Donors must keep track of all their donations regardless of the amount. For donations under $250, something as simple as a bank record will do.  For charitable contributions over $250 in value, the organization must provide a written acknowledgment.

The written acknowledgement must include:

1)      The organization’s complete name

2)      The date

3)      The amount of the gift

4)      A statement that the organization received the gift

5)      A statement whether the donor received any goods or services in exchange for the gift

The above information must be given to the donors by the time they file a tax return for the year the gift was made.

Further disclosure statements are required if gifts are over $75 and the donor receives goods or services in return. Organizations must state only the excess of the donation over the goods/services as a charitable contribution, and they must also state the estimate value of the goods and services that was exchanged.

For contributions over $10,000 in value, you must file an IRS Form 8300 and provide the donor with a copy.

When you receive an individual donation, wouldn’t it be a good idea to include this information with your Thank You note? 

- Annette

Bob Ottenhoff, president and CEO of GuideStar, and Greg Ulrich, director at Hope Consulting, suggest three ways that will better promote informed giving:

1)      Focus on common sectors that donors generally tend to research about.

2)      Engage donors. Donors want the full picture, in particularly the impact of an organization. Simple ratings are not enough.

3)      Get information to the donor. Donors don’t “shop” for nonprofits. Materials must be captivating as well as easily accessible.

Once a nonprofit promotes its impact and effectiveness to the public, donors feel more connected and better informed about the cause; thus, leading to further understanding and emotional connections.

How do you inform your donors?

- Annette

What better way to involve another person than story sharing?

Thaler Pekar, frequent guest lecturer at Columbia University Graduate Program in Strategic Communications, discusses the difference between story sharing and storytelling. “Telling is transactional. When you tell someone something, you shut down true communication.” Sharing creates meaning. It is about actively listening and having valuable dialogues. “It’s about moving beyond sympathy to empathy.” It is the most effective way to express complex emotions and truth.

This is particularly important to remember for nonprofits. Your stories must be shared. You are out there changing communities and transforming the world. Allow others to see the incredible solutions you yearn for, the wonderful future you envision, and the way your audience is an essential part of your amazing mission. These people can become heroes through your stories. That is the power of story sharing.

Just as the work that you do is life changing, communication is also transformative. Together, you can change the world.

Are you going to simply tell your story or are you willing to share?

- Annette

As I put together this event, I was struck by how many corners of the world you touch through your programs:  Brazil, China, Costa Rica, Ecuador, India, Israel, Nicaragua, Palestine, Peru, South Africa, Tanzania, Vietnam, and Zimbabwe; of course you also saturate our communities here in the Bay Area — Benicia, Berkeley, Fremont, Milpitas, Oakland, San Francisco, San Jose, San Martin and Sunnyvale.

You also do incredible things:

• You are a food line to the homeless, a center for spiritual practices and education, a community for believers – Jewish, Christian, Muslim and Buddhist.
• You are a support group for cancer patients, a social worker and a nutritionist to help after the diagnosis; a legal advocate for transgender people, mentors for our youth.
• You are a community garden, sustainable agriculture and urban farming.
• You diagnose HIV and AIDS in rural Africa; and build partnerships to prevent and treat HIV and AIDS with marginalized populations.
• You are a pediatric surgeon in rural India; prenatal care in Africa; a whole new concept for doctors collaborating with midwives.
• You create a global platform for scientists and patients to share stories, information, and research about cardiology; and build open technology sources for nonprofit organizations.
• You make loans to emerging youth businesses; change the way and create a new way for business to report material sustainability issues; advocate for a strong tourism and hotel industry in San Francisco to build a strong economy; and re-vision whole neighborhoods.
• You rebuild homes; protect wilderness lands; study the migration of butterflies; protect and preserve humane treatment of animals.
• You buy and refurbish foreclosed homes and then sell them to low-income families.
• You tutor our children; develop models of free on-line classrooms; provide scholarships to college students; engage students in new concepts for Middle-East peace; and teach non-violence tools to change the world.

Can you tell how much I love this work and why I think we have the bst clients on the planet?  It is our honor and privilege to work with each of you and support you misison of doing good in the world.

Thanks

- Annette

Jeanne Bell, CEO of CompassPoint Nonprofit Services, and one of the nation’s leaders in nonprofit finance, strategy, and leadership, will speak to our clients and share her latest insights.  Jeanne is a nationally recognized leader in nonprofit leadership, strategy, and finance.  Bell has also conducted a series of research projects on nonprofit executive leadership, serves as the Chair of the Alliance for Nonprofit Management and is a Contributing Editor at The Nonprofit Quarterly. Her talk will focus on the book she recently co-authored, Nonprofit Sustainability: Making Strategy Decisions for Financial Viability.

“CompassPoint is honored to celebrate this event with Nonprofit Suite,” Bell said. “We share the same vision, that nonprofits are critical to the success of our communities. And we support Nonprofit Suite in their goal of helping nonprofits
manage their finances and resources most effectively so they can accomplish their mission and continue to grow and serve our community.”

Since its founding in 2006, Nonprofit Suite has developed lasting relationships with numerous 501(c)(3) organizations by providing high level financial expertise to keep organizations abreast of their budgetary situations, and allowing employees of the charitable organizations to focus on serving the community. Over the years, we have built a team of accountants solely dedicated to accounting for nonprofits.

Your response within the nonprofit world has been overwhelmingly positive.  We have seen many nonprofits succeed in tough times by getting smarter about how to use and leverage outsourced talent and implement careful long-range planning.

I have often said — “We have the best clients on the planet!” This is a fabulous niche for us – we get to use our expertise and experience to support nonprofit organizations with practical tools and useful insights to improve our communities,  manage nonprofit missions and make a difference.

Thank you.

- Annette

To record the purchase of acquisition of a fixed asset, your accounting person will post the full price/value of the item as an Asset on the Balance Sheet.  The item is put on your depreciation schedule and then, periodically (usually month), a portion of the price is expensed as depreciation.  This allows the purchase price to be expensed over multiple years rather than recording it as an unusually large expense in a single year.

The particular dollar amount of your capitalization threshold is your decision.  We generally recommend a threshold of $1,500; however, in some circumstances, the dollar amount should be much higher and sometimes even lower.  There is no need to capitalize (i.e., create a fixed asset) for every office chair or inexpensive desktop computer you buy, even though you plan on using it for more than a year.  But that new network server you bought, that will be capitalized — so would the purchase of 10 computers at the same time because, as a group, the purchase price is over your threshold for capitalization.

You might be surprised to learn that your cost for website development can be considered a fixed asset and should be reviewed carefully by your accounting staff prior to audit.  Website maintenance is not capitalized, but re-designing your website (if it costs more than your dollar-amount threshold would need to be treated as a fixed asset.

Capital purchases should be tracked on a depreciation schedule (spreadsheet) showing:

• the date of purchase
• item description
• cost
• number of years of useful life
• calculation of the annual depreciation amounts from the date it was put in service.

Ideally, your Accounting Policies & Procedures will include something about capital purchases — the threshold amount, any approval requirements and funding arrangements the board and management might determine to be appropriate.

Finally, once a year, at your year-end, you will need to make sure your Fixed Asset list is up to date.  If you have added, sold, given-away or thrown-away any of the items, your accountant needs to update the list of what you have on hand at your year-end.

Thanks

- Annette

Well, our fascination runs smack dab into the law of diminishing returns more often than not.  There is a moment when adding more effort will not produce significantly more gains.  This is the moment when we have to step away from the number because it is “good enough.”

Auditors have a term for this.  They call this “materiality.”  For instance, in your annual budget of $1.5M, the $79.00 discrepancy in a particular account just doesn’t rise to the threshold of being meaningful. 

Perfection certainly makes sense when you are packing a parachute or doing surgery, but perfection is simply unattainable in most areas of life . . . or at least unattainable in a long-term, sustainable way.  I think that’s what makes us human.

Where do you find yourself running into the Law of Diminishing Returns?

- Annette

The National Center for Charitable Stastitics created a workgroup a couple of years ago to look at the question and answer the question:  “What is an adequate operating reserve?”  After much research, the answer came back:  “It depends.”  Turns out, there is no one-size-fits-all answer to the question.  Despite the many variables and considerations that prevent a precise answer to the question, the Workgroup made the following recommendations:

1. The minimum operating reserve ratio at the lowest point during the year is 25% or three months of the annual expense budget.
2. If the circumstances of your nonprofit organization lead you to use a different threshold, use the simplest and most widely applicable formula possible.

Nonprofit does not mean “no surplus allowed.”  Your surplus at the end of the year simply remains in your organization (as opposed to being paid to individuals or shareholders in a for-profit business).  You can and should have an operating reserve to ward off cash flow stress.  More importantly, by having an operating reserve, you ensure the energy of the organization can be placed in good long-term decision-making rather than being forced to make expensive short-term crisis-based decisions. 

If you do not have an operating reserve, start your savings plan today.  Add to the reserve every month in whatever amount you can. 

- Annette

The IRS thinks of expenses for nonprofit organizations all three categories:

1. Program
2. Fundraising (sometimes called Development) and
3. Management & General (M&G, sometimes called Administration)

Don’t use M&G as a catch-all for the time someone spends in the office or catches up on emails.  This is NOT M&G.

I recommend thinking of the categories in this way:

• M&G is limited to all Board-level, strategic planning and issues of the organization, especially as it relates to the corporate entity.  So, for instance, legal and accounting services (including your audit), travel and meeting expenses for your Board of Directors, and the strategic planning consultant you hired are all 100% M&G expense.
• Fundraising is limited to activities related to an “ask” for financial supporting, including expenses of a fundraising event, a grant writer, or even an envelope insert in a mailing. 
• Finally, Program Expenses are all about your mission and the work you do to accomplish your mission.  This includes all of the time you spend supervising program managers, working with constituents about the direction of program and delivering your services.

The Executive Director may spend 5 to 10% of time with the Board, audit and strategy, and maybe another 10% to 25% on Fundraising . . . but every ED I have ever met spends far and away the majority of time creating buzz for the mission, building relationships with stakeholders, working with staff and program implementation and furthering the cause.  So it is frightening to see 100% of the ED’s compensation be assigned to M&G.

By refining your definition of M&G expenses, you will improve the accuracy of your cost allocation model and avoid this common mistake.

- Annette

1. Historical Budget.  If you roll forward your budget from last year and maybe tweak a couple of numbers, then you have a historical budget.  You are so busy looking in the rearview mirror, you do not see where you are going.  This budget has the same line items and the same programs you have always had.  Since it is stale from years of re-use, you no longer look to the budget as a helpful part of your management toolbox. 
2. Operational Budget.  This budget looks ahead and includes new goals, but only goals you think are “doable.”  In order for an item to make it into your budget, you first have to believe you will secure the funding to pay for it.  Your Board – and maybe even you yourself – put a high value on achieving your goals and anything less than 100% of budget is failure.  So your budget is true for where you are now and whatever incremental change you think will happen in the year ahead.  This is an operational budget you are confident you will achieve.
3. Aspirational Budget.  This budget tells the story of great vision and hope – the same level of energy and passion the founder first brought to the organization.  This budget gives you organizational goals currently beyond your reach.  This is not pie-in-the-sky thinking; this is a story of dreams fulfilled, of plans effectively leading to change, this is high-impact and high-growth goals.  This is a story of motivation to go as far and as wide as you possibly can. 

Your budget is a map to fulfill the mission of your organization.  The only difference between your budget and your mission statement is the budget tells the story in numbers.

If you can dream, so can your budget.

- Annette