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What’s the Code: Exploring Fundraising Issues, Trends & Regulations
Michael J. Baker, CFRE
7/13/2011 1www.m3development.net
“To give away money is an easy matter and in anyone’s power. But to decide to whom to give it and how large and when, and for what purpose, is neither in everyone’s power-nor an easy matter. Hence it is that such excellence is raise, praiseworthy and noble.”
» Aristotle
7/13/2011 2www.m3development.net
• 1,046,719 Public Charities Registered with IRS in US
• 59% Growth over past 10 Years
• $1.44 Trillion in total Revenues
• $1.34 Trillion in total Expenses
• $2.6 Trillion in total Assets
• 52,121 Public Charities Registered with IRS in Florida
• 69% Growth over past 10 Years
• $54 Billion in total Revenues
• $91 Billion in total Assets
Non-Profits
7/13/2011 3www.m3development.net
Source: National Center of Charitable Statistics
Non-Profits
• Charitable Giving was $280.3 in 2009 compared with $303.75 Billion in 2008
• Charitable Giving is 2% of the US Gross Domestic Product (GDP)
• 1,046,719 NPO’s in US 2010
• June 2011, 275,000 NPO’s lost tax exempt status
• Employ 1 in Every 14 American Workers
• 9% of US Workforce
• Volunteers
• 64 million people
• 30% of all Women Volunteer
• 23% of all Men Volunteer
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Source: National Center of Charitable Statistics & Giving USA 2011
Professionals in Fundraising
• According to U.S. News and World Report,
fundraising is one of the top 25 hottest jobs for
the future.
• Average salary for Development Director
between $66K & $76K.
Source: U.S. News & World Report; AFP & Nonprofit Times
7/13/2011 5www.m3development.net
Regulatory Changes
• IRS Form 990 Redesigned effective 2009
returns for 2008 tax year to promote tax
compliance & transparency.
• IRS is currently seeking comments on new 990
by 8.1.2011 for upcoming revision.
• Pension Protection Act of 2006 had provision if
charity did not file 990 in past 3 years the org
automatically lost their tax-exempt status.
Source: IRS
7/13/2011 6www.m3development.net
2011 Federal Taxes• Income tax rates from 10% up to
35% (expires end of 2012)
• Long-term capital gains and dividends (expires end of 2012)
– For taxpayers in the 15% income tax bracket and below, the rate is zero.
– For taxpayers in the 25% bracket and above, the rate is 15%.
• Estate tax exemption up to $5,000,000 (expires end of 2012)
Source: IRS
7/13/2011 7www.m3development.net
Florida Regulations
• Florida law requires all charities to register
with the Florida Department of Agriculture and
Consumer Services.
• These groups do not file with the Department
of Agriculture and Consumer Services.
– religious or educational institutions, government
agencies or political groups
Source: FL Department of Agriculture & Consumer Services
7/13/2011 8www.m3development.net
7/13/2011 9www.m3development.net
The Giving PledgePaul G. Allen
Laura and John Arnold
Nicolas Berggruen
Michael R. Bloomberg
Eli and Edythe Broad
Warren Buffett
Jean and Steve Case
Michele Chan & Patrick Soon-Shiong
Lee and Toby Cooperman
Joyce and Bill Cummings
Ray and Barbara Dalio
John Paul DeJoria
Barry Diller & Diane von Furstenberg
Ann and John Doerr
Larry Ellison
Charles F. Feeney
Ted Forstmann
Phillip and Patricia Frost
Bill and Melinda Gates
David and Barbara Green
Jeff Greene
Harold and Sue Ann Hamm
Lyda Hill
Barron Hilton
Jon and Karen Huntsman
Carl Icahn
Joan and Irwin Jacobs
George B. Kaiser
Vinod and Neeru Khosla
Sidney Kimmel
Rich and Nancy Kinder
Elaine and Ken Langone
Gerry and Marguerite Lenfest
Lorry I. Lokey
George Lucas
Duncan and Nancy MacMillan
Alfred E. Mann
Joe and Rika Mansueto
Bernie and Billi Marcus
Michael and Lori Milken
George P. Mitchell
Thomas S. Monaghan
Tashia and John Morgridge
Dustin Moskovitz
Pierre and Pam Omidyar
Bernard and Barbro Osher
Ronald O. Perelman
Peter G. Peterson
T. Boone Pickens
Julian H. Robertson, Jr.
David Rockefeller
Edward W. and Deedie Potter Rose
David M. Rubenstein
Herb and Marion Sandler
Denny Sanford
Vicki and Roger Sant
Lynn Schusterman
Walter Scott, Jr.
Tom and Cindy Secunda
Annette and Harold Simmons
Jim and Marilyn Simons
Jeff Skoll
Tom Steyer and Kat Taylor
Jim and Virginia Stowers
Ted Turner
Sanford and Joan Weill
Shelby White
Charles Zegar and Merryl Snow Zegar
Mark Zuckerberg
Source: The Giving Pledge
7/13/2011 10www.m3development.net
Individuals$211.8 B
73%
Foundations$41 B14%
Bequests$22.8 B
8%
Corporations$15.3 B
5%
2010 Charitable Giving
Total = $290.90 Billion
7/13/2011 11www.m3development.net
Source: Giving USA 2011
The 2010 Non-profit Fundraising Survey
Funds raised in 2010 compared with 2009
• In 2010 more organizations saw growth (43%) than declines (33%).
2009 46% reported a decline.
• Larger organizations were more likely to see growth than were very
small organizations.
• There were few meaningful differences in the changes in amounts
received when organizations were grouped by region of the United
States.
• Just 45% of organizations received more than 50% of their
contributions from individual donors.
7/13/2011 www.m3development.net 12
Source: The Nonprofit Research Collaborative 3.2011
The 2010 Non-profit Fundraising Survey
Funds raised in 2010 compared with 2009
• Internet/online giving rose at 58% of the organizations that reported
using it–and more than three‐quarters reported online or Internet
fundraising.
• Major gifts and events proceeds rose at half of the organizations using
them, but for most other fundraising vehicles, the picture was mixed.
• Most organizations held their investment in fundraising steady in 2010.
However, those that increased expenditures, staffing, or volunteer
engagement were more likely to see increases in funds raised. There is
also a relationship between failing to invest in fundraising and failing to
meet goals. That is, investment doesn’t guarantee increases, but
decreased investment is associated with not meeting goals.
7/13/2011 www.m3development.net 13
Source: The Nonprofit Research Collaborative 3.2011
7/13/2011 www.m3development.net 14
7/13/2011 www.m3development.net 15
Most Cost Effective Ways to Raise $
• Email Marketing – $.02 per $1 raised
• Major & Planned Gifts - $.10 to $.20 per $1 raised
• Capital Campaigns - $.10 to $.20 per $1 raised
• Corporations & Foundations - $.20 per $1 raised
• Direct Mail (renewal) - $.20 to $.25 per $1 raised
• Special Events - $.33 to $.50 per $1 raised
• Direct Mail (acquisition) - $1.25 to $1.50 per $1
raised
Source: DMA 2009 & The Nonprofit Handbook 2002
7/13/2011 16www.m3development.net
Generational Giving
7/13/2011 www.m3development.net 17
Source: AFP
7/13/2011 18www.m3development.net
7/13/2011 19www.m3development.net
Recent Scandal’s
• Bernie Madoff stole over $18 Billion
– Many losers…….
• Individual investor’s
• Non-profit investor’s
• Foundation investor’s
• Corporate investor’s
• Government investor’s
Source: Wall Street Journal
7/13/2011 21www.m3development.net
Madoff’s Victims
7/13/2011 22www.m3development.net
Recent News……
The cancer charity Livestrong could face a $5-million to $10-million
loss in donations as investigators probe doping allegations against its
founder, seven-time Tour de France winner Lance Armstrong
Source: Bloomberg 6.7.2011
7/13/2011 23www.m3development.net
Some Recent Florida Press
Florida to Navy Veterans charity: Cease fundraising immediately
The activities of the U.S. Navy Veterans Association "constitute
immediate, serious dangers to the public welfare," the state of Florida
says in a new order, and the same order says the group must cease
operations immediately.
“three companies keep 60 to 90 percent of every dollar collected and
account for most of the $4.58 million the Navy Veterans Florida
chapter said it brought in “
Source: St. Petersburg Times
7/13/2011 24www.m3development.net
Case Study - Ethics in Action
The September 11th Fund
• Created by The New York Community Trust
and United Way of New York City.
• Leadership of Mayor of NYC; CEO’s of org’s;
& 22 independent directors.
• More than 2 million donors gave $534 million.
• Dissolved in 2004 after 559 grants totaling
$528 million were distributed.
7/13/2011 25www.m3development.net
Ethics and accountability: powerful forces in fundraising, ensuring…
• Stakeholder trust and confidence
• Assets are managed and accounted for
• All data are collected/used properly
• Donor privacy and rights are maintained
• Reporting/other requirements are fulfilled
• Programs are executed as promised
• Donors are retained
267/13/2011 www.m3development.net
The Donor Bill of RightsAll Donors Have Theses Rights…
I. To be informed of the organization’s mission, of the way the
organization intends to use donated resources, and of its
capacity to use donations effectively for their intended purposes.
II. To be informed of the identity of those serving on the
organization’s governing board, and to expect the board to
exercise prudent judgement in its stewardship responsibilities.
III. To have access to the organization’s most recent financial
statements.
IV. To be assured their gifts will be used for the purposes for which
they were given.
V. To receive appropriate acknowledgement and recognition.
277/13/2011 www.m3development.net
The Donor Bill of RightsAll Donors Have Theses Rights…
VI. To be assured that information about their donations is handled
with respect and with confidentiality to the extent provided by
law.
VII. To expect that all relationships with individuals representing
organizations of interest to the donor will be professional in
nature.
VIII. To be informed whether those seeking donations are
volunteers, employees of the organization or hired solicitors.
IX. To have the opportunity for their names to be deleted from
mailing lists that an organization may intend to share.
X. To feel free to ask questions when making a donation and to
receive prompt, truthful and forthright answers.
287/13/2011 www.m3development.net
AFP Code of Ethics
Suggests a fundraiser must…
• Seek to inspire others through dedication and
purpose
• Commit to improvement of knowledge and
skills
• Practice integrity, honesty, and full disclosure
297/13/2011 www.m3development.net
What would you do?
• Individual donor works at a company that
matches 2 dollars for every dollar an
employee contributes to a charity up to
$10,000.
• Donor suggests gifts from an event made in
cash be given to him & he’ll write a
personal check for $5,000 getting the
company he works for to match it for
$10,000.7/13/2011 30www.m3development.net
AFP Code of Ethics
The Code consists of two parts:
• A set of Ethical Principles, which state the
general professional values to which AFP
members aspire.
• Ethical Standards, which embody and give
practical measure to the general principles.
7/13/2011 31www.m3development.net
AFP Code of Ethics Adherence to the Fundamental Values
• Donor Intent
• Law
• Organizational Mission
• Personal Honest and Integrity
• Philanthropic Purpose
7/13/2011 32www.m3development.net
AFP Ethics Guidance Helps Us….
• Have an industry standard of excellence.
• Know that percentage based compensation is
not acceptable.
• Know that fees to process gifts via the internet
are ok.
• Have an understanding to interpret ambiguous
circumstances & lead to the correct decision.
7/13/2011 33www.m3development.net
AFP’s Social Media Guidelines
• Is to both Provide fundraising professionals
guidance on social media for their workplace and
to establish guidelines for Organization leaders to
use with their staff, consultants, volunteers,
members, stakeholders and affiliated groups.
• This document also covers the conduct and
expectations of the public when participating in
an organization’s social media or social
networking platforms.
7/13/2011 34www.m3development.net
AFP’s Social Media Guidelines• Organization and Affiliate Organization Staff, Consultants,
Volunteers, Members and Stakeholders
1. Follow Appropriate Industry Laws and Guidelines
2. Be Informed and Interesting – and Listen
3. Always Be Respectful, and Be Polite When Disagreeing
4. Make Sure You Properly Attribute All Content
5. Be Responsive
6. Use Discretion At All Times
7. Transparency, Honesty, and Integrity Are Paramount
8. Don't Mix Worlds – Know the Line Between Professional and
Personal
9. Be Authorized and Official
10. Respond to Violations of Standards 7/13/2011 35www.m3development.net
AFP’s Social Media Guidelines• Public (Non- Members/Non-Stakeholders)
By participating in Organization and Affiliate Organization social media (forums,
discussions, blogs, etc.), public users agree they will not do the following:
1. Post material that the Organization or Affiliate Organization determines is threatening,
harassing, illegal, obscene, defamatory, libelous, or hostile towards any individual or
entity.
2. Post phone numbers or email addresses of yourself or any other individual or entity in the
body of your comments.
3. Post material that infringes on the rights of the Organization or any individual or entity,
including privacy, intellectual property or publication rights. This includes the improper
use of (but is not limited to) images, logos, videos, content, documents, white papers, etc.
4. Post material that promotes or advertises a commercial product or solicits business or
membership or financial or other support in any business, group or organization.
5. Post chain letters, post the same comment multiple times, or otherwise distribute SPAM.
6. Allow any other individual or entity to use your identification for posting or viewing
comments.
7. Post comments under multiple names or using another person’s name.
7/13/2011 36www.m3development.net
Ethics in Practice
377/13/2011 www.m3development.net
Keeping stewardship in mind
The concept of stewardship includes:
• Managing and protecting funds
• Recording and tracking contributions
• Responding to and thanking donors
• Recognizing donors and reporting results
• Protecting donors’ privacy
• Protecting donors’ rights
387/13/2011 www.m3development.net
Maintaining Donor Records
397/13/2011 www.m3development.net
Accountability and donor records
• How to contact the donor
• Donor’s history of participation
• Proper accounting of each contribution
• Security and confidentiality issues
• Ethical considerations about what data to keep
407/13/2011 www.m3development.net
Proper Basic Thank You’s…..
Goods or Services Provided
Dear [Donor]:
“Thank you for your cash contribution of $150 that [organization’s name] received on [date received]. In exchange for your contribution, we gave you a cookbook worth an estimated fair market value of $25. Therefore, for Federal income tax purposes, your contribution deduction is limited to $125. Thank you again.”
Sincerely,
No Goods or Services Provided
Dear [Donor]:
“Thank you for your cash contribution of $300 that [organization’s name] received on December 21, 2006. No goods or services were provided in exchange for your contribution.”
Sincerely,
7/13/2011 41www.m3development.net
AFP Ethics Enforcement
• Submit a query to AFP President & CEO by either mail, email or telephone.
• Request complaint form.
• Fill out complaint form & mail to Office of President & CEO.
– Complaint form must be filled out and signed by the person making the complaint.
– Complaint must be filed within 3 years of the alleged unethical misconduct.
7/13/2011 42www.m3development.net
What Would You Do?
You are the vice president for advancement and alumni affairs of a small college. After many months of careful cultivation, you succeed in obtaining a pledge from a famous alum for the largest gift in the college's history. The only catch is, the alum insists that the college put his name on a building that was named for a previous donor (now deceased) as a condition of that alum's gift. You try to persuade the new donor to change his mind, but the donor is insistent.
Should you refuse this gift?
1. Yes
2. No
3. It depends
4. Don’t know
7/13/2011 43www.m3development.net
Yes you should refuse the
gift………..but why?• You have a responsibility to vigorously and ethically
raise funds for your college while ensuring that the intent of all donors is honestly fulfilled. Presumably the naming of the building (in perpetuity) was a part of the original gift agreement with the previous donor, and to make any changes would be a violation of Standards #12 and #14.
• You must review the original gift agreement and may wish to get advice from counsel if the gift agreement is complex or if one was not written. Assuming the Board approves significant naming opportunities, you will need to take the matter to your Board with the advice that the original donor’s name remain on the building.
7/13/2011 44www.m3development.net
The AFP Ethics Assessment
Inventory™ (EAI) Is Coming Soon!
7/13/2011 www.m3development.net 45
The AFP Ethics Assessment
Inventory™
• New benefit for AFP members.
• Voluntary & confidential.
• Available online in the member’s section in July 2011.
• Provides users a snapshot of their ethical performance along six dimensions of ethical practice.
• Users are compared with AFP peers.
• Designed as developmental tool.
• Funded through the AFP Foundation for Philanthropy with major gifts from numerous Chapters and individuals.
7/13/2011 46www.m3development.net
The AFP Ethics Assessment
Inventory™
Goal: Build a research‐based ethics assessment tool for use by AFP members and others.
Provides users with three pictures:
• Developmental snapshot of individual AFP member as
compared to normative AFP database.
• Developmental snapshot of the organization in which the user works, as compared to a normative database for organizations.
• Developmental snapshot comparing user and her/his
organization.
7/13/2011 47www.m3development.net
The AFP Ethics Assessment
Inventory™
• Built on information and insights provided by AFP members.
• Developed by the Center for Ethical Business Cultures® (CEBC) at the University of St. Thomas~Minnesota with the oversight of AFP Ethics Committee.
• Almost 2,000 AFP members participated in design and testing.
• Linked directly to AFP’s mission: AFP ... advances philanthropy by enabling people and organizations to practice ethical and effective fundraising.
7/13/2011 48www.m3development.net
Universal Principles as FundraisersHonesty:
Fundraisers shall at all times act honestly and truthfully so that the public trust is
protected and donors and beneficiaries are not misled.
Respect:
Fundraisers shall at all times act with respect for the dignity of their profession and
their organization and with respect for the dignity of donors and beneficiaries.
Integrity:
Fundraisers will act openly and with regard to their responsibility for public trust. They
shall disclose all actual or potential conflicts of interest and avoid any appearance
of personal or professional misconduct.
Empathy:
Fundraisers will work in a way that promotes their purpose and encourage others to use
the same professional standards and engagement. They shall value individual
privacy, freedom of choice, and diversity in all forms.
Transparency:
Fundraisers stimulate clear reports about the work they do, the way donations are
managed and disbursed, and costs and expenses, in an accurate and comprehensible
manner.7/13/2011 49www.m3development.net
YOUR THOUGHTS & QUESTIONS
7/13/2011 50www.m3development.net
“How wonderful that no one need wait
a single moment to improve the world.”
Anne Frank
7/13/2011 51www.m3development.net
Thank You!!!!
Michael J. Baker, CFRE732-245-9868
mbaker@m3development.net@mbakercfre
7/13/2011 52www.m3development.net
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