arising out of or related to this Agreement, or the alleged breach thereof, the prevailing party shall, in addition to any other relief, be entitled to recover its reasonable attorneys' fees and costs of sustaining its position. Each provision of this Agreement shall be separately enforceable, and the invalidity of one provision shall not affect the validity or enforceability of any other provision. This Agreement shall be interpreted and construed in accordance with the laws of the State of California. Time is of the essence of this Agreement and of each and every provision hereof.

7.Arbitration. In the event of any dispute under this Agreement, the parties shall attempt to resolve the matter themselves in an amicable manner. Failing such resolution, any dispute under this Agreement shall be resolved by binding arbitration in San Francisco in accordance with commercial arbitration rules of the Judicial Arbitration and Mediation Services (JAMS) then in effect, or any other rules mutually agreed to by the parties. Any award or order made in any such arbitration may be entered as a judgment in a court of competent jurisdiction. Any dispute, and the resolution thereof in any manner, shall be and remain confidential information, and all parties shall protect the confidential information from public disclosure, using any and all reasonable legal and technical means.

8.Entire Agreement. This Agreement constitutes the only agreement, and supersedes all prior agreements and understandings, both written and oral, among the parties with respect to the subject matter hereof. All Exhibits hereto are a material part of this Agreement and are incorporated by reference. This Agreement, including any Exhibits hereto, may not be amended or modified, except in a writing signed by all parties to this Agreement.

IN WITNESS WHEREOF, the parties have executed this Fiscal Sponsorship Agreement effective on the _____ day of _________________, 1999.

FS

By:___________________

Dated:_________________

[Name of Supervisory Body]

By:___________________

Dated:________________

Sample: Fiscal Sponsorship Grant Agreement

01-17-2006

FlSCAL SPONSORSHIP GRANT AGREEMENT

On _______________, 1999, ___________________ ("Grantor") decided that financial support of the following purposes __________________________________ ("the project"), more particularly described in a proposal dated _____________________________,1999 ("the proposal"), from _____________________________________("Grantee") will further Grantors tax-exempt purposes under Section 501(cX3) of the Internal Revenue Code ("lRC"). With regard to the selection of Grantee or any other beneficiary to conduct the project, Grantor has exercised and shall retain full discretion and control over the selection process, acting completely independently of Grantee or any funding source. Grantor has created a restricted fund designated for the project and has decided to grant all amounts that it may receive and deposit to that fund (less any administrative charge set forth below), to Grantee, subject to the following terms and conditions:

1. Grantee's separate legal existence, for all purposes including tax reporting, is established by the following: [choose one]

Grantee is a ___________________nonprofit corporation which is, and shall be throughout the duration of this Agreement, organized and operated for tax-exempt purposes described in IRC Section 501(c)(3). Grantee has applied to the Internal Revenue Service for recognition of its tax-exempt status and shall keep Grantor informed on the progress of its application. OR

Grantee has provided Grantor with a completed and filed IRS Form SS-4, along with any other registration or governing documents, showing Grantee's separate existence as an unincorporated association. OR

Grantee is an individual person, acting as a sole proprietor. OR Grantee is a partnership comprised of _______________________.

2. Grantee shall use the grant solely for the project described in the proposal, and Grantee shall repay to Grantor any portion of the amount granted which is not used for that project. Any changes in the purposes for which grant funds are spent must be approved in writing by Grantor before implementation. Grantor retains the right, if Grantee materially breaches this Agreement, to withhold, withdraw, or demand immediate return of Grant funds, and to spend such finds so as to accomplish the purposes of the project as nearly as possible within Grantor's sole judgment. Consistent with Interpretation No. 42 of Statement No. 116 issued by the Financial Accounting Standards Board, Grantor retains the unilateral power, without approval from any funding source, from Grantee, or from any other interested party, to redirect use of grant funds away from Grantee to another beneficiary capable of fulfilling the purpose. of the project. Any tangible or intangible property, including copyrights, obtained from third parties or created by Grantee as part of this project shall remain the property of Grantee. The amount and date of each disbursernent of grant funds to Grantee shall be within the discretion of Grantor.

3. Grantee may solicit gifts, contributions, and grants to Grantor, earmarked for the purposes of the project. Grantee's choice of funding sources to be approached, and the text of Grantee's fundraising materials, are subject to Grantor's prior written approval. All grant agreements, pledges, or other commitments with funding sources to support this project shall be executed by Grantor. The cost of any reports or other compliance measures required by such funding sources shall be borne by Grantee. Grantor shall be responsible for the processing, acknowledgment, and deposit in the restricted fund of all monies received for the project, which shall be reported as the income of Grantor for both tax purposes and for purposes of Grantor's financial statements.

4. Grantee assumes the risk that any funding source may exercise the discretion to not grant or not appropriate funds to Grantor for support of the project. Any amount advanced by Grantor to Grantee, with the expectation that a pending grant request will be approved by a funding source, shall be treated as an obligation to be repaid by Grantee to Grantor, either from monies deposited in the restricted fund or from Grantee's assets, upon demand by Grantor. Regarding any funds awarded to Grantor by the City and County of San Francisco ("City") for support of the project, the parties agree as follows: Grantor's rights under this Agreement may be assigned to City without the prior consent of Grantee. This Agreement shall incorporate all the applicable terms of any Grant Agreement executed between Grantor and City, including but not limited to the City's audit and inspection rights. Grantee shall be listed as a "permitted subcontractor" under any such City Grant Agreement.

5. An administrative charge of ________ percent ( _____ %) of all amounts deposited to the restricted fund shall be transferred to Grantor's general fund to defray Grantor's costs of administering the restricted fund and this grant. In addition, any interest earned on the restricted fund shall be retained in Grantor's general fund.

6. Grantor shall not be responsible for the community programs, public information work, fundraising events, accounts payable and receivable, negotiation of leases and contracts, insurance, day-to-day disbursement of project funds, or other matters related to activities conducted by Grantee. No one working on the project shall be an employee of or independent contractor with Grantor. Grantee shall assume full and complete responsibility for all liabilities to third parties incurred in connection with the project including but not limited to any and all claims whether asserted or unasserted while this Agreement is in effect. With regard to the selection of any subgrantees to carry out the purposes of this grant, the Grantee retains full discretion and control over the selection process, acting completely independently of Grantor. There is no agreement, written or oral by which Grantor may cause the Grantee to choose any particular subgrantee.

7. Nothing in this Agreement shall constitute the naming of Grantee as an agent or legal representative of Grantor for any purpose whatsoever except as specifically and to the extent set forth herein. This Agreement shall not be deemed to create any relationship of agency, partnership, or joint venture between the parties hereto, and Grantee shall make no such representation to anyone.

8. Grantee shall submit a full and complete report to Grantor as of the end of Grantee's annual accounting period within which any portion of this grant is received or spent. The initial report shall be submitted by Grantee no later than sixty (60) days after the end of such period. The report shall describe the charitable programs conducted by the Grantee with the aid of this grant and the expenditures made with grant funds and shall report on the Grantee's compliance with the terms of this grant.

9. This grant is not earmarked to be used in any attempt to influence legislation within the meaning of Internal Revenue Code Section 501(c)(3). No agreement, oral or written, to that effect has been made between Grantor and Grantee.

10. Grantee shall not use any portion of the funds granted herein to participate or intervene in any political campaign on behalf of or in opposition to any candidate for public office, to induce or encourage violations of law or public policy, to cause any private inurement or improper private benefit to occur, nor to take any other action inconsistent with Section 501(c)(3) of the Internal Revenue Code.

11. Grantee shall notify Grantor immediately of any change in (a) Grantee's legal or tax status, or (b) Grantee's executive staff or key staff responsible for achieving the grant purposes.

12. Grantee hereby irrevocably and unconditionally agrees, to the fullest extent permitted by law, to defend, indemnify and hold harmless Grantor, its officers, directors, trustees, employees and agents, from and against any and all claims, liabilities, losses and expenses (including reasonable attorneys' fees) directly, indirectly, wholly or partially arising from or in connection with any act or omission of Grantee, its employees or agents, in applying for or accepting the grant, in expending or applying the funds furnished pursuant to the grant or in carrying out the program or project to be funded or financed by the grant, except to the extent that such claims, liabilities, losses or expenses arise from or in connection with any act or omission of Grantor, its officers, directors, trustees, employees or agents.

13. Either Grantor or Grantee may terminate this Agreement on thirty (30) days' written notice to the other party, so long as another nonprofit corporation which is tax exempt under IRC Section 501(c)(3), and is not classified as private foundation under Section 509(a) ("a Successor"), is willing and able to sponsor the project. The balance of assets in Grantor's restricted fund earmarked for the project shall be transferred to the Successor at the end of the notice period or sooner if all parties so agree. Grantee shall be eligible to be a Successor itself so long as Grantee has received, no later than the end of the notice period, a determination letter from the Internal Revenue Service indicating that Grantee meets the qualifications for a Successor stated above.

14. In the event of any controversy, claim, or dispute between the parties arising out of or related to this Agreement, or the alleged breach thereof, the prevailing party shall, in addition to any other relief, be entitled to recover its reasonable attorneys' fees and costs of sustaining its position.

15. This Agreement shall be governed by and construed in accordance with the laws of the State of California applicable to agreements made and to be enforced entirely within such State.

16. This Agreement shall supersede any prior oral or written understandings or communications between the parties and constitutes the entire agreement of the parties with respect to the subject matter hereof: This Agreement may not be amended or modified, except in a writing signed by both parties hereto.

IN WITNESS WHEREOF, the parties have executed this Fiscal Sponsorship Grant Agreement effective on the ______________ day of _________________ , 199_.

GRANTOR: __________________________________________

By: ______________________________

Name:____________________________

Title:_____________________________

GRANTEE: __________________________________________

By: ______________________________

Name:____________________________

Title:_____________________________

EXHIBIT 1: SPONSORSHIP POLICIES

Sponsorship Policies of FS

Accounts Payable
Acceptable invoices received by end of business on any Monday will be paid and mailed by end of business on the following Friday. "Acceptable invoices" must be original, approved, coded documents (small receipts to be mounted on 8.5 x 11 paper). It will be the responsibility of each project to submit a completed IRS Form W-9 for each new vendor.

Cash Advances
Under no circumstances does FS advance money to projects. Deposited funds must be cleared by the bank prior to any requested draw, which may take up to two weeks.

Employees
FS does not allow projects to pay individuals who satisfy the IRS definition of employees as contractors. FS management is available to discuss employee vs. contractor classification issues with projects.

Payroll
ANY request to change a payroll record (pay rate, termination, regularly scheduled hours) must be communicated to FS management via an employee action sheet at least five business days prior to the effective date of the change. In order to receive a paycheck, an employee must have submitted a completed; INS Form I-9, IRS Form W-4, California Development Department Form DE-4 (if applicable), signed acknowledgment of receipt of a personnel policies manual, and an employee action form at least five business days prior to payday. FS management will provide action forms, file all payroll tax returns, and IRS Form W-2's. The head of each project will need to sign a statement agreeing that their project will not deviate from the personnel policies manual.

Bonuses are a very regulated benefit for tax-exempt organizations in California. In fact, the payment of discretionary bonuses is expressly prohibited. FS management is available to discuss incentive compensation arrangements with projects to help avoid conflicts with regulatory agencies.

Benefits
No project can offer or deny benefits to its employees which differ from the personnel policies manual.

Job Descriptions
Projects are asked to develop and maintain job descriptions for each employee.

Grants, Awards, and Scholarships Made
For any grants, awards, or scholarships made by a project, FS management requires a copy of the signed grant agreement along with a completed check request form. FS's Executive Director's signature is required for amounts over $5,000. If the grant is made to an organization that is not a 501 (c) (3) charity that FS currently lists in its database, additional paperwork will be required. Forms and procedures are subject to the Executive Director's review.

Grants Received
FS's Executive Director must co-sign all original grant agreements and be copied at least one week in advance on all progress and final report submissions. Grants involving government or public agency monies have very heavy reporting and auditing requirements that a project must discuss in advance of acceptance with the Executive Director.

Donations
FS will accept, process, and acknowledge contributions to each project. This includes issuing receipts for tax deductions. Donations should be made payable to "XXX, a project of FS".

It is not the FS accounting staff's responsibility to meet with a fund's donors and walk them through paperwork. FS management will work with funds to educate them on the necessary forms to liquidate a noncash gift. Donations over $250.00 will be individually receipted. Stock gifts can only be made through FS's designated broker.

Credit Accounts and Other Liabilities
Project Directors may not incur debts or liabilities beyond the project's ability to pay; individual Project Directors are personally liable for any excess. A project's ability to pay is measured strictly by its cash balances, without including anticipated grants or contributions.

Fundraising Activities
Fundraising activities are very labor intensive to administer. FS management requires at least one month's notice of any fundraising events. A copy of all mailings and solicitations must be approved by FS management in advance of mailing or other distribution. The project must complete a Fundraising Checklist form prior to each event. Please remember, other than bingo, any fundraising device involving an element of chance (ex. raffles) are a misdemeanor in California. FS management is available to answer any questions a project may have regarding fundraising activities.

Volunteers
The use of volunteers exposes FS to additional liability. ALL volunteers who provide services to, or perform services for, a project without compensation for their time must sign the standard volunteer indemnification and release form. (Reimbursement of expenses does not constitute compensation for time spent.)

Financial Statements
FS management will provide a statement of monthly activity and a detailed trial balance within 30 days of each month end. Any corrections to the project's accounts must be requested within 30 days after receipt of that statement.

Bank Accounts
No project shall maintain any bank account other than those maintained on its behalf by FS.

Multiple Funds
FS has the ability to set-up cost centers within a fund. FS also has the ability to set-up multiple funds for a project. In situations where projects need multiple funds on the general ledger, FS management is available to advise on inter-fund transfers to help compliance with charitable trust rules.

Advisory Board
Each project will need to maintain a current listing of the names, addresses, and phone numbers of all members of a project's Advisory Board. Advisory Boards will be provided with standard Articles of Association and FS will register those articles with the State of California. Each project should forward a copy of meeting minutes to the FS Executive Director, as they are finished, as well as the Advisory Board roster and any other governing documents.

Administrative Fees
Except as stated below, FS will charge each project 10% of its gross receipts as an administrative fee. The forgoing rate does not apply to receipts attributable to grants from governments or public agencies, which are subject to a 15% administrative fee.
In addition to the administrative fee on gross receipts, FS will retain one-half of all interest earned by a project's funds on deposit.

FS will charge projects $50.00 for each employee to cover setup costs.

FS will charge projects $50.00 for each manual check required.

Insurance Provided by FS
FS maintains general liability insurance, and workers' compensation insurance for all employees at no additional charge.

Fiscal Year
All projects must use a fiscal year ending on June 30.

Lobbying
Funds are prohibited from excessive lobbying, or any other activities that would jeopardize FS's charitable tax-exempt status. FS has the right to determine, in its sole discretion, what constitutes excessive lobbying by a project, or what activities jeopardize FS's tax-exempt status. All lobbying expenditures must be reported to FS management.

Mail Services
FS is applying for a bulk mail permit that may be available to projects. To be eligible to use FS's permit, a mailing must go through FS's designated mailhouse. Costs for this service will be charged against the project.

Sponsor Identification
All project letterheads and external communications must include the identifying line, "A project of Fiscal Sponsor."

Amendments
These policies may be amended from time to time with consent of Project's authorized representative.

Acknowledgment
I have received, understand, and agree to the forgoing sponsorship policies of Fiscal Sponsor, on behalf of my project.

_____________________________ ________________________

Program Director's Name & Signature Date

or

__________________________________ ________________________

Advisory Board Chair's Name & Signature Date

What are some of the services typically provided by fiscal sponsors?

01-17-2006

Financial

Federal, state and local tax & informational returns

Receipt and acknowledgment of tax-deductible donations and grants

Payroll tax remittance and filings

Monthly financial statements

Financial record-keeping

Independent Audit

Check processing and issuance for expenses, I-9s, 1099s

Insurance

Directors' & Officers Insurance

Volunteer lnsurance

General Liability

Umbrella

Commercial Automobile

Human Resources Administration

Payroll processing, W-2s

Personnel policies in compliance with federal, state and local laws

Comprehensive benefits package

Benefits administration, 5500

Technical assistance on personnel issues

General Administration

Bulk rate postal permit

Resale permit

Sales tax reports

Legal advice

Grant progress reports

What are the benefits of using a fiscal sponsor?

01-17-2006

Speed - It normally takes four to six months from the time an application for tax exemption is filed with the IRS to receive notice that tax-exempt status has been granted, and that is IF the IRS has no questions about information contained in the application. Theoretically one could make arrangements to be fiscally sponsored in a day or less, although a couple of weeks is more typical.

Efficiency - Especially for small groups, having someone else provide most of your administrative, or infrastructure functions may be cheaper than doing it yourself. This is especially true if you are a group that is only expecting to be in existence for a short period of time.

Convenience - Most groups, start-up or otherwise, want to focus their energy on their charitable activities. Having to create and maintain an infrastructure can be distracting from the mission of the group.

Necessity - There are some funding sources that will not fund brand-new groups. One way around this restriction is to become part of a group that has some history.

What are the disadvantages?

As a sponsored project of an already existing 501(c)(3), your "parent organization" is legally responsible for everything you do. This includes the responsibility to comply with the terms of the grants you have been awarded and how you operate. If you and your sponsor disagree, you may be forced to "do it their way".

Some foundations have policies that do not permit them to make grants through fiscal sponsors.

What are the reasons to provide fiscal sponsorship to another organization?

01-17-2006

What are the risks of being a fiscal sponsor for others?

01-17-2006

Since the law considers the project and the sponsor to be one legal entity, each can be held responsible for the actions of the other.

What can a fiscal sponsor provide us that we couldn’t do on our own?

01-17-2006

What happens if we want to leave a fiscal sponsor?

01-17-2006

What is a "fiscal agent"? Is a fiscal sponsor different from a fiscal agent?

01-17-2006

Where can I read more about fiscal sponsorship?

01-17-2006

How do I figure out how much someone can give to my organization?

01-17-2006

Determining how much someone can give is part of a process called "prospect research." The research process involves collecting information on prospects in three primary areas:

• the prospect's financial circumstances (income, assets, etc.)
• the prospect's relationship to the organization
• key personal "linkages" between the prospect and key organizational supporters (donors, board members, members, etc.)

In his classic book on fundraising, Achieving Excellence in Fund Raising, Hank Rosso describes a research concept that echoes this approach known as the L-A-L principle:

"A research concept known as the L-A-L principle of prospect identification will help fundraising planners separate suspects from prospects, thus enabling staff members to direct their solicitation and enlistment energies toward those individuals who are most likely to give or to volunteer their services.

What is the L-A-L principle and what is its function in both fundraising research and constituency development? The principle is timeworn. It is a heritage of the past, a piece of wisdom passed on from one clan of veteran fundraising practitioners to another, and it is as described below.

L -- Linkage

A linkage relates to a contact, a bridge or an access through a peer to the potential donor. If there is access to the gift source, then this link to the prospect makes it possible to arrange an appointment to discuss the potential of a gift. If access ability is not a reality, then it would be difficult or downright impossible to arrange for an appointment. Solicitation becomes a matter of a letter or telephone approach, and neither is effective in the production of large gifts.

A -- Ability

Through research, it can be determined that the potential gift source has sufficient discretionary holding to justify a gift solicitation at the appropriate "asking" level. Two perceptions pertain: the asker's perception that the prospect has a gift capability at the level suggested, and the prospect's own perception that such a gift capability is reality. Some wealthy but financially insecure individuals who are not brought up with the tradition of philanthropy are not sure that they have sufficient resources to give at the level requested. They may not be psychologically prepared to give.

I -- Interest

If the potential contributor has no interest in the organization or little knowledge about its work, then the person will be prone to make a small gift or none at all. Interest in the organization and an understanding of its mission and accomplishments are imperative in the identification of valid prospects."

It is critical to understand that a prospect's ability to give is only part of what determines a gift's size or whether it will be made at all. Ability alone does not qualify someone as a legitimate prospect. People, as well as philanthropic institutions, will give and maximize their giving when a relationship between them and the organization has been established and developed. The stronger the relationship the more likely a prospect will give and give generously.

In the Grassroots Fundraising Journal, volume 2, no.5, Kim Klien discusses the prospect research process in terms of "ABC:"

You are looking for three things in each prospect:

• Evidence that the prospect is connected with someone in your organization, so that you can establish contact.
• Evidence that the person believes in your cause (or a similar cause), which includes evidence that the person gives money to similar organizations.
• Evidence that the person has the ability to make the size gift you want.

When you have positive information about ability, belief and contact, then you have a qualified prospect - that is, someone who can be asked for a gift. For obvious reasons, we call these criteria ABC, but in order of importance, they are CBA, and we'll examine them in that order.

Contact

The most important factor is contact. If you don't know the person or have no access to them, that person is a stranger and not a prospect. That's why you start with who you know. You know three kinds of people: people you know personally, people who are known by people you know (you might gain access to a person in this category by using the name of someone you both know), and definitely, people who are currently donors. Though you may not personally know each current donor, you can call any donor and say, "We don't know each other but we have in common that we support Very Good Group." As described earlier, many of your best contacts are going to come from people who give money already.

Belief

Ask yourself if there is any reason that the potential prospect would not believe in your cause. Social change groups often think that a person won't believe in their cause when in fact the prospect has no opinion one way or the other. He or she may not have heard of the group, or even the issue, or doesn't see how the issue affects him or her.

Sometimes a person may not recognize that his or her own beliefs are represented by a group because of the way the issues are presented. For example, an organization working to keep abortion legal ran into problems at a meeting in a small, politically conservative community when it described abortion as a vital feminist issue. This language did not resonate with the audience. When a leader in the organization said that the government should not make these decisions for us -- a woman should make a decision about the outcome of a pregnancy for herself, the meeting participants clapped loudly. Though they support legal abortion, they do not identify their support as a tenet of feminist ideology. Several large contributions to the abortion-rights group subsequently came from that community.

In a second example, a man living in a small town was approached for a donation by a suicide prevention group. The person asking him had not done any research on this prospect, but was able to make an appointment through a common acquaintance. The prospect believed suicide tended to indicate a weak character and was, furthermore, more a problem of big cities. He listened politely and noncommittally as the solicitor described the global nature of suicide, using as examples numbers of suicides in Los Angeles, New York an London. He was sent away with a token donation.

Later that year, another person did more research on this prospect. The prospect was member of the local Chamber of Commerce and active in civic affairs. He had lived in this community all his life and owned a great deal of real estate there, much of which had become suburban developments. This solicitor made an appointment to see the prospect and told him exactly how many suicides and attempted suicides happened right in that town. He further discussed that some of the suburbs had high suicide rates for no apparent reason. The suicide prevention program, he explained, proposed to address the problem of suicide locally having on-call counselors available at churches and libraries and by launching a large poster campaign telling people how these counselors could be reached. Posters would be hung in grocery stores ('Two of which are yours,' the solicitor commented) and other public places. The solicitor then asked the prospect to underwrite the entire campaign. He walked away with a check for $10,000 -- exactly what was needed. Obviously, this prospect is not interested if the entire city of Los Angeles kills itself. What matters to him is what happens in his community.

A great deal of money is lost through assuming a lack of belief on the part of a potential prospect. Be careful and broad-minded in weighing evidence of belief in a cause.

Ability

The first question to ask about ability is not how much the prospect has, but whether he or she gives away money at all. Many people profess to be committed to the environment, or women's rights or civil liberties; however, if they do not make financial contributions to groups representing those causes, they are not good prospects for them. We know that about seven out of ten adults are donors. You need to first determine if your potential prospect is one of those seven. If not, she or he is not a prospect.

Sometimes people wonder how they can find out if someone is a donor. There are several ways. (In the course of a conversation, one might ask, "Do you belong to Greenpeace? or ... the National Organization for Women?" If the person says yes, you know that he or she has given to these groups.

To find prospects, start with yourself. Can you give $100? Whom do you know who could give that much or more? (Keeping the size of a major gift at $100 opens up the possibility for a lot more people to become major donors. Almost any employed person can give $100 if they pledge $8-10 per month.) Recognizing that being a large donor is not the exclusive province of the upper-class, you begin to find a number of prospects among your own friends and acquaintances.

From yourself, you can move out to he Board of Directors and other volunteers or staff in the organizations. Statisticians tell us that every person knows 250 people -- no doubt some of these people can give large donations.

Another place to look for prospects is your current list of donors. Do you now have any donors who have given $50 or more? What is the highest gift you have received, and how did it come about? It is not unusual for people to send in $50 or $100 from a mail appeal, and sometimes people send in large donations based on a radio program or other publicity. If any of these people are in your area, it is perfectly legitimate to contact them to renew their gift and to ask them to give you the names of five to ten people they think could also give a gift. Ask first if they will ask their friends: if they don't feel comfortable asking, then ask if you can use their name in contacting their friends."

Therefore it is essential to think about fundraising as a long term process of building on-going relationships with potential donors. In other words, the task is to build a constituency of regular givers. Every organization has a natural constituency of people and institutions that are predisposed to be supportive of your mission: board members, clients, members, current donors and volunteers. Each member of these various constituency segments has a relationship with you. The process of fund raising requires that you understand that relationship and the existing level of commitment, and then solicit an appropriate gift. Beyond the natural constituencies are additional individuals and organizations that have similar interests, but have not yet been identified. The organization's job is to find out who these people are and begin developing relationships with them.

Answering the question "How much can someone give to my organization?" involves judgments (informed by facts) about their financial ability and their relationship to the organization. Remember, almost anyone can give something. However, true generosity depends on strong commitment to a cause that is built and reinforced over time. Involvement builds commitment and commitment leads to generous giving.

Excerpt from Hank Rosso's Achieving Excellence in Fund Raising reprinted with permission from author. Copyright (c) 1991 Jossey-Bass Publishers, San Francisco, Ca.

Excerpt from Kim Klein article in the Grassroots Fundraising Journal, volume 2, no.5, reprinted with permission from author. Copyright (c) 1986 Chardon Press/Grassroots Fundraising Journal.

How do I get my board involved in fundraising and how much should a board member give?

01-17-2006

There isn't a senior nonprofit manager alive that hasn't asked herself this question at some point in her career. Take some comfort in the fact that you are not alone in pondering this question. No one will argue with the notion that the ultimate responsibility for organizational success resides with the board of directors. Further, success not only requires good programs but it also requires the necessary funding to implement those programs and services. Yet this argument alone is rarely enough to motivate board members to spring to action around the fundraising program. True motivation springs from involvement in the life and mission of the organization.

It is a tremendous asset to any organization to have an active board of directors involved in the fundraising function. Most professional fundraisers will tell you that before boards get involved in fund raising, they must first be involved in the mission and governance of the organization. This involvement with the larger scope of the organization often leads to more focused commitment to the fundraising program. It is important to remember that fundraising is a means to an end, and therefore we must involve our board members in the ends if we are to secure willing help on the means.

First and foremost, board members must be engaged in the planning process to determine with staff what the organization wants and what it will do. Involvement in planning builds ownership of the plans which essentially become the organization's agenda for the future and the foundation for all subsequent fundraising. After goals, objectives, programs and services have been determined, planning turns to translating these aspirations into real financial needs, often reflected in budgets. It is essential that the Board participates in determining the financial needs if they are to be involved in serious fundraising in the future.

After this process has been completed, board and staff need to form a partnership to develop and implement a plan to secure the necessary funds required to go forward with the plan. The actual fundraising task is immeasurably strengthened when a true partnership between board and staff is in place. As with other management functions, staff manage the fundraising program, while board members get involved in those elements that are suited to their interests, skills and capabilities. A good fundraising plan is explicit about both board and staff responsibilities. The following breakout of tasks is an example:

BOARD
Have input into fundraising plan
Organize and participate on fundraising committee
Identify and cultivate new pro
Organize and participate on fundraising committee
Identify and cultivate new prospects/donors
Ask peers for donations
Always be an advocate for the agency
Make introductions for staff to follow-up
Accompany staff on key visits to funders
Help with expressions of thanks when appropriate

STAFF
Accompany staff on key visits to funders
Help with expressions of thanks when appropriate
Research new and existing donors
Write case materials
Assist board in any way possible
Write proposals
Accompany board members on solicitation visits
Ask for money when appropriate
Take care of all logistics related to fundraising activities
Plan, plan, plan

Most people do not gravitate to fundraising naturally or easily. It can be helpful to get board members involved in a process to explore their personal feelings about giving and asking. Several helpful exercises on overcoming reluctance to asking can be found in FAQ #3, Why Are People Afraid to Ask for Money.

A related question to the larger issue of board involvement in fundraising is how much should a board member give? We have another simple answer: the goal should achieve 100% giving by the board and for each member to make a "generous" gift. Obviously, each board member will have to determine what constitutes generosity in terms of their personal financial situation. Another question to ponder: If you can't convince your board members to give, and give generously, what barriers are standing in the way? Answering this question forthrightly will be a critical step in turning a bad situation around.

Fundraising requires commitment from people. The first place to look for the commitment is within the board. After all, the board is the vital link between a nonprofit organization and the public. Board membership in itself represents a significant level of commitment. The fundraising process demands a deepening of this commitment. Once in place, the organization has a powerful asset for reaching out into the larger community for gift support.

How do we select fundraising software?

01-17-2006

Overview

What can we expect to pay?

How do we know what computer configuration will best meet our fundraising needs?

What are some of the questions I should ask a software sales representative and what things should I look for in the product?

How should we handle staff training?

What about references?

For the short run, should I maintain my old and my new systems?

Fundraising database software needs to be set-up to reflect how we conduct our fundraising program. How does this work?

Is there anything special I need to know about data conversions?

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Overview

Over the past ten years, fundraising database software has gone from being a luxury to almost an everyday necessity for most development programs. However, unlike most other software genres, instead of facing few choices, purchasers are confronted with a multitude of options at every price level from comprehensive proprietary packages with sophisticated add-on modules to introductory-level shareware or freeware programs available on the Internet. And as a result, one of the most common computer-related questions voiced by development officers is, "How do we evaluate and choose a fundraising database program that best meets our needs?"

"We know we need a database for recording, tracking, reporting, managing, and implementing our development program, but where do we begin?" Begin your search with a thorough analysis of your current situation including:

Program Operations (what are the specific elements in your fundraising program plan?)

Computer Equipment (how many computers are there in your office? with what chip, speed, RAM, and storage? and if you have a network, how many are on it, and what is your network software?)

Expense Budget (how much can you spend?)

Staffing (what is your departmental structure, who and how many currently use your database software and at what level of proficiency?)

Now, make a determination of where you will be in 3 to 5 years in each of those same areas. These two steps will help clarify the most basic features and performance priorities required of your future software.

What can we expect to pay?

In general, the basic purchase price for fundraising software falls into four price ranges (not including the cost for additional user licenses, data conversion, additional staff training, and annual technical support agreements), as follows:

$1,500 and under (including shareware and freeware)

Generally, the products at this level are very simple, basic programs designed for organizations running very modest development programs with limited budgets. In most cases they have very limited constituent management capabilities (coding, indexing, sorting, etc.) and come with pre-configured reports. They are usually designed to export data to a word-processing program (for mail merge) or spreadsheet (for analytical reports).

$1,500 to $5,000

These programs are a major step up from the level below, they are fully networkable, and have all the features required for most development operations including extensive coding, tracking, and reporting capabilities. They include a broad array of pre-designed reports as well as report generating capabilities which eliminates the need to export your data to word-processing or spreadsheet programs.

$5,000 to $10,000

The programs at this level have all the elements above, but they tend to include a broader array of data recording and data management capabilities as well as more comprehensive recording and tracking for specialized development operations. Most of the programs in this range offer an assortment of equally comprehensive add-on modules (for an additional cost) to address specialized needs like membership, major/capital gift prospects, and special events management, to name a few.

$10,000 and up

In general, once you get beyond $10,000 for the base price, you are getting into the area of expensive, customized systems designed for complicated large institutional or organizational settings. These systems are designed to work with large area networks (LANs), wide area networks (WANs), and multiple sites, and are created to manage and manipulate huge amounts of constituents or data. Also, they are most often combined in packages to work with specialized software in other departments or offices like accounting and finance, facility management, and other non-fundraising program operations.

How do we know what computer configuration will best meet our fundraising needs?

Do we go IBM or Apple? Should we be networked? Questions of this nature deserve a more comprehensive response than can be included here, but there are some basic considerations:

As for basic configuration and equipment (mainframes, mini-mainframes, servers, and desktop computers), most development offices use desktop computers in a small network or as stand-alone computers.

For equipment and operating systems, for all intents and purposes, you face one of two choices using IBM compatible or Apple equipment, but you can have both systems working on a network. However, most fundraising software currently on the market is designed for an IBM compatible running Windows 95/98/NT or 2000.

As for new equipment, you will want:

• Pentium III level (or, if Apple, a Power PC) processor with the fastest speed you can afford (but usually no less than 500Mhz)
• Largest RAM you can afford (but no less than 64 Megs and preferably 128 Megs or more)
• Largest hard disk you can buy (4 to 6 Gbs for a workstation, 10 to 12 Gbs or more for a server).

If you are on a network, you will want a server that has a minimum of 10 Gbs disk space and preferably double (or more) since the program files in modern software "suites" will quickly fill that initial space. You'll still need room to load your existing work files and your new database.

With regard to networks, in general, even the smallest two-person office derives a benefit from being on a network. Printing is easier, editing documents is easier (though you will need to establish file naming procedures), and viewing and sharing data is greatly simplified.

Those are some very basic responses but each office, program, and organization is unique. Given the complexity of this situation, for a more specific recommendation on systems, equipment and configurations, contact a local computer consultant that has experience working with nonprofit organizations.

What are some of the questions I should ask a software sales representative? What things should I look for in the product?

Before looking at software, an organization must first be clear about its overall current and future operations (see #1 above). Having that information in hand, some of the basic questions to ask are:

How does their software's features meet your specific program management needs?

How does it conform to your program structure (does it work the way you work?) or does it force you to conform to its structure?

Does the manufacturer help configure or otherwise set-up the software to reflect how your program operates?

How does it look on the screen? Do the screens appear overly busy or complex? Is it easy on your eyes? Can you adjust for color, shading, contrast, etc.?

How many options can you use to tag or otherwise "code" a constituent?

How are gifts/grants, pledges, and pledge payments recorded?

How does the software handle importing of new records and/or data elements (e.g., phone numbers or zip+4 codes) from other sources? In what formats?

How does it handle exporting data? In what formats?

How are yearly program revenues tracked and reported?

How are appeals and solicitation programs managed?

How are grants tracked and reported?

How does the report generator work?

How does the mail merge work?

How do you search the database using multiple criteria?

How do you index or otherwise segment a group of constituents?

How are special events managed and reported?

How long has the company been in business?

How many installations have they made in similar type/size organizations?

Do they have any installations locally you can visit?

What would be the total cost for your installation (adding software purchase price including costs for all necessary user-licenses, data conversion, annual technical support, and initial staff training)?

What are their options for additional staff training?

How does their technical support work? What is the average telephone wait time? Can you get help via e-mail or fax?

How should we handle staff training?

Most sophisticated fundraising database programs will require a fair amount of staff training in order to be used properly and effectively. In most cases, paying for additional (more intensive) staff training either on or off-site is advisable after the initial free training. There is usually a sizable fee attached, but in most cases it is well worth the expense. Why have a high powered program if you're not going to use it effectively?

Identify at least two people in your organization to learn the program. In most organizations, only one staff member is the primary user; however, having a second person who has a basic, even rudimentary, understanding is helpful during vacations periods and other absences.

What about references?

For any product that you find interesting, ask the sales representative for at least three references you can contact by phone. Be sure to ask for clients that are similar to the type and size of your organization and development program. Call all the clients. Your conversation need not be more than a quick five-minute chat but you will get some interesting information. Some sample questions you might ask are:

What are its strengths?

What are its weaknesses?

How long have you had the program?

Do you like the program?

Does it do everything you need it to do?

Did you look at other programs?

Would you buy it again?

How was the staff training?

How did the data conversion go?

How is the Technical Support?

Once you think you've made your final selection, make a site visit even if you have to do a bit of traveling to another organization that has the software up and running. Make the visit without the sale representative present. Interview the