Four Strategies to Keep Your Nonprofit On Course

by Phil Newton
Perennial Partners

Recognizing and adapting your organization to an ever-changing world

Nonprofits these days are steering into a full force gale of change. They’re facing headwinds of:

- Political instability;
- Increased donor scrutiny;
- A smaller pool of traditional dollars available;
- More grantors asking for a Long Form 990 from potential grantees;
- A Dow at an all-time-high;
- The Baby Boomer generation deciding that it’s finally time to retire;
- The federal government possibly looking at overtime restrictions that disproportionately affect charities; and
- Increased momentum for eliminating the federal “death tax.”

All of these concerns conspire to blow a nonprofit off-course. Here’s how to recognize the trends on the wind and trim your sails to make those winds of change carry your organization toward more friendly waters.

Unlock Grant Dollars
To make up for dwindling government grant dollars, make a plan to learn about and approach all the private family foundations in your area. It’s a growing number, and they all have increasing dollars if they’re invested in the stock market (most are). Get a free account on guidestar.org. Invite their contacts to come and see your charity in action. Ask for permission to approach them, and hand-deliver a great grant application!

Nearly all charities must file a 990 tax form with the IRS annually. Most do the bare minimum required. However, several Peoria-area foundations are now insisting that potential grantees complete a Long Form 990 each year—even if the IRS does not require it. That means: if you are going to get any grant money from them, you have to fill out the long form. Yes, it means more money and time devoted to the task, but it’s the price to get in the door with more and more grantors. I recommend that all my clients complete the Long Form 990 in an effort to unlock more dollars.

Begin a Major Gifts Strategy
Donors invested in a Dow at all-time-highs may need to make a significant donation for tax purposes. Why not start a $1,000 givers club at your charity? Let donors know they can gift appreciated stock or make a cash gift to join. Give the club a special name, and invite them to members-only events. Hold an annual barbecue at a member’s house for other members. Send a monthly e-newsletter and snail-mail version telling of news, stories, stats and opportunities. This is the first step toward beginning a major gifts program.

Retirees at age 70½ can choose to make their required minimum distribution to a charity, with no tax penalty. Again, this could be a way for the retiree to join your $1,000 givers club or fund a project at your charity. Savvy nonprofits will let donors know about this valuable service available to them at least once a year. Work with your contacts in the financial planning industry to suggest your charity to their clientele when it comes to minimum distributions time. This also can be a part of your organization’s major gifts strategy.

Lower Staff Costs
Nonprofit evaluation sites like Charity Navigator and Guidestar are ruthless when it comes to penalizing an organization for being too “staff-heavy” in expenses. Because more and more donors—especially major donors—are looking to such sites before deciding where their charitable dollars go, charities need to lower their expense ratios ASAP!

A powerful way to do this is to begin “hiring volunteers” when staff move on. Today’s retirees have goals to volunteer or become very involved in the charities they love. Give these volunteers big jobs—roles previously held by staff.

One of my clients recently placed an ad on Craigslist looking for a volunteer executive director. I am happy to say they found a semi-retired person who wanted to give up to 20 hours a week to the program. In fact, I have three clients right now with volunteer executive directors. It’s a trend worth watching. In the future, I believe we will see more nonprofits having a limited number of highly-trained, well-paid staff and a large cadre of volunteers carrying out the mission of the organization.

Last year, nonprofits across America were fearing new federal overtime restrictions. A well-meaning restriction was on the way that said employers needed to pay overtime to any staff making just under $48,000. A look around central Illinois shows many nonprofits with salaried, exempt staff making far less than $48,000—even executive directors!

This rule was struck down by a federal judge late last year. If the rule had stood, many charities would be required to pay a crippling amount of overtime. While the federal law was struck down, some states have enacted similar rules. California has an overtime threshold of just over $40,000, so it could happen in Illinois in the future. How does a charity avoid this potential issue? By bringing in volunteers to do the jobs of or pick up the slack for workers making less than $50,000.

Increase Planned Giving
Donald Trump has talked about repealing the “death tax,” which takes a significant portion of a decedent’s estate if valued over a certain amount. Most of us don’t have an estate that qualifies—an important area exception are farm families, which sometimes have enough in property to fall prey to the tax.

Despite all the noise, charities should continue to push wills, trusts and life insurance with their donors. Almost all gifts through estates, or “planned gifts,” fall into these three categories. Sit down with longtime donors, board and former board members, and volunteers and ask them to include your organization in their estate. With the average estate gift these days upwards of $40,000, it may be the most valuable way to spend an hour of development time. iBi

Phil Newton is founder and partner in Perennial Partners, a Peoria consulting firm that specializes in grants, major gifts, planned giving and strategic planning for nonprofits. For more information, visit perennialpartnersci.com or call (309) 689-2809 for a “no-obligation” conversation over a good cup of coffee.

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