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Private sector philanthropic giving with a focus toward nonprofits who are grassroots is a means for knowing the donation will have local geographic reach.

The initial investment in the grassroots approach should be viewed like the planting of tree seedling.  The donor plants the seed of their idea.  The donor provides ongoing giving for a set number of years.  It should be the intent of the donor’s reasoning behind giving to be willing to be involved in the effort long enough to build strong roots for the grassroots nonprofit idea to have a foundation and the strength to grow branches.

The direction of the branches will be pruned in the direction of strengths.  The nonprofit should be open to being provided direction on prioritization and direction the donor wishes the support should grow.  The nonprofit should accept this direction especially if it falls within the mission of the organization.

Grassroots nonprofits have as a catalyst the strength of passion and volunteers.  The nonprofit with appropriate planning should be able to know strategically how their organization is to cover fixed costs, including staffing.  It should be the goal of the nonprofit to have each year an understanding of how they are going to have the funds to cover the approved budget for the year.  After five years it should be expected that the nonprofit knows how their financial support is being covered.  A nonprofit should include in its planning whether there is an opportunity to have members, user fees, a reserve or endowment to cover 75% of the expenses and fund-raise for the rest.  If there is a persistent 10-25% shortfall in spending it is usually attributed to providing raises each year to administrative staffing.  Is is with this in mind that outsourcing for nonprofits below three and a half million dollars that a donor should request the nonprofit do.

The use of the word “grassroots nonprofits” is to bring about a more powerful impact quickly to the cause at hand.  Nonprofits are created to address a cause.  The main weight for deciding a budget should be what the nonprofit can afford to do with its two main assets of cash and volunteers.

Throughout all of the nonprofit’s activities there has to be accountability.  A regulatory perspective of the nonprofits interaction with governing bodies, government agencies and financial intermediaries that require administrative forms, records sent or financial records distributed to others will fall to the designee or default to the Board officers.  The interaction requires time to contract with auditors for the annual audit of the nonprofit, and to ensure compliance with all respective laws, statutes and regulations.  The outsourcing of the service can provide an ad-hoc basis throughout the year when the Board and/or designated individual need the assistance.  A scheduling of the compliance work can be planned in order to be timely with the compliance.

Incorporating is the easy part for a nonprofit.  The hard part is annually keeping the donations from donors coming and expanding the donor base for giving.  
 

pic by Hiking Artist

In the struggle to compete for a donor’s dollars, some nonprofits think that they deserve the money without the hard work of providing the proof that the organization deserves it.  There are over 1.6 million nonprofits in competition for the billions donated each year - the majority going to religious organizations.  Therefore, what passion or motivation does your nonprofit generate in the donor?  Yes, you’re marketing what your organization does and creating that draw is an important component to your success in gaining donors, but do not stop there.  The nonprofit must also provide the support to keep the donor coming back each year.  Copy what the colleges do to keep their Alumni coming back year after year. 

The race to the finish is about to end for the calendar year if your organization only focuses on December for the largest segment of its donors. Charitable statistics will be evaluated on the calendar year as well to show the winners and losers. A clear effect of recession was the decreased amount of mailing solicitations and that cutting of development units of organizations.

I wish to remind organizations that without a 12 month plan for raising money the organization has left donations more to chance than strategic.

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Corporate giving is about community outreach with a response to positioning the organization for providing resources at targeted efforts.

A corporation getting involved in various opportunities for interaction with the community needs can greatly increase the corporations and employees grasp of the community.   The personal nature of corporate giving creates a valuable personal and corporate approach to philanthropy.  The message a corporation conveys on its corporate giving program to nonprofits should be for the nonprofit to show why corporate giving is good for their business.  Corporate giving starts with the corporate leadership.

The leadership conveys the meaning/purpose of their corporate philanthropy program.  The leadership conveys the mission, goals and objectives of the corporation’s philanthropic giving effort.

Nonprofits in an effort to win recognition by the decision making team needs to understand the past efforts of philanthropic giving.   Nonprofits should make an effort to define clear goals for the corporation giving of financial, in-kind services or products.

Show how the act of giving makes a difference.

Pic by Hiking artist

Corporate giving does not have to be a last minute philanthropy gesture to a nonprofit.  Corporate Philanthropy to be the most effective giving effort should be planned.  With over 1.2 million nonprofits, strategic giving should support your corporate philanthropy.  Targeting nonprofits that meet the mission of the corporate philanthropy act of giving will improve the likely successes of nonprofits.  Those nonprofits with a mission, which meet corporation’s philanthropy goals towards giving, will increase the likely outcome for both parties to achieve the goals set. 

Corporate executives devise and execute business plans to maximize the likelihood of success of the goals and achieve the monetary return on the invested capital.  Therefore, maximize the effect of corporate giving with a philanthropy business plan.  Identify those elements required by the nonprofits for the corporate giving to occur or for consideration of giving by the corporation.

Have a logical process for the nonprofits to identify how their mission matches the corporate giving mission of the philanthropy endeavor.  Have the nonprofit show what outcomes they would plan to achieve from the corporate philanthropy endeavor.

pic from Ben Heine

Regardless of size, every non-profit organization needs the ability to do some basic administrative functions, such as human resources, accounting, purchasing, and auditing.  Larger non-profit organizations (defined by me as having greater than $3.5 million in revenue) are able to achieve economies of scale in many of these areas, allowing them to spend a smaller percentage of their overall income on administration and more on direct care.  Non-profits generally begin to gain this benefit by expanding to offer a wider cross section of services across multiple communities.  For small non-profit organizations, they are unable to benefit from such economies of scale.  Rather, they tend to excel in treating a small, focused segment of one community very intimately for their cause.  Simply put, they subscribe to the theory of quality over quantity to the cause.  Smaller nonprofits also have a tendency to be more passionate or driven by faith vision to donate their time effort and own funds to the cause.  Thereby, every donation brings them to want to do even more with what donors give.

Nonprofits that have too much money do not always make wise choices.

pic from Jacob Covey

The great majority of non-profit organizations are started with the lofty goal of a cause such as improving or enhancing the lives of a specifically targeted group in their community, with services ranging from child day care for low income mothers to group homes for mentally disabled individuals to saving the environment.  The leadership of the founding individuals of a nonprofit for a cause are the first donors to the nonprofit, volunteers and expected members of the philanthropic nature expected to be reached by the nonprofit.  These non-profits serve a much-needed function around the state or country by picking up where government programs or causes often fall short.  Many of these organizations are small, serving a very specific segment of communities, allowing them to the opportunity to truly get to know who their clients are, what the communities needs are and how best to serve them. 

Extraordinary people with an extra-ordinary desire to improve communities run these non-profits, and who often dedicate and donate much of their free time their whole lives towards helping the cause.  A number of these organizations have donors who wish to remain anonymous.

pic by veggie trader 

Most non-profits depend on government funds to support their operations and pay for their overhead.  Government organizations which provide the funding for these non-profits are constantly struggling with the need to purchase services in the most efficient, cost effective manner possible.  Often larger non-profits are able to offer the efficiency and cost effectiveness the government is looking for and at times government has defaulted to the larger organizations.  However, there is a level of government that realizes that as a donor to a cause that looking for more than just efficiency of over head is important to reach the intended cause.  They are also concerned about quality of care issues and being able to fairly reach the intended communities.  Small non-profits are typically focused on a small, specific segment of the population, which naturally lends itself to a high quality of care or reaching more diverse communities.

The nature of giving by a donor is personal and their reasoning to give to a cause need not be scientific.  However, the nonprofit should be expected to quantify its intended approach with goals, objectives and measures for the intended cause.  A nonprofit being able to clearly show how it intends to be held accountable goes a long way in the providing assurances in philanthropic giving by donors to continue to support the nonprofit.  If nonprofits do not post how they spend their money or funnel it to another organization in lump sums without designating the funds, that is not a accountable nonprofit to give to. 

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The Internal Revenue Services (IRS) reason for issuing nonprofits a tax exempt status is with the purpose that an organization is going to raise money from donors whether it be from individuals, corporate, a philanthropy initiative, in-kind contributions, or volunteers to offset its cost of providing it purposes.  The IRS does not define whether the donation comes from individuals, donors or from corporate philanthropy giving.  The act of donating and the manner under which it happens is up to the nonprofit.  The nonprofit must however, follow any state guideline for the solicitation of funds from donors.

There have been many different opinions on what percent a nonprofit should raise from donors.  There is even some debate of whether government funds should be considered part of that offset, which it currently is to be considered a public charity.   However, there are several key examples that provide a guideline.  The IRS mandates that an organization spend a minimum of 5% of it’s funds each year.  The federal or state government has required a 10%-25% match or limited what the money can be spent on.

The reason largely lies in people’s understanding of the description of a non-profit.  While non-profit companies are not in the business to profit from their activities, they are also not called “for-loss” organizations either. There is wide expectation of the need and understand that non-profit companies are under the same pressures as for-profit companies to operate as efficiently as possible to avoid loss in a down economy.  A nonprofit being dependent on the philanthropic nature of corporations, individual donors and foundation does not mean that donations (capital) are to be used inefficiently.

The great majority of non-profit organizations are started with the lofty goal of improving or enhancing the lives of a specifically targeted group in their community, with services ranging from child day care for low income mothers to group homes for mentally disabled individuals to saving the environment.  The leadership of the founding individuals of a nonprofit are the first donors to the nonprofit, volunteers and expected members of the philanthropic nature expected to be reached by the nonprofit.  These non-profits serve a much-needed function around the state by picking up where government programs often fall short.  Many of these organizations are small, serving a very specific segment of communities, allowing them the opportunity to truly get to know who their clients are, what the communities needs are and how best to serve them.  Extraordinary people with an extra-ordinary desire to improve our communities run these non-profits, and who often dedicate and donating most much of their free time their whole lives to helping others or a cause.

pic by Beo Nquyen

For the dedicated people running small non-profit organizations, the rewards can be endless.  Unfortunately, they also face many of the problems as other small business owners, namely where to find donors (money) for start-up,  growth, obtaining health benefits for their employees, finding the right bank to fit their nonprofit needs, and drafting a plan that will help them achieve their ultimate visions of the nonprofit.

The nonprofit industry is primarily financed through two main sources, government agencies and private sector philanthropy.  Both sources of these donations are heavily tied to the health of the economy, with the private donor sector being more closely tied to the performance of investment securities.  With both the economy and the major aggregate indexes (equity and fixed income) having suffered declines in the past few years, nonprofit funding has leveled off and the competition for funds among non-profits has become much more fierce.  Both government agencies and philanthropic organizations are becoming more selective in distributing funds, looking for nonprofit organizations providing a more effective use of its funds. It is a fallacy to think that bigger nonprofits are better at using the donations.  A philanthropic program for giving to make the biggest impact should think about how the focus of the donation will create an equable impact on the intended geographic area.