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What Do Grant Organizations Look For? What Funders REALLY Want When They Make Decisions About Where the Money Goes

By | Budget, Fundraising, Grant Management, MIP Fund Accounting, Nonprofit | No Comments

Funders, defined as people at grant organizations, approve fund requests. They can be a nonprofit organization’s bane or best friend. A new report, called Social Solutions: Foundation Report Study, examined the metrics by which foundations and granting organizations determine which nonprofit organizations to awards funds. The results are surprising and tell us a lot about what nonprofits can do to increase their opportunities to receive funding.

The Three Most Important Considerations for Funding

Funders overwhelmingly agreed on the main consideration for granting an award: IMPACT.

98% of those responding to the survey picked “impact” – as in the award they gave would make an impact on the project or people – as the most important consideration for funding.

Lagging behind impact but coming in second is MISSION. How well does the project or request match the fulfillment of the nonprofit’s stated mission?

And third, legal nonprofit status was cited as the third most important consideration. That was surprising given that one would assume that anyone applying to a foundation or grant organization would already have legal nonprofit status before requesting such funds.

Evaluating Impact

It wasn’t just the overall impact that was important to these funding organizations. To evaluate impact, they look at several criteria. This included:

  • Outcomes
  • Detailed data
  • Consistency to mission
  • Outputs
  • Community
  • Financials
  • Other criteria

Funders are also seeking clear, concise reporting, as well as strong community outreach. Communication around projects and nonprofit goals are also important. The funding organizations wanted to be sure that organizations are “putting their money where their mouth is” and doing what they state they will do in their mission and materials.

Reports Are Important

Reports back to the foundation are also an important part of the process. What the foundations and granting organizations seek in reports includes plenty of stories about how the money is making an impact, as well as the data to back that up. Spreadsheets, paper-based reports, and other documentation lends credibility and credence to reports and supports the nonprofits’ assertions of how money is being used or will be used.

One thing is certain: more feedback is required from nonprofits as part of the grant process than ever before. Funds are one thing, but telling a story about the funds is important.

Donors Like to See Dollars in Action

Donors like to see their money in action, making an impact, effecting change, and supporting the mission of the nonprofit. That goes for individual donors as well as foundations and granting organizations.

Large or small, all funders preferred to see stories (82%) over other forms of reports. Why stories? Stories paint a great picture of how funds have made a difference. That doesn’t mean that stories have to be written out. They can be told through images, slideshow presentations, or videos, but illustrating the impact of the funds on the lives of others was deemed very import for the funders to decide to whom to give money..

Your Take Away: Get Your Ducks in a Row

The big takeaway for nonprofit organizations is to be sure that you have your entire package prepared as best as you can before sending it to a funder. If your nonprofit status isn’t fully documented, your application may be pushed to the bottom of the pile.

Documenting achievements in both qualitative and quantitative formats is also important. Qualitative documentation such as stories, testimonials, and presentations enhances the emotional impact of your nonprofit’s work, while quantitative data support assumptions about its effectiveness.

Funders have money to give to worthy causes. Knowing what they are looking for and tailoring your grant paperwork to their requests can help you achieve your nonprofit’s funding goals.

About Welter Consulting

Welter Consulting bridges people and technology together for effective solutions for nonprofit organizations. We offer software and services that can help you with your accounting needs. Please contact Welter Consulting at 206-605-3113 for more information.

 

Trust, But Verify: Avoid Fraud by Maintaining Internal Controls

By | Accounting, Fraud, Internal Controls, MIP Fund Accounting, Nonprofit | No Comments

Trust, so the experts tell us, must be earned over time. In the workplace, it is earned by consistently performing one’s duties well and by successfully accepting ever-increasing responsibilities.

The nonprofit workplace, like the for-profit workplace, works best in an atmosphere of trust and mutual respect among one’s colleagues. Without it, the workplace can be hostile, unfriendly, and uncomfortable.

But there is a fine line between suspicion and performing due diligence. Nonprofit organizations should guard against allowing trust to blindside them to the potential dangers of fraud and theft in the workplace.

A Cautionary Tale of the Ramifications of Blind Trust

One story that stands out is the story of Marge (not her real name), who worked at a large nonprofit organization. She was like a second mother to the staff. Honest, always willing to work extra hours, diligent in her job duties in the accounting department, Marge was trusted with managing many areas of the organization’s finances.

Although the organization had internal controls in place, they were often waived for Marge and other senior staff members who were so well-regarded and trusted that they weren’t questioned when they dodged the procedures. Marge was especially trusted and valued and did not have anyone present when she counted out petty cash or handled the checkbook.

One day it was discovered that money was missing from the petty cash. An audit revealed that small amounts of money had been taken from the petty cash box as well as from the checking account. Because Marge controlled both, she could make slight adjustments in the entry ledgers to avoid suspicion for a long time. It took the auditors only a short while to uncover the discrepancies and for Marge to confess that her lottery ticket habit had become a necessity and that she had been stealing ever increasing amounts to fuel an obsession with gambling.

Is Marge an isolated case? We think not, and a quick survey of the various nonprofit journals reveals similar patterns of fraud. Fraud doesn’t occur in isolation. It tends to occur when gaps are left within the internal controls that are intended to prevent such situations. In this case, trust and friendship overrode common sense. Exceptions were made that should not have been made. The result was an organization poorer for the loss of both money and a trusted employee who had to be let go when the truth was revealed.

Preventing and Identifying Fraud

Trust is a wonderful thing and a valued commodity in the workplace. That said, it should not preclude the use of standards, internal controls, and audits.

  • Preventing Fraud
    • Standards are the accepted norms for an industry. Accounting standards, security standards, and workplace standards can be codified and recorded in written manuals provided to all employees. Everyone can then be held to the same shared standard of conduct and behavior.
    • Internal controls are the processes and procedures put into place around access to the organization’s finances. These controls should be written down and shared among staff. Training sessions and refresher training session are also important to ensure consistent understanding of the controls among everyone.
  • Recognizing Fraud:
    • Audits bring in outside consultants such as CPA firms, well-versed in accounting for nonprofits to examine your organization’s financial records, provide recommendations, and discover discrepancies.
    • Provide staff with an anonymous method to report incidences of fraud to their supervisors or to the managers in your organization.

Trust doesn’t have to be blind. Assuring people that their work matters, listening to their ideas, implementing their suggestions and other positive examples of trust can build bonds among workers that engender loyalty to your organization. Don’t leave your nonprofit open to fraud or theft due to blind trust. Trust, but verify, and stick to accepted norms and standards of behavior and internal controls to prevent problems before they occur.

About Welter Consulting

Welter Consulting bridges people and technology together for effective solutions for nonprofit organizations. We offer software and services that can help you with your accounting needs. Please contact Welter Consulting at 206-605-3113 for more information.

Helping Donors Choose You: Encouraging Charitable Deductions

By | Accounting, Fundraising, Nonprofit | No Comments

Many nonprofit organizations rely upon charitable donations for their operating budget, to fund special projects, or to accomplish specific goals. Your organization can do a great deal to encourage donations by making it easy for potential donors to identify your tax-exempt status and receive receipts for donations that they can use with their tax returns. Here, we present a checklist of things you can do to assure the public of your organization’s tax-exempt status and facilitate their donations.

Valid Tax Deductions: Contributions to an Eligible Organization

To benefit from a valid tax deduction, contributions must be made to an eligible organization which is defined as a. nonprofit organization. Religious organizations such as churches, synagogues, and other houses of worship may qualify, as do some schools, war veterans associations and the like.

Provide Proof of Eligibility

Your marketing communications should provide proof of tax-deduction eligibility for potential donors. Your website should have a link to GuideStar, an organization that specializes in providing information on nonprofits to the public. A listing in GuideStar provides a great third-party proof point that goes a long way with the public.

Offer Receipts

Automatically offer any donor a receipt. The proof a donor needs to respond to a question from the IRS about a deduction includes the following: A letter on your organization’s letterhead, with the tax-exempt certificate number included, that identifies the donation amount, donor’s name, and date of the donation.

IRS Maximums

Although all donations are welcome, the IRS sets a limit on the amount of money that can be declared on an individual’s tax returns. Currently, cash deductions are set at either 50% or 30% of a donor’s annual adjusted gross income, depending upon the type of the organization.

Cash versus Non-Cash Donations

Cash and non-cash donations are also treated differently. Stock, for example, is treated differently than cash. Appreciated, publicly-traded stock held for more than 12 months must include information on capital gains as part of the donation. Donors can claim the amount, but not the capital gain, from the date of the transaction from their account into yours.

Other non-cash items may follow different rules. Household items, automobiles, furniture, and real estate can all be donated to a nonprofit organization. There are specific rules, timelines, and proof required for your donors to deduct non-cash donations of $5,000 or more. Non-cash donations of $5,000 or more may require a professional appraisal, by an IRS-approved appraising firm, to ascertain the value you can put on the donation receipt. Speak with the donors and discuss any potential ramifications before concluding the transaction so that both you and the donor have what you need to benefit from such a generous gift.

Giving Something in Return

If you give donors something in return for their donation as a thank you, whether something as simple as a tote bag or as wonderful as free tickets to the opera or ballet, the amount of the return gift must be deducted from the donation.

Let’s say that you receive a $500 cash donation from the Millers. In return, your charity, a local performing arts nonprofit, provides the Millers with two free theater tickets worth $100. If the Millers claim the deduction, they should claim $400, rather than $500, on their tax return.

Obviously, that’s up to the Millers. But you may wish to provide them with all of the facts so that they can make an educated decision about how to claim deductions on their tax returns.

The Bottom Line: Make It Easy to Give

The bottom line is a simple one: make it easy for people to donate to your organization. The easier it is for people to donate and receive receipts for their donation, the more likely they are to give.

About Welter Consulting

Welter Consulting bridges people and technology together for effective solutions for nonprofit organizations. We offer software and services that can help you with your accounting needs. Please contact Welter Consulting at 206-605-3113 for more information.

 

Getting Your Staff Ready for the Annual Audit

By | Accounting, Audit, Nonprofit | No Comments

As the manager of a nonprofit organization, you’re probably all-too familiar with the paperwork aspect of the annual nonprofit audit. Documents must be managed, maintained, and updated, and everything prepared for the auditors.

There’s a second part of managing the audit process that’s equally as important: managing the people who are part of the audit. To help you with this aspect of auditing, we’ve put together the following tips.

Schedules

  • Make sure you schedule the audit well in advance of any deadlines. Be sure to set aside enough time for your staff so that they can be available to assist the auditors in any way necessary.
  • Contact the auditing firm and confirm that the dates for the audit are available. Auditors’ schedules may be booked months in advance. Be sure to confirm again the week prior to the scheduled audit to ensure nothing has slipped through the cracks.
  • When scheduling your audit, offer three days and times that work for all. Allow the auditors to choose the one that works best for them.
  • Clear calendars to make sure no offsite or other meetings will interfere with the audit schedule.

Logistics

  • Provide a clean, private, well-lit workspace for the auditors to use while they are at your company.
  • Create the necessary computer and WIFI access in advance so it is ready for the auditors immediately.
  • Ensure that a telephone line is also available for the auditors.
  • If parking spaces are reserved at your building, make sure you take the necessary steps to secure parking spots for the auditors.
  • Provide them with directions on how to get to your building.

Communications

  • Inform the internal staff that an audit is taking place. Reassure them that it is both a necessary and beneficial aspect of nonprofit management – it’s not like a personal IRS audit, but more of a consultation to ensure that your nonprofit is operating correctly.
  • Make sure that staff understands they can’t use conference rooms or other workspaces that the auditors are using during the week.
  • Ask staff not to interrupt the auditors while they are working.

Following Up on the Audit

Once the audit is over, it will take your firm several weeks to prepare the materials and provide them to you. Take time to review them and discuss the findings with the auditors. The final report can then be presented to your Board of Directors.

As a final step, share the audit with your entire team. Although not required as part of a nonprofit audit, the more information that you can share with your staff, the better they will understand what’s going on within the organization as a whole. They’ll feel invested in the outcomes and better informed about the financial aspects of the organization. The more information they have, the better they can do their jobs.

Preparing for an audit can be stressful, but if you’re organized and take the appropriate steps, you can ensure that the entire audit process from start to finish goes smoothly. Both your auditors and your Board will thank you for the extra effort made to ensure a streamlined process.

Welter Consulting offers auditing as one of our core services for nonprofits. Our experience encompasses audits, consulting, software selection and more for the nonprofit industry. Please contact Welter Consulting at 206-605-3113 for an appointment.