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Sweaty Palms: Surviving In-Person Meetings with Foundations

I am a great believer in shoe-leather philanthropy. People in the granting field can learn so much more by leaving the abstract world of proposals and meeting the people who are seeking funds. And for me, anyway, meeting grantees is the most fun a grantmaker can have.

Nonprofit Congress: Many Missions, One Voice

The National Council of Nonprofit Associations (NCNA) has established the Nonprofit Congress in order to unite charitable nonprofits and strengthen the sector. NCNA invites anyone concerned about charitable nonprofits to participate in this initiative.

Nonprofits play a critical and unique role in our society. Charitable organizations provide direct service to citizens, initiate new ideas, support minority and local interests, and build collective life by bringing people together. Nonprofit organizations are also an important vehicle for promoting citizen engagement and encouraging altruism.

Nonprofits are already working in coalition and reaching out to businesses, foundations, and individuals in collaborative and creative ways to respond to community needs and advance citizen engagement. Despite these efforts, "the survival of many charitable organizations is uncertain," says Audrey Alvarado, NCNA executive director and project director of the National Congress. "Due to a convergence of threatening factors—including declining resources, increasing demands to deliver more services, widespread misunderstanding about nonprofits, and mounting operational complexities—nonprofits find themselves operating in a most challenging environment. The communities we serve and the issues we care about suffer when we are fragmented and isolated."

Goals of the Nonprofit Congress

The Nonprofit Congress aims to bring together nonprofits from across the country to:

  • Affirm the sector's shared values;
  • Develop a vision and priorities for the sector; and
  • Exercise the sector's collective voice.

Components of the Nonprofit Congress

The Nonprofit Congress is divided into four phases:

  1. Personal Declaration
    Individuals who care about nonprofits—including staff, board members, volunteers, funders, clients, business leaders, and government officials—are invited to show their support for the sector and the aspirations of the Nonprofit Congress by signing the Declaration for America's Nonprofits. To date more than 2,200 individuals have signed the  Declaration, which encourages nonprofits to come together as an industry and develop a unified and forceful agenda.

  2. Town Hall Meetings
    The Nonprofit Congress is being driven by local nonprofits. Charitable leaders and their allies are convening via local Town Hall meetings to share their dreams, express their concerns, define their values, and unite around opportunities for the future of the nonprofit sector. Information gathered from the Town Halls will be used to develop the values and priorities for the sector. To date, 37 Town Hall meetings have been held in 16 states. An additional 50 meetings are in planning in 18 another states, for a total of 34 states.

    The issues of concern to local nonprofits that have emerged in Town Halls thus far include:

    • Accountability (governance and regulations/oversight)
    • Advocacy/Public Policy
    • Communication with Constituents
    • Collaboration (both within the sector and with external partners)
    • Employment (attracting new people to work in the sector)
    • Funding
    • Public Relations (spreading the word about the good work that nonprofits do)
    • Technology
    • Volunteers (recruitment, retention, and management)

  3. National Meeting
    On October 16-17, 2006, approximately 500 nonprofit delegates will meet in Washington, D.C., to affirm the values and prioritize the issues generated from input gathered at Town Halls and to create a collective action plan for the sector.

  4. Taking Action
    After the National Meeting, the Nonprofit Congress will continue to build the capacity of delegates to take action in support of the plan at the local, state, and national levels in partnership with media, business, government, and civic leaders. In addition, the Nonprofit Congress will link the delegates to key partners, such as state associations of nonprofits, in an effort to strengthen and build the initiative.

More Information

For more information, go to

Jocelyn Harmon, June 2006
© 2006, National Association of Nonprofit Associations

Jocelyn Harmon is director of development and communications for the National Association of Nonprofit Associations (NCNA). NCNA advances the vital role and capacity of the nonprofit sector in civil society and supports and gives voice to state and regional associations of nonprofit organizations.

Reflections on "Dirty Money": March Question of the Month Results

The March Question of the Month originated from a Newsletter reader's response to Bob Ottenhoff's February article on politicians' donating funds they had received from Jack Abramoff to charity. She wrote, "I think a GuideStar poll asking how many organizations were offered this money and how many kept or returned it could give us some very interesting perspectives. I would have asked my Board not to accept it. I honestly don't know if they would have granted my request or not."

From the President's Office, June 2006

Dear Friend:

I'm sometimes asked what I mean when I say that GuideStar is a mission-driven organization.

It's a simple proposition: whatever we do—from allocating resources to determining what activities to engage in—the ultimate purpose is to further GuideStar's public service and our vision of connecting people and organizations with valuable information to improve the world around them. We measure our success in terms of the people and organizations that we serve through the data and services we provide.

An analysis of our site traffic confirms that the vast majority of GuideStar users are still served—at no cost to them—by our public service, GuideStar Basic.

We provide the nonprofit sector with a platform for voluntary transparency, posting the three most recent Forms 990 we have received from the IRS for each organization. We also post additional information that nonprofits voluntarily provide—information about their missions, programs, goals, accomplishments, and needs. More than 112,000 organizations have embraced this form of self-regulation and made voluntary disclosures at GuideStar that can be accessed without charge to any of our 500,000+ registered users.

A growing number of philanthropic partners recognize the value of this public service and have generously supported free public access to important information on the nonprofit sector. We couldn't continue to offer GuideStar Basic in its current form without their financial help.

Last fall we made a commitment to the future of the nonprofit sector when we launched GuideStar for Education.

GuideStar for Education gives academic researchers, faculty, and students enrolled in nonprofit management courses access to GuideStar Premium, a $1,000/person value, at no charge to the students, the professors, or the colleges and universities. GuideStar for Education facilitates research and new learning about the nonprofit sector. It adds a powerful tool to supplement academic curricula at 90 colleges and universities across the country. It empowers more than 3,000 students, many of whom will become leaders of the nonprofit sector, to discover the world of nonprofit organizations based in the United States. GuideStar is at the center of all of this important work. And we are proud to be giving back and offering free services to increase knowledge and to train the next generation of leaders, donors, and board members.

There's a lot at stake. The phenomenal growth in the nonprofit sector—70 percent in the past 10 years—coupled with the aging of my generation—the Baby Boomers (yes we are beginning to retire)—mean we have a growing leadership succession challenge.

As we reported in our January and May 2006 Newsletters, a study by the Bridgespan Group, "The Nonprofit Sector's Leadership Deficit," predicts that the sector must "attract and develop some 640,000 new senior managers just over the next decade." This figure is the equivalent of 2.4 times the number of managers currently employed in the sector.

One important path to nonprofit leadership is through academic centers. Recent years have seen a phenomenal growth in the number of educational institutions offering curricula on the nonprofit sector. Currently 600 academic institutions offer a degree or individual courses on nonprofits, and 91 U.S. institutions offer a graduate program on the nonprofit sector.

We'd appreciate your thoughts on how to improve this resource for educational institutions. Or maybe you have some recommendations on how to improve our other public services. Let me know what you think.


Bob Ottenhoff
President and CEO

Top Seven Indicators That You Should Consider a Capital or Endowment Campaign

A campaign is a pivotal event in the life of an organization. Over the years many leaders have asked, "How do I know when I should consider a capital or endowment campaign?" Although each organization is unique and there is no one right answer, there are several indicators that organizations may share. In my experience the following situations signal the right time to begin planning for a campaign, if your strategic plan is complete; the plan has costs affixed to it; there are capital, endowment, or operating needs identified; and the discussion of your mission values is behind you. The launch of a comprehensive campaign is evidence that your organization is acting on its plans to improve or increase services by executing the strategic plan.

  1. Your needs outpace your budget.
    The preponderance of your daily operations is funded from your operating budget. As you grow and the demands on your organization increase, the demand for funds may exceed the budget. Many organizations draw supplemental income from an endowment fund. Building an endowment fund secures the future of your organization in several ways. First, it provides a relatively constant source of annual income to help bridge the gap between your needs and annual pledged income. Second, it provides a reserve asset to draw upon in times of emergency or unforeseen circumstances. Finally, it demonstrates surety and strategic long-range financial planning. This final element is crucial because it bolsters donor confidence, which in turn enhances pledges to the annual operating budget.

  2. Your staff and volunteers have more good ideas than you can fund.
    A key element of successful not-for-profit organizations is creativity and energy for meeting the challenging needs of the community. By definition philanthropic organizations must be resourceful to fulfill their missions. The staff and volunteers are on the front lines working with your constituents. They assess need and opportunities to serve the constituents more effectively and efficiently. A thriving organization will engage those ideas. If you have more good ideas than you can fund, it is time to consider a capital or endowment campaign. A capital campaign may provide funds to turn one or two large ideas into reality. The funds raised can take the organization to the next level, generating vitality for not only the staff and volunteers but also the community. A campaign to build or increase an endowment fund will provide revenue to augment the annual budget, funding the new initiatives proposed by staff and volunteers.

  3. Your facilities are out of date or violate safety codes.
    Obviously, when your facilities can no longer safely meet your organization's needs, it is time to consider a campaign. Space transformation, expansion, or relocation are inevitable components of facility management. Instead of funding the maintenance through small funds, a campaign is an option worth considering. In addition to securing the funds needed to make the facility improvements you need, a capital campaign will generate an awareness of your mission, commitment from volunteers and community leaders, and a renewed energy for serving your constituents. Many of the most beneficial elements of a campaign have nothing to do with money. Rather, a campaign will draw attention and support for your mission that will serve your organization for years to come.

  4. You have a waiting list for services or programs.
    Although having a waiting list may seem like a positive indication that your organization is needed, there is a down side. Some may perceive that your organization does not have the expertise or ability to meet your constituents' needs. Donors may lose confidence in your capability and turn to other organizations. Although it is never possible to meet every need and at times waiting lists are expected in philanthropic organizations, a waiting list may also be a strong indicator that an endowment or capital campaign may provide the resources needed to expand your services or programs strategically.

  5. Your annual fund has been stalled at the same level for two or more years.
    Consistency is valued. But when it describes your annual fund, consistency can turn into complacency. The annual fund of a philanthropic organization should be dynamic, growing as it attracts new volunteers, donors, and grants. If your annual campaign is not seeing an influx of new resources over the course of two or more years, it is time to consider a jump start. The campaign process crystallizes the organization's mission and focuses energy on one or two key expansion opportunities. Campaigns invite donors to become invested in new ventures, seek new donors and volunteers, and energize existing services and programs. The momentum created can generate a growth in the annual fund while securing capital or endowment funds for additional development.

  6. Your volunteers have energy to raise money and expand the organization.
    One of the key elements of a successful campaign is volunteer participation. Campaigns involve a large number of people, not only to spread the work load but also to generate a sense of ownership in the campaign. If your volunteers have energy, you should take stock of this advantageous position. The right board members and volunteers are not only beneficial to the everyday operation of your organization but they are a critical component to a successful capital or endowment campaign.

  7. Income from your endowment is not adequate to augment earned income.
    If you rely on earnings from an endowment fund to augment earned income on an annual basis, paying careful attention to the endowment fund is critical. Not only does it need to have positive growth from investments but it must continue to receive donations in order to meet increasing demand from the operating fund. It is reasonable to conclude that as the organization grows, the demand for funds will grow. Therefore, the endowment should keep pace. A successful endowment campaign will position you to fund future growth.
In the case that your organization is experiencing one or more of these situations, it is time to consider whether a capital or endowment campaign will benefit your organization. From my 38 years of experience, I know a campaign can help you attain your goals while increasing knowledge and enthusiasm for your mission and vision.

Bob Carter, Ketchum
© 2006, Ketchum

Bob Carter is president of Ketchum, the nation's most recognized name in not-for-profit fundraising. Under his leadership, Ketchum provides management and campaign guidance to a broad cross section of gift-supported organizations. Among numerous civic and professional activities, Bob is a board member of the International Association of Fundraising Professionals (AFP).

Finding Effective Board Members: May Question of the Month Results

Last year, Newsletter readers identified board recruitment as one of their key challenges. "Great topic," we thought, and started searching for expert advice on the issue. Although we found excellent resources on other aspects of nonprofit boards, little came up on recruitment. Hence May's Question of the Month: "If someone asked you for advice on recruiting effective nonprofit board members, what would you suggest?"

Regulatory Round Up

The IRS and many sector leaders are concentrating on enforcement. Here is a round up of recent initiatives in that area.

Everson's Law: Enforcement + Customer Service = Compliance

On March 15, IRS commissioner Mark W. Everson told an audience at the National Press Club that "scrutiny of the nonprofit sector will increase."

Everson's tenure as the IRS commissioner has been marked with an increased emphasis on enforcement; he has made enforcement in the tax-exempt sector one of the IRS's top four priorities. Everson used to lead the Office of Management and Budget, the executive agency in charge of proposing how the federal government should spend its money. He is now in charge of the agency that collects taxes to fund the government.

There is a new operating philosophy at the IRS. Some call it Everson's Law. According to Everson's Law, Enforcement + Customer Service = Compliance.

The IRS, an agency with a budget of $11 billion, is one of very few non-Defense, non-Homeland Security agencies to see a budget increase in this period of growing federal deficits. Everson's emphasis on increased compliance with the nation's tax laws is seen by many as a safe bet to closing the tax gap—an estimation of the nation's unpaid tax obligation.

Enforcement: IRS Cracks Down on Private Benefit in Credit Counseling Agencies

In 2004, the IRS began targeting credit counseling agencies for review and audit examination. It has sent compliance letters to every credit counseling agency in the Business Master File of tax-exempt organizations and initiated audits of 63 of them. Each of the 41 audits completed so far has resulted in revoking the organization's tax-exempt status.

In theory, credit counseling organizations can provide a legitimate charitable mission, offering financial education, advice, and assistance. The importance of these nonprofits has grown because the Bankruptcy Reform Act of 2005 requires anyone who files for bankruptcy to visit a credit counseling agency first.

The IRS is finding that these organizations fail to provide a level of public benefit that warrants the privileges of tax exemption. Many offer little or no education or counseling, and many officers and directors of the nonprofit agencies also serve as officers and directors of related for-profit businesses.

"Over a period of years, tax-exempt credit counseling became a big business dominated by bad actors," said IRS commissioner Everson. "Our examinations substantiated that these organizations have not been operating for the public good and don't deserve tax-exempt status. They have poisoned an entire sector of the charitable community."

In addition to expanding compliance activities in the credit counseling area, the IRS has also tightened up its determination process. Of the 110 new applications for tax exemption for credit counseling, the IRS has rejected 95 and only approved 3. Twelve more applications remain under review.

See more information

Enforcement: IRS Addresses Political Activities by 501(c)(3) Organizations

Earlier this year, the IRS released a report on political activity by 501(c)(3) organizations, including churches, during the 2004 political campaign. Organizations exempt under section 501(c)(3) of the tax code—i.e., private foundations and public charities, including churches—are prohibited from either supporting or opposing candidates for office.

The IRS found that "nearly three-quarters of the organizations examined under this initiative had engaged in prohibited political activities." Such activities included supporting or opposing candidates in printed materials, on Web sites, and from the pulpit; posting campaign signs; and giving preferential treatment to specific candidates by allowing them to speak at functions.

The IRS is continuing its Political Activity Compliance Initiative and has issued guidance for this year's elections. See more information on both the report on the 2004 election and guidance for the 2006 elections

Customer Service: Phone Forums Further Compliance through Education and Outreach

Compliance is also aided by clear guidance and education opportunities. The IRS recently convened a free phone forum on executive compensation. This education or customer service program followed on the heels of a larger compliance effort by the IRS.

In 2004, IRS began an executive compensation initiative that explored a number of issues related to the compensation practices of tax-exempt organizations. More than 1,800 exempt organizations were contacted, and 600 examinations were initiated.

During the phone forum, the IRS identified the factors triggering a compliance check. All relate to improper or incomplete disclosure on IRS Form 990, the annual information return thousands of exempt organizations must file with the IRS and which are available on the GuideStar Web site.

One factor leading to a compliance check is failing to answer or answering "Yes" with no explanation on a question about sales, exchanges, or leasing of property on Schedule A, Part III. Part III deals with whether a nonprofit directly or indirectly engaged in acts such as leasing property, lending money, or furnishing goods, services, or facilities to substantial contributors, trustees, directors or other key employees or members of their families, or to any taxable organizations with which such a person is affiliated. These activities trigger a conflict of interest analysis by the IRS and raise questions about possible improper private benefit by nonprofit insiders.

Other triggers are an entry with no explanation on Line 50 of Part IV of Form 990, which involves receivables from officers, directors, or other key employees. No answer or a "Yes" answer with no explanation to questions about excise taxes imposed by IRS during the year due to excess benefit transactions can also trigger a compliance check.

Compliance checks differ from audits in that their goals are to alert organizations to reporting errors and to obtain further explanation by the nonprofit. There is no guarantee, however, that a compliance check will not result in an audit.

According to the IRS, nonprofits continue to struggle with setting reasonable compensation and making full and accurate disclosures on the Form 990. The IRS's educational outreach efforts will help clarify the rules surrounding nonprofit compensation and should result in better disclosures and improved compliance.

Learn more about upcoming IRS Phone Forums, subscribe to the IRS EO monthly newsletter

More Money for IRS Enforcement

The response by many in the nonprofit sector to the proposals coming from the Senate Finance Committee is that more enforcement of current laws is preferable to new laws on the nonprofit sector. The reality at the IRS is that increased enforcement requires more resources. Additional resources can come from two sources—shifting resources from current expenditures or adding more resources to the IRS for enforcement.

Independent Sector is leading an effort to support additional resources to the IRS for increased enforcement. GuideStar supports these efforts. For more information, go to Independent Sector.

Dan Moore and Suzanne E. Coffman, June 2006
© 2006, Philanthropic Research, Inc. (GuideStar)

Dan Moore is GuideStar's vice president for public affairs. Suzanne Coffman is GuideStar's director of communications and editor of the Newsletter.

Charity Reform Update

Legislation that would enhance charitable giving incentives and crack down on nonprofit abuses of the tax law is still pending in Congress, and the chance for passage this year remains uncertain.

With Congress in recess until early next week, Senate Finance Committee chairman Chuck Grassley (R-Iowa) and House Ways and Means chairman Bill Thomas (R-Calif.) continue to discuss whether the charitable giving incentives and reforms will move as part of a forthcoming tax "extenders" package.

Representative Thomas has said that some of the charitable provisions Senator Grassley supports—particularly some of the reforms—require further study and may not be ready to move anytime soon. Whether the extenders package includes charitable provisions or not, it is widely expected to include several other provisions that were pushed out of the final tax reconciliation bill, the Tax Relief Act of 2005 (H.R. 4297), signed into law on May 17, 2006.

In recent weeks, Senator Grassley and Representative Thomas have said the extenders package may move as part of pension reform legislation (H.R. 2830), which is currently in Senate-House conference negotiations.

Lawmakers are hopeful they can work out the differences between the Senate and House versions of the pension bill when they return from recess next week. If, however, agreement cannot be reached on the pension bill, Senator Grassley and Representative Thomas could try to attach the extenders package—which may or may not include the charitable provisions—to another bill.

As this process continues to unfold in Congress, key lawmakers and national nonprofits continue to debate the merits of the various charitable provisions under consideration. For example, several members of the House have circulated letters expressing concerns over several of the charitable reforms, particularly how they might affect smaller nonprofits. In contrast, last week more than 100 charities sent a letter to Congressional leaders supporting the full package of giving incentives and reforms in front of Senator Grassley and Representative Thomas.

Also last week, a House subcommittee held a hearing on charitable giving incentives where Representative Roy Blunt (R-MO.), the Majority Whip, urged Congress to move on several incentives this year, including a provision that would allow people age 70½ and older to withdraw money from their individual retirement accounts and donate it directly to charity without having to pay adverse tax consequences as well as a provision that would allow donors who do not itemize deductions on their tax returns to write off a portion of their charitable contributions. Representatives from Independent Sector and the Association of Fundraising Professionals also testified at the hearing and strongly endorsed these two incentives.

Perry Wasserman, The Vivero Group, June 2006
© 2006, The Vivero Group

The Vivero Group is a Washington, D.C.-based government relations and communications firm representing GuideStar and other nonprofits on federal public policy issues. For more information, please visit