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From the President's Office, March 2007

Dear Friend:

Several recent news events have me thinking this month about the roles and responsibilities of foundations.

Take these separate but related items:

Joel Fleishman's new book, The Foundation: The Great American Secret; How Private Wealth Is Changing the World, both applauds America's foundations and asserts that they are not meeting their potential. Foundations, he maintains, have been driving forces behind civil society here and abroad. Yet they need to "create a climate of transparency, the lack of which both causes foundations to underperform their potential and creates growing public distrust." Currently, these institutions "operate within an insulated culture that tolerates an inappropriate level of secrecy and even arrogance in their treatment of grant-seekers, grant-receivers, the wider civic sector, and the public officials charged with oversight. This needs to change."

A recent Los Angeles Times series on the investment practices of the Gates Foundation has rekindled a debate that has been with us for years: what should be the connection between an organization's activities and its investment policies? This is not just a question for foundations. The corporate and academic worlds face this issue as well with their business and investment practices. We heard it many years ago about investments in South Africa and more recently with products such as tobacco and liquor. Although investment policies are important, an even bigger issue for me is whether foundations are getting sufficient social leverage out of the enormous amount of money they manage.

And finally, according to a recent Chronicle of Philanthropy article, 2006 was a "blockbuster" year for philanthropy, a year in which 60 Americans contributed a total of nearly $7 billion dollars, up from $4.5 billion in 2005. And this figure doesn't even include Warren Buffet's $43.5 billion gift to the Bill and Melinda Gates Foundation. Twenty-one Americans contributed over $100 million. The money continues to grow, so the urgency to do something more continues to grow as well.

There are many interesting issues to explore, but I want to focus on an issue that I think could have a big impact: is there more that foundations could be doing to unlock the power and potential of their endowments?

Foundations manage hundreds of billions of dollars, but most hold very stringently to using no more than 5 percent of their investment returns for philanthropic purposes. Current practice is to build a high wall between a foundation's investment arm and its program activities. More than one program officer has been told that he or she doesn't have a prayer of influencing a foundation's investment practices. But does that have to be the case?

What would happen if every foundation took a tiny percentage of its assets—let's say one-quarter of 1 percent—and invested—not granted—it in nonprofit organizations and required a modest return, one roughly equivalent to investments in other low-yielding investments, such as government bonds? What if foundations invested this money in such activities as Program Related Investments (PRIs), or created something new like "nonprofit investment bonds," or started a lending program for nonprofit organizations with scalable economic models of sustainability?

Many nonprofit organizations have the capability of expanding their scope and impact but are hindered by the systematic lack of investment capital. Foundations have the potential to do more to advance philanthropy and meet the needs of communities today. Small changes in foundation investment practices can unleash new resources that could strengthen nonprofits and provide a return on investment for foundations' investment managers.

It would be a small step, but a step that could have a dramatic impact on—with lasting consequences for—the nonprofit sector.

What if?


Bob Ottenhoff
President and CEO

International Giving by Public Charities

Note: The following discussion is provided for informational purposes only and is not intended to serve as legal advice. For specific information about international giving, consult your attorney.
This article is a guide for public charities that want to engage in activities outside the United States. It addresses the federal tax laws governing the use of funds by public charities as well as anti-terrorist financing laws. This article does not cover the additional restrictions placed on private foundations. (For more information about public charities and private foundations, click here.)

In general, a public charity may conduct part or all of its activities in a foreign country as long as the activities are consistent with the charity's exempt purposes. A charity's exempt purposes are generally found in its organizing document, for example, the articles of incorporation. A charity may operate abroad through a foreign branch office or subsidiary. It may also make grants to foreign organizations and individuals.

Sales and Use Tax Exemptions for Nonprofit Organizations

Reprinted from Nonprofits Legal Update

Paper-Thin Transparency: March Question of the Month Results

The March Question of the Month asked Newsletter readers, "What documents does your organization use to demonstrate accountability and transparency to your donors and funders?" Transparency and accountability are crucial components for any nonprofit wanting to demonstrate its commitment to honest and responsible philanthropy.

Describing philanthropy that way must sound redundant. Honesty and responsibility are at the heart of all good philanthropic work. They are also, however, qualities that must be easily confirmed by those who generously donate their time and money to nonprofits.

This is where accountability and transparency come in. When an organization makes the effort to document its operations clearly and does so effectively and verifiably, it shows that it is fulfilling its half of the social contract—the good works half, for which it receives tax exemption.

There are a variety of documents and methods to help organizations demonstrate transparency and accountability. Figuring out the most effective—and most feasible—can vary from nonprofit to nonprofit, depending on each organization's structure and situation. In being transparent, a nonprofit helps to ensure that it will maintain accountability, as the details of its operations will be free and open for all to inspect.

As our survey participants told us, GuideStar Newsletter readers often use a combination of documents in their efforts towards achieving accountability and transparency.

What Readers Use to Demonstrate Accountability and Transparency

(Participants could choose more than one answer)
Annual audited financials

Annual report 69%
Letter of determination or advance ruling 58%
Written conflict of interest policy 23%
Written document retention/destruction policy 15%
Written whistleblower policy 12%
Other 12%

Over 40 percent of survey participants said they use at least three documents.

We all know what it means to be held accountable, but with all of this talk of transparency, people might be confused as to just what the word means and just how important it is.

What Is Transparency?

At GuideStar, we think transparency means answering these questions for donors and funders:

  1. Is this a legitimate 501(c)(3) nonprofit?
  2. What social impact will my donation have?
  3. How fiscally responsible is this organization?
  4. What are this organization's goals and intentions?
Effective means that address these questions are to state publicly, clearly, and concisely your mission, annual accomplishments, ways you measure success, and goals. It is also vital to make readily available federally required public disclosure documents (for more information on what those documents are, click here) and to check your state's laws, which may include additional requirements (for a list of state charity offices, click here). GuideStar offers nonprofits a platform to demonstrate their transparency by updating the GuideStar Information Form and by uploading PDFs of required and substantiating documents to their GuideStar report.

From there, it's up to each individual nonprofit to weigh its options carefully and then determine the most efficient and effective approach to demonstrating accountability and transparency.

Why Are Accountability and Transparency So Important?

Although transparency is just one component of the social contract between nonprofit organizations and donors and funders, it is the foundation for the bond between them. It establishes the trust that is so essential to the relationship and shows everyone that the only agenda at work are the great philanthropic ideals that are at the heart of the nonprofit sector.

Transparency isn't just an expectation externally imposed upon organizations by a sometimes skeptical public. Its implementation can actually serve organizations themselves, as Karen Clark of H.E.L.P Animals, Inc. pointed out: "People like to see the actual bank statement. This openness that we have benefits our group. People like to see cash deposited from our donation jars, special events, yard sales and low cost pet shot clinics. All bills and reimbursements are paid by check; therefore we have an accurate paper trail."

Indeed, the more we know about both others and ourselves, the better we work, the better we feel about that work, and the better that work is.

Christopher Trent Kaplan, April 2007
© 2007, Philanthropic Research, Inc. (GuideStar)

Chris Kaplan is an undergraduate at the College of William and Mary and a communications/marketing intern at GuideStar.

A Year in the Life of a Fundraiser: Year-round Fundraising for Everybody

The big day is here ... the one you've been working and planning toward all year ... your annual fundraising event. It's a success! Fantastic! Well done! Take a breath. Congratulate your staff and yourself, thank your supporters, and let the celebration dust settle before you start planning for next year.

Large annual fundraising events are standard practice for a reason. They raise a lot of money and get your supporters really involved with you and your organization's community. But they also require a lot of planning, a lot of resources, and a lot of energy (thus one per year). And they don't consider the fact that your supporters are still your supporters during the rest of the year.

I recommend running smaller, more frequent fundraising campaigns parallel to your annual event.

"I'm So Busy, You're Going to Have to Convince Me"

One of the most obvious benefits of frequent or ongoing fundraising campaigns is that more funds are raised. When you have less frequent fundraisers, all too often people who would otherwise donate to your event aren't able to at that time, or they just don't get around to it. Providing sponsorship opportunities without time constraints lets you capture more of your available pool of donors.

Another benefit of ongoing fundraising and events is more frequent engagement with your supporters. You already have a community of people who care strongly about your cause and want to help; providing more opportunities for them to be actively involved can create a deeper sense of community and commitment.

A third benefit is virality. Every time you run a campaign that encourages your supporters to be fundraisers, you create one more time to get your message out to the world, helping to build awareness and bring your cause to the top of people's minds. The more creative and compelling the campaign, the more memorable it will be, and the greater the likelihood that your community will grow as a result.

"How Am I Going to Do This When All of Our Resources Are Tied Up Planning Our Regular Event?"

There are many simple things that you can do to drive fundraising and supporter engagement year-round. Some are highlighted below. Important factors to keep in mind when you're planning additional fundraising campaigns are time, money, and energy. Incorporating an on-line component into your fundraising can make things simpler and less expensive.

"How Do I Get Started?" (Or, "Do You Have Any Suggestions or Examples of Things I Can Do?")

Why, yes! This article is titled "A Year in the Life of a Fundraiser" because it outlines activities that augment your annual event and that you can fit into your yearly calendar. For the purposes of this illustration, let's say your big annual fundraising event is in May, and that your cause's National Awareness Month is in October.

  • The Big One
    Your annual big event could be a walkathon, a bowlathon, a run, or whatever you've found works for you. You organize it and promote it, encouraging your supporters to register for the event and get sponsors to donate. This is a powerful way to bring your community of supporters together and to motivate them to spread the word about what they are doing.

  • Smaller Periodic Campaigns
    It's hot. Send an e-mail to your supporters asking them to set up a virtual lemonade stand in support of your cause. They can ask their friends to make a small donation and drink a glass of lemonade at home; this is a great way to let your community engage their own communities to support you.

    Encourage your supporters to launch their own grassroots fundraising appeal in honor of your National Awareness Month. If they are using an on-line fundraising page, they can easily communicate their passion for your cause and help educate people while they raise contributions. Awareness months are obviously focused on education, but you'll find that people like to take action then, too, and that this activity lets them.

    Remind your supporters that they can ask for donations to your cause in lieu of holiday gifts; the giving spirit really takes over at this time of year, and they may find that their friends are more than happy to make a donation, even if they gave earlier in the year.

Year-round Campaigns

Almost every nonprofit has a "How to Help" section on its Web site for a reason: people want to help, for all kinds of motives. Maybe they have a personal connection with your cause through a family member. Maybe they received help from your organization in some way and want to give back. In any case, you should provide them with a way to become an advocate and raise funds for you. Simply listing an on-line fundraising site as a resource makes it easy for people to garner support for you in honor of their wedding or their birthday, or in memory of or in tribute to a loved one.

In Summary (Or, "What a Great Concept!")

These ideas do not require much time or money, and they involve very little management on your part. The point is to keep things simple and to harness the passion that already exists in your community.

Your supporters will appreciate having a range of opportunities, one of which is bound to fit into their schedule and appeal to their sensibilities, through which they can get actively involved in supporting you. And you'll make the most of your community while engaging them in a deep and meaningful way.

Laurel Ackerman, Firstgiving
© 2007, Laurel Ackerman

Laurel Ackerman is the marketing director for Firstgiving, an on-line fundraising company. Firstgiving opens up on-line fundraising for anybody by running a Web site where people can raise money on-line for any charity, for any reason, at any time. For more information, visit or contact Laurel at

Writing Fundraising Materials That Raise More Money: On the Delicate Subject of Committee and Board Approvals

Excerpt from How to Write Fundraising Materials That Raise More Money: The Art, the Science, the Secrets

Moments like this happen quite often in my workshops.

I'll mention something that industry professionals pretty much all agree on. The perfect example: Repeated tests find that four-page letters used to acquire new donors typically outpull one-page letters, all else being equal. Counter-intuitive? Absolutely. But much of direct mail practice seems at first glance contrary to common sense.

A hand goes up. It's a worried query from an attendee who smells trouble ahead. "My board chair says he throws away four-page letters whenever he gets one. So he'll only approve one-pagers. What should I do?"

Keeping Everyone in Your Organization on Brand Message

Reprinted from Branding Bytes

Question: How can we do a better job of keeping everyone in our organization on brand message?

Answer: It doesn't matter how good the choir is. If everyone is singing from different song sheets—it's just noise! The same holds true for an organization's brand. If everyone is sending out different messages, it confuses the audiences you are trying to reach. One of the best ways to keep everyone on message is to create a "messaging package."

Fundraising's Four Magic Questions: Answer These and the Gift Is Yours

If I must say so myself, I thought I'd made quite a good presentation. Perhaps short of dazzling—but not bad at all.

I had listened carefully, probed when necessary, searched for areas of interest, and maintained intent eye contact. We had come to that charged moment—frightening and awesome, when the air crackles with hope and expectation. The time had come ... I was about to ask Dick for his gift.

I had rehearsed well. To paraphrase Winston Churchill, and put his admonition into fundraising terms: There is nothing as effective and successful as a very well rehearsed, carefully scripted, spontaneous ask!

The visit had gone mostly as planned. But no matter how often you've asked for a gift, thoughts race through your mind before you speak those magic words: Did I probe enough? Do I really know Dick's primary interest? Did I talk enough about the benefits and how his gift would change lives? Am I asking for the right amount? Wait ... perhaps I should plan for another visit. Is the time precisely right? I could come back another time.

But then I follow my own preaching. I decide to ask. Even if all factors don't fit my perfect blueprint, it's better to ask than not to ask at all. Better ready, fire, aim ... than ready, aim, aim, aim.

Using the words I find most comfortable, I present the opportunity.

Dick ... I would like you to consider a gift of $100,000 that will save lives for a generation to come and transform this into one of the great cardiac centers of the country. The words, "I would like you to consider," are the ones I find most appropriate.

Ah, I've asked for the gift. That wasn't so difficult after all.


I follow the example I teach others. Make the ask, and for a precise amount. Don't fill in the silence. No matter how long it may seem, wait. Follow the dictum: The first one who speaks is dead! And so I pause ... for what seems eternity. Dick finally responds.

No, I don't think so, he says. I don't think I can give that much, not at this time.

Perhaps you're thinking it's time you gather your things, thank Dick for the visit, leave the proposal behind, and ask that he consider it.


You've only come to the beginning of your ask. There's still important work and delving to be done. It's time to seek, search, and study. Incidentally, what I'm about to tell you really happened. Dick is alive and a wonderfully generous person.

Given Dick's response, there are four riddles I have to find the answers to. I put these in the form of questions. If I don't ask these four questions, I'll leave and never know where we stand in the mind of the donor. And if I return for a subsequent visit, I still won't have the information I need to move forward with a successful ask.

I must find out whether Dick responded the way he did because:

  1. There's no great feeling or involvement with the institution.
  2. There is a lack of interest in the specific project.
  3. I asked for too much.
  4. The timing is a factor.
I must know the answer to these immutable questions: Is it the organization, the project, the amount, or the timing? And I mustn't leave until I do.

I march on.

Dick, I said, thanks for responding so clearly to my request. And I did hear what you said. I don't mean to press you on the matter ... but I feel I must ask you a question. Do bear with me. Is there something that bothers you about the hospital (Is it the institution)? You've been a supporter for so long and have done so much, I was certain you felt positive about our work and our vision. Do you still feel that same friendship and support?

Oh, yes, Dick said. Now, probably more than ever. I think they're doing a great job. (I'm past the first hurdle.)

I continued.

I was pretty sure you felt that way. I also sensed this was the kind of project that would really interest you, that the new Cardiac Center had real meaning for you—because of your own situation and your family's. Is there something about the project that makes you hesitate?

Oh, no. Certainly not, Dick says. On the contrary, the Center is something I feel is very important, something we should have at the hospital.

(Great! We can now cross out the question, Is it the project? And now to the really tough question. If I get by this one, we have the gift.)

Well, then tell me, Dick, did I ask for too much? I need to know. I honestly felt that based on your identification with the hospital and your past support, $100,000 was just about the amount you'd want to give to a program this important. Am I correct? That's about the amount you would want to give, isn't it?

(For the past dozen years or so, Dick has been making an annual gift of between $5,000 and $10,000. There were a couple of years he missed, but other than that he's been consistent. The $100,000 request is certainly reasonable, following my rule that the request for a major capital venture can be somewhere between 10 and 25 times the regular annual giving.)

Dick responds: No, you were correct, that's just about the amount I'd like to give to a project like this. (Yea! This was working out better than I could have hoped. In my mind, I'm doing a high five.)

And now, my final question.

Is it the timing, Dick? Is the timing off? You've indicated your enthusiasm and excitement for the Cardiac Center, and said the amount was what you'd want to give. Is the timing a problem?

That's it exactly, said Dick. And then he went on to explain how it would be impossible to make a gift, even a small one, at this time. He was so heavily committed to a few other projects that there simply weren't funds available.

I responded as you would expect.

But that's the easiest part of all, I said. Don't worry about the timing. We can easily work that out. The important thing is that you're included in this program and able to do what you hoped. Let's extend the timing. Could you make your first payment in a year or so, or do you need more time than that? This new Cardiac Center has to have your involvement. It will be easy to work out the timing.

From that point, it was great fun. Dick felt he could make a small payment a year from now, and then make equal payments for the next three years and fulfill his commitment. He was absolutely delighted. And everyone won. Dick was able to do what he really wanted to do, I was in a position to help make it happen, and the hospital is one step closer toward its new Cardiac Center.

This particular visit followed the script, but it's not always as easy as this real example. Regardless, my four probing inquiries will get you through all situations, and they must be used if you're to be successful.

Jerold Panas
© 2003, Jerold Panas. Reprinted with permission of Emerson & Church, Publishers.

Jerold Panas is executive partner of one of America's leading fundraising firms and author of several books, including Asking: A 59-Minute Guide to Everything Board Members, Volunteers, and Staff Must Know to Secure the Gift; The Fundraising Habits of Supremely Successful Boards: A 59-Minute Guide to Assuring Your Organization's Future; and Making the Case: The No-Nonsense Guide to Writing the Perfect Case Statement.