Tag Archives: accounting

Campaign to End the Overhead Myth

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Guidestar CEO, Jacob Harold, published a letter condemning the use of administrative expenses as a measure of nonprofit performance. You can read the entire message at www.overheadmyth.com.

The letter was co-signed by Art Taylor, president and CEO of BBB Wise Giving Alliance, and Ken Berger, president and CEO of Charity Navigator—making it the first time the three leading nonprofit information providers joined together to share the same message: the percentage of a charity’s expenses that go to administrative costs, the “overhead” ratio, is not appropriate to consider when determining if the nonprofit is effective or efficient.

You can get involved!

For nonprofits: visit www.overheadmyth.com to print the letter, and include it in your postal mailing to supporters. Include a summary and link on your web site, your blog, on your Facebook page, on Twitter, and in any email newsletters.

Publicly commit to ending the focus on overhead by signing the pledge at www.overheadmyth.com.

Spread the word about the Overhead Myth campaign to your own networks online. Guidestar has created a communications and social media tool kit with turn-key content that you’re welcome to use: www.overheadmyth.com/press. But don’t just send out canned messages – say why you are particularly interested in this campaign.

Get your supporters, including volunteers, involved. Encourage them to share info about the campaign via their social media networks, and to blog about it, as well.

Nonprofits: Share your data and information with Guidestar. “We need nonprofit leaders to provide more public information about their missions, programs, and results so we can move past the overhead ratio once and for all. Our GuideStar Exchange program allows nonprofits to share data with stakeholders for free!”

And here’s the freaky part: I whined about the misplaced focus on overhead costs at nonprofits just a few hours ago on TechSoup.

This is an issue that’s very near and dear to me.

Also see: Survival Strategies for Nonprofits , a guide for nonprofits facing critical budget shortfalls.

Why I’m not outraged at the IRS

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Each year, the IRS reviews as many as 60,000 applications from groups that want to be classified as tax-exempt.

501(c)(4) tax-exempt status is a different nonprofit category than organizations like homeless shelters, arts groups, animal groups, etc. The (c)(4) status allows advocacy groups to avoid federal taxes, just like 501(c)(3) orgs, but the status doesn’t render donations to the groups tax deductible. The primary focus of their efforts must be promoting social welfare – and that can include lobbying and advocating for issues and legislation, but not outright political-campaign activity. Also, these groups do not have to disclose the identities of their donors unless they are under investigation.

The U.S. Supreme Court’s January 2010 “Citizens United” ruling lead to a torrent of new 501(c)4 groups: the number of applications sent to the IRS by those seeking 501(c)4 status rose to 3,400 in 2012 from 1,500 in 2010. MOST of these applications were from conservative groups. And many of these organizations flout the law in terms of not being involved in political-campaign activity – if you saw the whole process where Stephen Colbert oh-so-easily formed his own 501(c)(4) organization, you know what I mean.

So what was the “extra scrutiny” by the IRS? Good luck trying to find out specifics beyond the phrase “extra scrutiny” again and again. It took me an hour on Internet searches to find out enough to make this list of what the “extra scrutiny” was:

  • more details on what “social welfare” activities the organizations were undertaking
  • speakers they had hosted in meetings
  • fliers to promote events
  • list of volunteers
  • roles/works of volunteers
  • lists of members
  • list of donors
  • positions on political issues the organization was advocating

Some groups have claimed they were asked who was commenting on the group’s Facebook page, but I can’t find any confirmation of this claim.

Of course, this “extra scrutiny” is a fraction of what many of these same people outraged at the IRS were demanding regarding the now defunct nonprofit group ACORN. It’s the same scrutiny these conservatives were screaming about wanting for arts organizations back in the 1990s, in their attempt to eliminate all government funding for arts organizations. And probably most importantly: no organization was prevented from engaging in the activities it wanted to, not even those with pending status. None. Zilch.

This scrutiny is not only what I have been asked for in every nonprofit and government-related job I have held in the last 15 years (yes, I have been asked by a government agency to provide a list of paid staff and volunteers – they wanted to see if our arts organization was involving “enough” volunteers”); these are details I have long encouraged nonprofits to provide on their web sites, to show transparency and credibility.

So, I’ll be by usual blunt self: any nonprofit organization, no matter what their designation, that can’t easily provide details on its programs – who, what, where, when – as well as information the number and role of volunteers and information on any activities that might be considered political advocacy, shouldn’t be a nonprofit. And if that organization is a political group, it should have to provide a public list of all financial donors. Period.

But, no, I’m not going to provide a list of volunteers. Their roles and accomplishments, yes, but not a list of volunteers.

In fact, let’s get rid of (c)(4) nonprofits status altogether. You want to form an organization that engages in political activities? Form a PAC. 

My sources:

http://www.politico.com/story/2013/05/israel-related-groups-also-pointed-to-irs-scrutiny-91298.html#ixzz2TSsJpVJ1

http://www.reuters.com/article/2013/05/14/us-usa-tax-irs-idUSBRE94B08I20130514

http://www.southcarolinaradionetwork.com/2013/05/15/at-least-2-sc-tea-party-groups-say-they-were-singled-out-by-irs/

http://www.coyotecommunications.com/outreach/scrutiny.html

http://www.salon.com/2013/05/14/when_the_irs_targeted_liberals/singleton/

Basic Fund-Raising for Small NGOs/Civil Society in the Developing World

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Some of the most frequently asked questions (FAQs) to online forums for community-based organizations (CBOs) in developing countries, whatever the subject, are regarding funding.

In addition, the first impulse of many small non-governmental organizations (NGOs) seeking funding is to request the contact information for possible funders, and once they find the name of any company they think gives grants to NGOs, these NGOs often write immediately to the company with a desperate please for funds. This approach often harms the NGO, rather than garnering any support at all. Not only do these please rarely attract funding, they can turn funding sources against the NGO altogether.

After seeing these questions and messages again and again over several years (I’ve been on the Internet since about 1994) I drafted a list of basic tips for fund-raising for small NGOs – it was 15 pages long. Now, years later, it has evolved into 31 pages. It is a PDF file.

The document is meant to provide very basic guidelines for small NGOs in the developing world regarding fund-raising and adhering to the basic principles of good governance, and to point to other resources. By small NGOs, I mean organizations that may have only one paid staff member, or are run entirely by volunteers; and may or may not have official recognition by the government. These organizations are extremely limited in their resources, and are often in unstable environments and/or serving profoundly poor populations. Certainly medium-sized NGOs could use it as well – organizations that may have two or three paid staff members.

Please note that this document is NOT written for nonprofits serving the “developed” world — organizations serving communities in North America, Western Europe, Australia, New Zealand or Japan would probably not find this document particularly helpful, as it has been prepared to make recommendations relevant for nonprofits serving in a developing country.

This document is also not for organizations that send volunteers into developing countries to work. This document will not help you fund the trips of such volunteers. If you are such a volunteer-sending organization, see funding your volunteering trip abroad and fund raising for a cause or organization for more helpful information.

THIS DOCUMENT IS NOT A LIST OF FUNDERS/DONORS.

Let me repeat that: THIS DOCUMENT IS NOT A LIST OF FUNDERS/DONORS.

It is, instead, a set of guidelines on how to prepare an organization in a developing country to be attractive to donors, how to search for potential donors and how to approach such potential donors.

The document includes:

  • A list of activities an NGO should NEVER do regarding fund-raising
    (& how I know if an NGO has actually read this document!)
  • How to network among various sectors in your country and establish credibility to insure fund-raising success
  • The absolute essential preparations to solicit donations, both locally and from international NGOs working in your geographic area
  • Establishing credibility and a reputation of integrity, transparency and accountability
  • How to find donors that would be interested in your NGO and how to make contact with them
  • A warning about fund-raising scams
  • Online resources for detailed tips on writing funding proposals
  • Suggestions regarding volunteers in other countries fund-raising on your NGO’s behalf (new chapter added October 2011)
  • Online resources for further information

Once you have received this document, please do NOT distribute the document via a web site or on an online discussion group without my written permission. I frequently update the document, and want to ensure people are getting the most recent version.

Here is the web page for more regarding: Basic Fund-Raising for Small NGOs/Civil Societ in the Developing World, including how to access the document.