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Contracting for Fundraising

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We recently had the question at Spokes, “What are the pros and cons of using independent contractors for fundraising and basing their fee on the amount of money raised?” Good question!

The answer? Well, when done correctly, it is legal, but there are lots of steps that must be taken. In addition, there are ethical and practical issues that you really need to consider before taking this route. If you or your board is considering this approach, Spokes recommends you carefully review the following references, in order.

Compensating Nonprofit Fundraisers – this is a good overview that gives pros and cons.

Professional Fundraising Consultants and Grantwriters  – Pay particular attention to the section, “Did you know?”

California Attorney General’s Guide for Charities – California is a state that does require both the fundraising professional or company to be registered and the charity/nonprofit to follow specific procedures as to contracting, etc. See Chapter 9 beginning page 68.

AB5 issue. – Finally, be aware that California now has very stringent rules with regard to employees versus independent contractors. Basically, a person is an employee unless “proven otherwise.” There is a list of exceptions that includes “grant writer” but not fundraising consultants.

Do You File IRS Form 990-EZ?

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The Taxpayer First Act, enacted July 1, 2019, requires tax-exempt organizations to electronically file information returns and related forms. The requirement to file electronically generally became effective for tax years beginning after July 1, 2019. However, for small exempt organizations, the legislation specifically allowed a postponement (“transitional relief”). As a result:

  • For tax years ending before July 31, 2021, the IRS will accept either paper or electronic filing of Form 990-EZ, Short Form Return of Organization Exempt from Income Tax.
  • For tax years ending July 31, 2021, and later, Forms 990-EZ must be filed electronically.

IRS will be sending an educational letter (Letter 6194) to organizations that filed paper Forms 990-EZ previously.

Resources for Effective Board Governance

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BoardSource is a great resource for all things related to nonprofit board leadership and governance. For example, Recommended Governance Practices is a six page document that gives high level advice in three areas:

  • Essential Practices: practices to function successfully.
  • Leading Practices: practices to move toward board excellence
  • Compliance Practices: practices that address legal requirements

Download a free copy here.

Post-Pandemic Fundraising

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As we watch the world slowly return to a new normal after a global crisis, it’s important to assess which fundraising strategies we have used during the pandemic are worthwhile to continue. Traditional and long-standing fundraising plans have been replaced with more flexible and innovative ideas. Some nonprofits enjoy and find value in online fundraising while others anxiously await in-person events. 

Did the pandemic strengthen or strain your organization’s online presence? No matter how your nonprofit decides to fundraise post-pandemic, here are five resources that may offer ideas and guidance. 

The European Fundraising Association surveyed over 800 charitable organizations on the skills they have relied on to persevere during the pandemic and reported that digital fundraising capabilities and strategic financial planning are two of the most crucial skills to maintain in a post-pandemic world. 

The Chronicle of Philanthropy covers what fundraisers hope will stick post-pandemic, which could mean changing the traditional rules of fundraising and relying on donor trust to fundraise for unknown potential and possibilities. 

NonProfit Pro provides examples of innovative uses of online fundraising and how they can remain useful post-pandemic. Volunteers of America Illinois utilizes Facebook for donor acquisition, United Service Organization conducts virtual fireside chats to connect with donors, and the Boys & Girls Club of America has begun to evolve their fundraising messaging to be more strength and equity based. 

Nonprofit Tech for Good lists fundraising trends which resulted from the pandemic such as virtual events, recurring giving, strong connections with other organizations, and more. 

AFP outlines fundraising planning in 2021 and preparing for a new era with suggestions such as holding hybrid in-person and online events, re-examining your donor database, and remaining intentional about increasing diversity in all aspects of your nonprofit. 

Policy or Procedure?

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Setting policy is an important responsibility of the board of directors of a nonprofit organization. Determining procedures is not. That’s why board members need to know the difference!

Policies are general statements that express principles or requirements of behavior for the organization. They don’t change often. What are some examples of basic policies nonprofits should have in place?

  • Conflict of Interest
  • Whistle Blower
  • Document Retention and Destruction
  • Gift Acceptance
  • Financial Control
  • Investment

By contrast, procedures lay out the steps and processes by which the policies will be implemented. They do change, as often as needed, to make sure they are working right.

When a nonprofit has paid staff, generally it is the Board’s responsibility to establish polices and the staff’s responsibility to develop the procedures to implement the policies. In an all-volunteer nonprofit, the job of developing procedures probably should be delegated to a committee. In either case, the goal is for the board as a whole to work at the level of policy and strategic direction, and avoid “micromanaging” the organization.

Two good resources to learn more:

What Governance Policies Should Your Nonprofit Have?
Creating Nonprofit Policies

Guiding nonprofits to achieve their goals through support and expert resources.

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