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Cannabis-related Contributions: Should you accept them?

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The growing and selling of marijuana is almost officially legal in San Luis Obispo County. In fact, the San Luis Obispo County Board of Supervisors is currently scheduled to adopt a permanent ordinance for cannabis land use regulations on October 3, 2017. In the next few months, marijuana promises to become very big business in our local economy – a potential challenge or an opportunity for many local nonprofits.

As the legal cannabis industry grows, is your nonprofit ready to accept or deny charitable contributions from cannabis-related businesses? If not, it may be time to have a board discussion on the topic. It may take several years before the legal regulations governing cannabis-related contributions – if there will be any – are fully defined. In the meantime, it would be wise to have a formal policy to guide your organization.

Here are a few points to consider: 

If the funds being donated were obtained from legal means, you may accept them. Never knowingly accept donations that come from revenues related to the sale of heroin or other illegal drugs or activities. Be sure to define a process for vetting donors before accepting gifts. The California Secretary of State’s website can be helpful in verifying legitimate businesses and personal references can be a resource for vetting individual donors you may not know.

And, speaking of legal parameters, there is some current confusion on this topic for nonprofits that receive federal funds. Most federal grant contracts stipulate that the recipient organization must not violate any federal laws and doing so will cause a forfeiture of the federal funds. However, while selling and using marijuana for recreational purposes currently remains a federal crime, there is no federal or state law prohibiting nonprofits from accepting gifts from cannabis businesses. As long as your nonprofit is not growing, selling, or distributing recreational marijuana, you will be in compliance with federal laws. (As always, be sure to carefully review and abide by all federal contract provisions as they may evolve and change.)

Because marijuana is being legalized in California, the debate to accept contributions from the cannabis industry is less a legal one and more an ethical one. It’s up to your board of directors to determine what are the ethical standards or expectations to which your organization will adhere. As an example, consider a tobacco business wants to make a donation to a cancer-related nonprofit. There are two schools of thought the nonprofit could employ:

  • The tobacco business is causing the problems we are trying to solve. Why shouldn’t it be held accountable and contribute to the solutions we are creating?
  • The tobacco business is causing the problems we are trying to solve. It is an enemy to our mission and we cannot be associated with it in any way without losing our credibility and integrity.

Both are points are fair and reasonable. Does the use or growing of marijuana negatively affect the work of your organization? Will accepting a contribution from a cannabis business cause you to lose the support of donors? Can you afford to lose those donors? Alternatively, if accepting a significant donation from a cannabis business will allow you to dramatically increase the number of clients you serve, do you have an ethical obligation to accept it in order to do more of your good work? Again, there is no single “right” answer that will serve all nonprofit organizations. It’s up to you to determine which answer best serves the men, women, children, plants, and/or animals who rely on your mission and programs.

Lastly, take steps to understand what is motivating a cannabis business to make a donation to your organization. Cannabis business are not recognized by the federal government. And, it is the IRS, a federal agency, which authorizes tax deductions for charitable contributions. Therefore, unlike other businesses, cannabis businesses will not be able to receive a charitable deduction for the gifts they make (at least until federal law changes). Is the cannabis business making a contribution in hopes of receiving brand exposure or awareness? If your nonprofit serves minors, promoting a cannabis business may present an ethical conflict. On the other hand, if the cannabis business is making a contribution in honor of an employee or friend who benefited from your program, no ethical conflict may exist.

If you decide to accept contributions from cannabis businesses, remember to:

Update and/or finalize your nonprofit’s gift acceptance policy accordingly. It’s hard to anticipate every unusual gift you may be offered, so be sure to outline conditions when legal counsel will be sought for guidance and to ensure legal compliance. Remember, Spokes has sample policies to help guide you.

Keep it in California. Only accept gifts from those recognized businesses that are incorporated and located in California. If a cannabis business located in Arizona (where selling recreational marijuana is illegal), or even Washington (where selling recreational marijuana is legal), wants to make a donation to your organization, be cautious and avoid the risk. Especially if you are exchanging any goods or services for the gift (e.g. tickets and advertising for an event sponsorship). Conducting business across state lines could place your nonprofit in the jurisdiction of the federal government and a tricky gray area.

Be consistent. Once you set your policy, stick to it and treat all donors the same. Borrowing from the example above, if you feel it is unethical to promote a cannabis business as a donor because your organization serves minors, you’ll need to hold the same standard for the many wineries and breweries that generously contribute to the nonprofit sector and also sell a product that is illegal for minors.

Follow your mission – doing so will always protect your organization. Various government agencies and the insurance industry are still grappling with how to define and protect the insurable interests relevant to cannabis businesses. To protect your nonprofit from a potential or emerging insurance risk, always use the donated funds received for clearly defined mission-related activities and expenses. Avoid accepting restricted gifts for new programs or activities requested by the cannabis business donor that are not closely aligned with your mission or current strategic priorities.

File IRS tax form 8300 when you receive more than $10,000 in cash from a single donor in a single donation or two “related” donations. For now, most cannabis businesses are unable to bank like other businesses and are forced to operate on a cash-only basis when paying for everything from rent to contributions. To protect your organization from unwittingly participating in illegal money-laundering activities, complete and file form 8300 within 15 days of receiving the funds. Ask a CPA for guidance, as necessary.

Continue your board’s discussion of the ethical concerns they may have regarding cannabis-related contributions (as well as all other types of contributions). Good leadership requires a willingness to make the best decision possible with the information that is currently available. As new information and understanding becomes available around the cannabis industry, new decisions may be necessary. Evolution is expected and responsible. Discuss, decide, and document your process.

We will continue to research issues related to cannabis-related contributions and look forward to updating you on new information and best practices we discover. If you have a related experience or story to share with us and the Spokes community, please contact us.

Ditching Technology (just this once) May Bring Your Nonprofit More Money

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It’s almost that time of year to start drafting your annual appeal. You may be debating about an all-email campaign or a written campaign. Turns out, a solicitation that is printed mail solicitation may be more successful. And, a phone call, may be even more so.
Yup. Technology may not be the solution for every potential donor you have. You may already know that Baby Boomers like to read their mail, but did you know that Millennials love to receive mail, too?
The Nonprofit Quarterly article, “The Case for Going Low Tech in Communications and Fundraising”, written by Sheela Nimishakavi offers some good advice:
Only use digital communication  AFTER you have already created a connection with a prospect or donor through other means (unless the prospect/donor has indicated a preference for receiving communications digitally).
Nimishakavi writes, “The golden rule of stakeholder engagement still applies – digital communication is good, phone is better, but in-person is the best.” Read her entire article here and consider making a few follow-up phone calls or visits after your solicitations are sent this year. Good luck!

An Easy New Way to Connect with Grantmakers…

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Spokes Members can now connect grant research and personal relationships through LinkedIn

The most successful grants are always the ones that come as the result of a personal connection with the granting organization. But, making a personal connection can be much more challenging than writing a compelling narrative. What’s a grantwriter to do?

Never fear! Foundation Directory Online has the perfect solution for you!

Foundation Directory Online just announced a partnership with LinkedIn that will allow you to quickly and easily identify personal connections between your board members and key staff members of granting organizations. Spokes Members can simply log onto Foundation Directory Online, select a foundation, view its profile, and look for the LinkedIn logo to see who in your network knows someone at the foundation.

In order to take full advantage of this new system, be sure to establish an organization profile on LinkedIn and connect each of your board members with it. That way, you’ll be able to immediately see any connections between your team and the grantmaker’s team.

Once you do find a connection, ask the connected board member to send an outreach letter to introduce your organization to the foundation. (This is a great strategy for reaching out to foundations that don’t accept uninvited grant applications, as well.) Find a sample outreach letter here.

Don’t know what Foundation Directory Online is? It’s THE premiere grants research database with more than 140,000 grant makers profiled, including many that don’t have websites and are challenging to find. Foundation Directory Online now also includes government grants, too! A one-year subscription to Foundation Directory Online costs $1,500, but Spokes members receive free access. Call our office to reserve one of our Foundation Directory Online computer terminals in San Luis Obispo and Santa Maria or see if you qualify for a remote pass and start securing new grants today!

How to Ask for Overhead Funding

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90Many nonprofits who receive government grants/contracts were thrilled when the U.S. Office of Management and Budgets (OMB) implemented its “Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards” as part of the Council on Financial Assistance Reform in December 2014. More commonly known as “Uniform Guidance,” the program mandates that all nonprofit-government contracts that include federal money cover 10% or more of the indirect costs for the related program or service it is subsidizing. Unfortunately, at least 30% of nonprofit-government grants/contracts in California are currently failing to reimburse at the required 10% or more rate.

It’s not just our federal government that is struggling with the concept of overhead costs – private donors and foundations struggle as well. As part of its Nonprofit Overhead Project, CalNonprofits wanted to better understand donor resistance to paying for overhead costs and engaged Lake Research to study the issue. Specifically, Lake Research surveyed California County Supervisors and donors to measure:

  • How these audiences perceive nonprofits generally;
  • How they perceive nonprofits that are worthy of their contract or donation versus those that are not; and,
  • What “overhead” means to them and how comfortable they are funding it.

And, the results were very interesting. Following are some of the highlights:

County Supervisors Results:

  • Supervisors know that nonprofit overhead is a reality of doing business, and they are not opposed to funding nonprofit overhead in general. They are more concerned with ineffective management than with dishonesty or malfeasance.
  • As politicians, County Supervisors are highly tuned in to messaging, and are resistant to being messaged to. Replacing “overhead” with another term would elicit a strongly negative reaction. Language that comes across as doublespeak—such as replacing “overhead” with another term such as “real costs”—quickly raises red flags
  • Supervisors want overhead and language about overhead to be clearly defined. The phrases “real costs” and “foundational costs” both test well, but they still raise questions about definitions. Supervisors want to know what, specifically, they are being asked to fund.

Private Donor Results:

  • Donors judge nonprofits on a range of intangible metrics, including their gut feelings – but generally like when they are visible in the community.
  • Donors are encouraged to give based on urgent problems that they see in the news or their community, and are highly moved by personal stories.
  • Donors are highly trusting of where their money goes. The focus groups indicated that donors may feel this way partially out of a desire to stand by the organizations that they have decided to support.
  • Donors are not convinced by lofty or corporate sounding messages. For many, donating to a nonprofit is not comparable to investing in a company. Donations to nonprofits aren’t seen as investments. These actions are need- and value-driven.
  • Donors prefer to receive email updates from nonprofits they donate to.

So, what can we learn from these findings? Here are a few tips for your next grant proposal or donor conversation about overhead:

  1. First, use the term “operating costs” rather than “overhead costs,” “real costs,” “full costs” or “basic costs.”
  2. Don’t use words like “top-notch” and “high-quality,” which imply a costly operation.
  3. Emphasize results. Make performance central to donation messaging. Integrate “overhead” into the value of performance, explaining that outcomes matter most, and overhead is necessary to achieve them.
  4. Specify the types of investments included within “overhead,” e.g. training, planning, evaluation, and internal systems.
  5. Talk about how overhead allows your organization to meet emerging needs (rising rents, etc.), a reality donors know a nonprofit – and everyone else – faces.

Additionally, for private donors, include these tactics:

  • Treat giving as a values-driven action.
  • Focus on immediate needs that the organization is meeting.
  • Use words like “effective,” “responsible,” and “viable” when developing persuasive messaging.
  • Demonstrate that you can stretch a budget.
  • Follow through on what you say you will do and demonstrate this to donors.
  • Share with donors the importance of operating costs in your ability to meet your organizational goals.
  • Talk about the community you serve and how your organization’s dollars are reinvested in the community.

And, for County Supervisors, try these:

  • Build on your Supervisor’s existing recognition of the importance of overhead funding.
  • Don’t be afraid to specifically discuss and inquire about the OMB requirements and the problem with counties not implementing that guidance.
  • Reach out to Supervisors with personal backgrounds in the nonprofit world.
  • Reach out to County staffers – Supervisors rely on them to inform their funding decisions.

We nonprofits can’t hope to grow our donors’ understanding of our overhead costs if we don’t adequately and thoroughly explain our needs. Use these tips to start more direct and honest overhead conversations with your public and private donors today.

4 Steps to Better Networking

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Relationships, relationships, relationships. Every nonprofit organization relies on its external relationships to achieve its mission. Relationships with donors, relationships with clients, relationships with volunteers – they’re all paramount to our success. We are continually asking our board members and staff to network and create new relationships for our organizations. And, yet, even though we recognize that networking is a necessity for our nonprofits, many of us are overwhelmed by where to start or how to do it successfully.

Are you a confident and competent “networker”? Take this test to find out:

Quick! Fill in the missing letters:

W_ _ H
S H _ _ E R

S _ _ P

Which words did you spell?

If you spelled “wish,” “shaker,” or “step,” you are most likely very successful at networking. If you spelled “wash,” “shower,” or “soap,” however, you may have a negative perception of networking and struggle to make connections at social events. In fact, you may find professional networking to be – at best – distasteful and – at worst –  “morally dirty.”

If you are more of a “washer” than a “wisher,” don’t worry. In their article, Learn to Love Networking published in the May 2016 issue of the Harvard Business Review, authors Tiziana Casciaro, Francesco Gino, and Maryam Kouchaki offer four simple steps to help anyone learn to be excited about networking – and more effective:
  1. Focus on what you can learn through networking;
  2. Identify common interests you have with the folks you meet to create truly meaningful relationships;
  3. Give what you can to those you meet; and
  4. Network in order to serve others; a higher purpose will make your interactions more authentic and enjoyable.
Read the entire article here (https://hbr.org/2016/05/learn-to-love-networking) to learn more about each of these steps and make your next “mixer” your best one yet! Want a little practice? Be sure to join us for our next Spokes Happy Hub Hour on Tuesday, September 20, 2016 from 5:30pm-6:30pm at Spokes’ offices. It’s a fun, fast, free, and fulfilling way to meet other great nonprofit professionals, volunteers, consultants and donors just like you!
Click here to register today!

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