In the nonprofit world, fundraising is as inevitable as death and taxes in the for-profit world. Nonprofit leaders must ensure a strong fundraising plan if their organization is to accomplish the good that is intended and fulfill its mission. While there are many fundamental principles of fundraising that must be employed to ensure success, the #1 unscientific basic truth of fundraising that was reiterated throughout graduate school is this– Organizations must earn trust to get money. Period.

So with all the charities out there asking for donations, how does your organization assure the public that you and your cause are, in fact, trustworthy? Luckily, most states have taken the first step in recognizing and protecting the public’s trust through the implementation of charitable solicitation laws.

In my experience working with numerous small startup nonprofits, I have found that many are unaware of the charitable solicitation laws that states have designed and adopted to protect donors, the general public, and charities themselves from fraud. Generally, these laws require charities and their fundraisers to register with the state, describe their fundraising activities, file financial documents, and pay a fee that covers the administrative expenses of monitoring charities. An organization must remain in compliance with the solicitation laws in each and every state in which they will make requests of the public. There are some exceptions to these statutes, so it is imperative that you abreast of the laws in each area where you will conduct fundraising.

Possibly even more important to your legitimate organization is the recognition of the penalties imposed for violation of these statutes. In my state, Florida, the law imposes a penalty of $1000 per violation. This means that for every person you asked for a donation, whether they actually donated or not, you would have to pay a fine in the amount of $1000. For an organization that is doing their best in these tough economic times to remain funded and retain the ability to provide critical services this could be a huge hit in the pocketbook, thus remaining in compliance is essential.

Churches and religious organizations, like many other charitable organizations, qualify for exemption from federal income tax under IRC section 501(c)(3) and are generally eligible to receive tax-deductible contributions. To qualify for tax-exempt status, such an organization must meet the certain specific requirements. These requirements generally outline the specific purposes for which the organization has been organized and operated. Many religious groups seeking exemption from federal income taxes under section 501(c)(3) are in fact organized and operated for religious purposes, but are unsure as to whether they should be classified as a church or as another religious organization, such as a faith-based ministry.

To be considered a church by the Internal Revenue Service, an organization must meet specific guidelines. If an organization fails to meet these specific standards they may still be eligible for federal tax exemption, however they will be subject to different compliance regulations. Religious organizations that are not churches typically include nondenominational ministries, interdenominational
and ecumenical organizations, and other entities whose principal purpose is the study or advancement of religion.

In order to be recognized as a church, and to receive the benefits of such recognition, an organization must possess the following 14 attributes.

• Distinct Legal Existence
• Recognized form of worship and creed
• Definite and distinct ecclesiastical government
• Distinct religious history
• Formal code of doctrine and discipline
• Membership not associated with any other church or denomination
• Organization of ordained ministers
• Literature of its own
• Established place of worship
• Regular Congregations
• Regularly scheduled religious services
• Sunday schools for religious instruction of youth
• Schools for preparation of its ministers

it is important to be aware of the specific classification the IRS has allowed for your organization, as churches, exempt under subsection 170(b)(1)(A)(i) and religious organizations, exempt under 170(b)(1)(A)(vi) are subject to differing reporting requirements. Particularly important is timely compliance with regulations regarding the filing of an annual Form 990, as failure to do so may result in revocation of the organization’s tax exempt status.

In the past, a recently formed 501(c)(3) organization was subject to a five year advanced ruling period. During this period the organization would be classified as a public charity . After five years had passed the organization was charged with the responsibility of providing documentation of all income for the previous five years in an effort to demonstrate that they had in fact passed the public support test. A tedious Form 8734 would be prepared and submitted in support of such claim. However, new temporary tax regulations passed on September 9th have eliminated this advanced ruling process.

Under the new regulations, all organizations will retain their classification as a publicly supported charity for the first five years of operations. Beginning the sixth taxable year, the organization must demonstrate that it is meeting the guidelines for classification as a public charity each year on its annual return. If an organization passes the public support test on a given annual return, they will retain their public charity status for that tax year and the following tax year only. An organization may be reclassified as a private foundation at any point that it does not meet the public support test on an annual return.

So how will this affect your organization? If your application is pending with the IRS or if you are currently in your advanced ruling period you need do nothing. Your organization’s information will automatically be updated to reflect classification as a public charity until your sixth taxable year. While the new regulations eliminate the burden of completing the cumbersome form 8734, it also opens up the possibility for continual reclassification of your organization’s status. Administrators must remain more diligent than ever in maintaining good financial records , as the complexity of the new
form 990s beginning with the 2008 tax year will prove to require detailed information.

As a nonprofit professional in an already troublesome economy, the wall street crash that’s in the news this week makes my thoughts immediately go to its effects on charitable giving. The demographic that gives the most to charitable organization, will prove to have collaboratively lost millions in the wake of this week’s events. This will obviously negatively effect the level of charitable giving in America. So what can nonprofits do to stay afloat? I believe the key to sustainability within the nonprofit sector will now rest more than ever in building donor loyalty.

Nonprofit organizations recognize that donors are their lifeblood, allowing them to do the good works for which they were created. Development staff work diligently to cultivate donors and generate a successful response when making the ask. However, in an economy that is so inhibitive to the development of new charitable donors assuring donor loyalty through the development of relationships with private donors and grantmaking agencies is essential.

To build good donor reltionships, start with Martha Schumacher’s Seven Strategies for Building Meaningful Major-donor Relationships. Make sure every member of your staff, including development and programmatic professionals, are tuned in to the importance of good donor interactions. Make sure their actions are focused on donor-based approaches to fundraising as much as they are on mission fulfillment. And always keep in mind the 3 most important key words in fundraising- relationships, relationships, relationships!

As a grant writer, I have always found that the most difficult part of writing a comprehensive proposal for an organization is obtaining detailed, suitable information to include in the proposal. It seems to me that leaders of nonprofits should have information ready to roll off their tongues at any moment—a simple request should lead to a passionate delivery about whom they serve, what they do, and how they do it best. Unfortunately, this is not usually the case. When asked to describe their missions, programs, and target demographics, most leaders of small nonprofits find themselves stumbling over the answers. In an effort to develop reliable funder research and facilitate success, here’s some information you’ll need to have available to be ready to jump into solicitation of grant funding.

Mission- Know your mission in and out. Be prepared to describe your organization’s specific mission and know how you work each day to fulfill that mission.

History- What inspired your organization’s founding? What have been the major milestones since? Has your organization received any recognition for its efforts? Be able to provide success stories to demonstrate your capabilities.

Funding- How have you sustained your organization thus far? Who are your major contributors? How do you fundraise?

Need- Can you show that there is really a significant need for your organization’s programs within the community you serve? Research statistical data on the problem you address as well as the degree of other efforts being made to combat the same problem.

Capabilities- Are you able to promote members of your board or staff as responsible, knowledgeable nonprofit professionals? Be prepared to describe their education and experience. Convince me that they are competent leaders.

Objectives- Know the difference between a goal and an objective. You must be able to provide measurable objectives!

Methods- Do you really know, step-by-step, how you will meet your objectives? Are you aware of everything and everyone that will be involved, down to the smallest detail?

Evaluation- How will you evaluate the success of your proposed project? Take the time to develop a scientific plan for evaluation and know who will be involved and what cost will be incurred.

Sustainability- You must think past the grant award period. Exactly how will you continue to fund this project once the grant funds run out?

Budget- Learn to develop a precise line item budget. Know the difference between an operating budget and a project budget, and learn how to allocate your administrative costs within each program.

Often times grassroots nonprofits spend time exploring ways to become more effective. The most common areas of evaluation seem to be mission clarity, program development and implementation, staff training, fundraising, and mission based marketing. One area, however, that may not be so deeply investigated is Board performance.

Board leadership is a success factor for organizations seeking to increase organizational capacity and maximize impact. Nonprofits rely on their Board for effective decision making, organizational accountability, donor cultivation, community reputation, and financial and legal oversight. Unfortunately, one essential element of Board leadership that may have been overlooked is full Board financial contribution.

When undertaking fundraising efforts, an organization should be able to demonstrate to the community that each of their leaders are willing to make donations to ensure mission fulfillment. Why should I give to a cause whose own administration does not feel strongly enough to make a personal financial contribution? While not all Board members- especially those in startup nonprofits- are affluent individuals, each should be willing to make a sacrifice in order to lead by example within their community. In addition to making a personal contribution, each member of the Board should be charged with the responsibility of soliciting donations from others with with they have established relationships.

So how do you get your Board to become a fully contributing Board? Asking the Board to give is the job of the President. At the end of each fiscal year, the President should draft a letter to each member requesting their direct donation toward the upcoming budget. If some motivation to give is necessary, remind members to keep in mind that many times other prospective donors, especially foundation grantmakers and major donors, will only make a donation if everyone on the Board has made a capacity gift. Such gifts need not be excessive, they should be to the extent of each individual member’s capacity. By demonstrating that a stretch of your personal budget has been made in an effort to demonstrate dedication to the cause it will influence other members of your community to do the same.

Each year, thousands of people set out to start a nonprofit organization. These individuals are undoubtedly passionate about their cause and truly want to make a difference in their communities. Unfortunately, many start off on the wrong foot because they fail to fully develop their idea through comprehensive planning. Most do not recognize that operating within the nonprofit sector requires a unique set of knowledge, skills, and abilities. To help you identify what area of your plan needs more attention, here are some common things to think about.

What equipment, supplies, and human resources will I need?
• Create a realistic budget, and know where you will get funding

How do I make it legal?
• Obtain 501 status
• Make sure you are registered in each state you solicit funding in
• File your taxes to keep from being removed from Publication 78
• Make sure you are exempt from state taxes

Where will I find the following resources?
• Articles of Incorporation
• 501c3 tax exempt services
• State tax exemption & Charity Registrations
• Grant writing Services
• Fundraising Services
• Web development Services
• Bookkeeping and Accounting Services

What Financing will I need?
• Salary
• Rent/ Utilities
• Office Supplies
• Program Supplies
• Fundraising Expense
• Incidentals

What’s my Advantage?
• What skills and experience do I bring to the nonprofit business?
• What solution will you offer that other organizations do not?
• What is your Marketing Advantage?

What makes my organization unique?
• Choose methods of service delivery that are unique
• Do not duplicate the services of other organizations in your community
• Discover ways to collaborate with other nonprofits, offering unique partnership abilities

It has been my pleasure over the last couple of years to have the opportunity to work with many passionate, inspired Christians during their journey in church planting. These faithful missionaries have been such an inspiration- demonstrating their devotion to God by working diligently to create a new flock from the unchurched. Reaching out to both believers and non-believers in many areas of the world, those called to plant new churches exude a dedication and zeal that reminds me why I chose a career in the nonprofit sector.

But there is more to strategically planting a new church than simply following God’s call to action. For a new church to be successful in acquiring initial capital, attracting a faithful membership, and expanding outreach ministries to reach all populations in need, church leaders must learn to take on the characteristics of entrepreneurs.

It may seem divergent to view the Church in a commercial sense, however if you think about churches who have achieved extreme success they are operating as a business- a big business. While your goals in church planting most likely have led you to focus on location, congregation, and ways to reach out to disbelievers, you may not have considered the following essential aspects of church administration:

Incorporation- Becoming a legal entity, limiting the liability of those involved, and increasing eligibility for funding and benefits such as tax exemption are of importance. Rules and regulations for incorporation vary by state, so be sure you know the facts in your area.

Bylaws- While I’m sure you’ve developed a Doctrinal Statement and religious hierarchy for your planned church, it is also essential that you develop and affirm Board duties and responsibilities, conflict of interest policy, and checks and balances.

Tax Exemption- Recognition as an exempt organization under section 501(c)(3) provides validation to supporters that your church is legitimate. It provides the opportunity to receive faith-based grants, receive discounted rates on occupancy, and assures the members of your congregation that their tithes are tax deductible.

Marketing- Word of mouth is a great way to develop membership, however other avenues to market your organization are critical, especially if the church you are planting is in an area in which you do not have established personal contacts. Website development is a great start, as about 50% of Americans log onto the web to conduct searches daily. Search engine optimization for your site is also key- if someone is searching for a Christian church in your target area you’d rather your site be at the top of the list of results rather than buried ten pages in.

Grants- There are many established grantmakers out there whose specific mission is to fund religious organizations and churches. Drafting a successful proposal and conducting detailed research into funding agencies may add a much needed source of capital for your organization. While tithes and offering will undoubtedly represent your bulk of funding, think of how many more missions you could undertake if you could generate a few thousand (or more) extra dollars each year via grant funding.

I understand your area of expertise may be in theology and the thought of assuming such administrative responsibilities may seem a daunting task. If that’s the case, you may want to look to outside experts for support. That’s why I’m here.