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The magic of the humble giving circle

It’s the name each organization gives to gifts at the level of $1,000, $2,500, $10,000. It usually gets trotted out on the sponsorship form for an annual event, and on the response device for solicitations. And not given any thought in between times.

Research Reveals LGBT Nonprofits Making a Big Difference Nationally and Locally

“Burst down those closet doors once and for all, and stand up and start to fight.” Harvey Milk

Thank You!

Jenny Taylor

Charitable Giving in Business Trends

The following is a guest post by Rich Fausta, MBA, freelance writer and blogger.

Two Sides of the Charitable Deductions Debate

Although this month's "Fiscal Cliff" legislation retained the charitable deduction, the question of eliminating or restricting it has by no means been decided. Nor are opinions in the sector about this issue unanimous. Here are two different perspectives. Where do you stand in this debate? Tell us in the GuideStar Blog.

Don't Push Charities Over the Fiscal Cliff

Reprinted from Independent Sector

December 11, 2012

Dear Mr. President and Members of Congress:

We, the undersigned, write to express our concern that ongoing discussions in Washington to avoid the so-called "fiscal cliff" may ultimately produce policies that disproportionately impact our most vulnerable communities. We lead nonprofit organizations whose tens of millions of employees and volunteers are working to improve lives in every community across America.

In particular, we are deeply troubled by reports that an aggregate cap, whether a dollar-limit or percentage, on the value of the charitable deduction is under consideration as a potential short-term revenue solution during the lame duck session. Since 1917, our nation's tax system has strongly encouraged Americans to give back to their communities, and the broad concept of charity on which the deduction is based has given rise to a diverse and pluralistic set of organizations all dedicated to the public good.

Research has suggested that a cap on the charitable deduction could reduce charitable giving by as much as $7 billion a year; this would come on top of the nearly $20 billion annual decrease in giving since the economic downturn began in 2007. Federal and state budget cuts have further overburdened and diminished the capacity of nonprofits and disproportionately affected those least able to help themselves. It is simply untenable to ask them to now endure the inevitable reductions in nonprofit programs and services that will be driven by a cap on the charitable deduction.

Congress has, in fact, long recognized the connection between the tax code and giving to charitable organizations. In the days following the devastating January 2010 earthquake in Haiti, legislation was enacted allowing taxpayers to claim a 2009 deduction for donations made to Haiti relief efforts between the date of the earthquake and March 1, 2010. Similar extensions were enacted following the Southeast Asia tsunami of 2004, Hurricane Katrina in 2005, and storms in the American Midwest in 2008.

Congress took these steps out of recognition that the deduction does, in fact, encourage people to give to charity. We know that more than 80 percent of the 46 million Americans who itemized their tax returns in 2009 claimed the charitable deduction, and that these individuals and families, who represent barely one-quarter of all taxpayers, were responsible for more than 76 percent of individual contributions to charitable organizations.

Moreover, the power of the incentive can be seen in the timing of charitable gifts. Between 2003 and 2009, charitable organizations in the U.S. received $281 million in online donations. Remarkably, more than 22 percent of those donations were made on December 30 and 31 each year, underscoring the extent to which tax implications guide donor behavior.

The charitable deduction is also a fair and efficient way for the government to spur investment in communities. The current tax code treats every taxpayer who claims the deduction equitably; regardless of the rate at which their income is taxed, individuals are not required to pay taxes on the portion of their earnings donated to charity. When an individual in the highest tax bracket donates $1,000 to charity, the government foregoes $350 in tax revenue, but communities benefit from the entire $1,000 gift. The government is unlikely to find another vehicle that leverages, at a nearly 3-to-1 ratio, private spending to provide educational and economic opportunities for families in need, alleviate poverty and suffering at home and abroad, assist victims of disaster, enhance the cultural and spiritual development of individuals and communities, and foster worldwide appreciation for the democratic values of justice and individual liberty that are part of the American character.

Unlike other deductions, which subsidize personal spending that benefits the individual taxpayer, the charitable deduction actually encourages taxpayers to give away income in order to benefit our communities. The tax deduction for charitable giving is not a path to amassing greater personal wealth or accumulating tangible personal assets. In fact, it is the beneficiaries of contributions made by Americans of all incomes, rather than the taxpayer, who will pay the highest price in a loss of vital services if Congress acts to limit the charitable deduction.

We are also greatly concerned that the impending automatic, across-the-board spending cuts and proposed changes to entitlement programs being discussed could undermine the social safety net and cause added hardship for low-income families. We urge you to avoid cuts in programs that help meet basic needs and provide educational and employment opportunities. Increased poverty must not be an unintended consequence of avoiding the fiscal cliff.

In this critical time we acknowledge and support the need to put our nation on a more sustainable fiscal path, but urge you to protect programs that assist people with low incomes and preserve the charitable deduction's powerful incentive for giving. Taken together, these steps will help ensure that basic human needs are being met in communities across America.

Thank you for your leadership and your consideration of these vital issues.


More than 940 nonprofits and foundations

Reprinted from Independent Sector; reprinted with permission.

Independent Sector is a nonprofit, nonpartisan coalition of approximately 600 charities, foundations, and corporate philanthropy programs, collectively representing tens of thousands of charitable groups in every state across the nation. Its mission is to advance the common good by leading, strengthening, and mobilizing the nonprofit and philanthropic community.

In Defense of Taxes—Even If They Might Cut into Charitable Giving

Reprinted from Nonprofit Quarterly

In recent weeks, nonprofit organizations mobilized against the threat that Congress would limit tax deductions for charitable gifts. Because charitable deductions provide an incentive for giving, many nonprofit leaders fear that scaling them back will make it harder to raise money. Following the "fiscal cliff" negotiations, the charitable deduction remains more or less intact—at least for now. As we consider the broader implications of tax reform and government spending and gear up for legislative fights to come, I am concerned that many of my nonprofit colleagues are overreacting or—even worse—responding to the wrong threat.

First, a few facts about charitable giving. Seventy percent of American households contribute to nonprofits. Only one-third of taxpayers itemize their deductions. In other words, a majority of donors currently get no tax benefit from their giving, and yet they continue to give. If the charitable deduction is reduced, experts project that donations will decline by one to three percent, hardly worthy of the panic we see in the nonprofit community. Why can't we accept this loss and say, "We are willing to do our part"—especially if increased revenue helps to protect government programs that serve our nonprofit clients and customers?

The larger issue is the demonization of government and the culture of tax avoidance. For the past thirty years, we've heard the insistent drumbeat of the argument that government is bad, and therefore paying taxes is a waste of money. A recent vice presidential candidate called taxes "unpatriotic." I prefer the perspective of Supreme Court Justice Oliver Wendell Holmes, who said, "Taxes are the price we pay for a civilized society." While many nonprofit networks were mounting an all-out campaign to preserve the charitable deduction, a handful of important voices—including author Kim Klein and Aaron Dorfman of the National Committee for Responsive Philanthropy—were offering more nuanced messages, in the spirit of Justice Holmes, about tax policy, equity, and democracy.

Nonprofit leaders, who are daily healing the sick, caring for the needy, protecting the environment, serving our spiritual needs, enriching our communities with arts and culture, and so on, need to talk more about what we buy with our tax dollars. We buy not only a safety net for the poor and dignity for the elderly, but also roads, bridges, courts, parks, public safety, public schools, public airwaves, regulations that protect our food, water, air, workers, drivers, other species, etc. Government is not "them." It is us. It's how we express our common values and create shared rules and expectations. These things enrich our lives, so it's appropriate to support them with our taxes. Furthermore, those who vigorously avoid paying taxes continue to use government services while shifting the costs to others. At the very least, this is unfair. Under some circumstances, it's criminal.

Let me be clear: healthy skepticism about government behavior is a fine thing. We can and should argue about the specific ways our government spends money—too much on pointless wars, in my opinion—and we must hold our elected officials accountable for their decisions. Furthermore, there is no shame in claiming legitimate deductions. Congress and our state legislatures create tax breaks, including the charitable deduction, as a way of implementing public policy. A few years ago, while legislators debated the state budget, I marched in front of the statehouse carrying a sign reading, "I will pay more taxes." Dozens of my Vermont neighbors joined the rally to make the same point: government serves the common good and paying taxes is a patriotic and necessary act.

Nonprofit leaders can and should take the lead in delivering this message. The current debates about government spending and fiscal policy offer a great opportunity to say, "We are willing to risk a small decrease in charitable donations to strengthen the common good."

Andy Robinson
© 2013, Nonprofit Quarterly. Reprinted with permission.

Andy Robinson is an author, consultant, and trainer based in Vermont. Nonprofit Quarterly is an online and print publisher whose mission is to promote an active and engaged democracy.

Note: The views expressed in this letter and editorial are those of the authors and signatories and may or may not represent GuideStar's opinions. GuideStar is committed to providing a range of topics and perspectives to our users. We make every effort to obtain articles from knowledgeable, trustworthy sources, but we make no warranties or representations with regard to content provided by persons outside GuideStar.

Interview with Veteran Fundraiser Jerold Panas

In his career, Jerold Panas has helped a diverse range of organizations raise an estimated $11 billion. He recently spoke with his publisher about the state of fundraising today and the lessons he has learned throughout his career. GuideStar has published excerpts from Mr. Panas's books (see the links on the right), and we're pleased to be able to share his additional thoughts with you.

If you had to cite the single most important reason donors give, other than the fact that they're being asked to, what would it be?

I've done studies on what motivates people to give—it's a subject dear to my heart. The reason donors cite most often is that they believe in the mission of the organization and the way it touches lives. This far outweighs any other factor. Two other reasons closely follow. One, they feel their funds will be used wisely, and two, they have regard and respect for the staff, often the CEO.

Are there some words or phrases that should never be used in fundraising?

The one phrase that should be banished forever is "We have you down for ..." I also tell clients they shouldn't talk about the needs of the organization. People have needs; your organization has the response, the solution. The best way to make sure you don't use a "no-no" phrase is to listen instead of talk. You've heard of fundraisers who talk too much. You've never heard of one who listens too much. Funny enough, that makes you a brilliant conversationalist.

Your book, Asking, is considered a classic. Here's your challenge: I'm about to knock on the door of a would-be donor; tell me in 30 seconds what I need to know to be successful.

That's an easy one, and it'll take less than 30 seconds. Don't think you need to be eloquent or say just the right words. The art of asking, as I just said, lies in listening.

Cite a few common mistakes made during a solicitation.

The ones that come to mind quickly are these: the solicitor didn't go in with a strategy; he or she talked too much; didn't probe and ask enough questions; asked before selling the project; and focused too much on the features of the project rather than its benefits. Donors want to know about results, what will happen after they make a gift. And consider this an inviolate rule: never have a volunteer go with you or by himself before making his own gift.

I understand that when working with organizations you often get personally involved in asking for gifts. What's the largest amount you've ever asked for, and how did the prospective donor respond?

Well ... it's quite true, I often do get involved. Those of us in a consultancy aren't supposed to do that—though there's no ethical prohibition. I can't help myself, I simply love asking.

There are two major solicitations that come to mind. One was for $100 million, the other for $50 million. I secured the former, but not the latter.

In either case, it wasn't about selling the prospective donor. They were both passionate about the organization. It was the amount of the gift.

In the case of the $100 million gift, it actually could have been for more. With the $50 million gift, it was too much of a stretch.

There's a good lesson here. I hadn't done enough homework in either case, and I should have done more probing when I made the call.

It seems that today's donors are more concerned about the use of their gifts than in the past. Why is that?

I've never seen a time when those who give are more concerned about how their dollars are used. In fact, more and more we're finding that they're not calling them gifts. They're calling them "investments." And I'm finding that I'm calling those who give "investors"—not donors.

When you make an investment, what's the thing you're most concerned about? You guessed it. The return. The dividends. Is the organization using the money wisely and are they serving more people more effectively?

Why is this attitude so prevalent now? Some of it, I would think, has to do with the occasional scandal making the news. It could also be that today's donors are more values-driven than in the past.

Ahmet Ertegun, founder of Atlantic Records, missed out on signing Elvis Presley. Presley's manager wanted $45,000 for the contract; Ertegun stood firm with an offer of $25,000. Ertegun claimed it was his biggest professional mistake. Tell us something similar in terms of your career.

I don't have anything to top that, but along the lines of what I said earlier, for years I thought being a brilliant presenter was the secret to success. I was mistaken. Lofty rhetoric can actually be a turnoff for some donors.

Also, in my early days I found it easier to offer a range when I asked for a gift—"We would like you to consider a gift of $25,000 to $50,000 to our program." Now I know that's not effective. You have to ask for a specific amount, or you'll receive the lower amount, if you receive a gift at all.

Something else: I used to think when I was turned down, it meant no. But it usually means maybe. It could be the donor is saying not now, not for the amount you asked for, not at this time, not for this particular project. If you accept no as the answer, you're on the losing side. You need to probe to determine what it actually means.

One last thing: in the past when I was turned down I took it personally. I felt I hadn't done an effective job. But, really, when you're turned down it has little to do with you. It's simply that your prospect doesn't feel keenly about your group's mission.

The artist Lucian Freud, when asked what he hoped to achieve through his work, said this: "To astonish, disturb, seduce and convince." Isn't that a pretty good description of fundraising?

Freud's description is brilliant. I plan on using it and making it my own!

We know the questions donors ask when called upon for a gift: Why should I give to this organization? Why this project? Why now? Why me? My colleague Harvey McKinnon explored these in his great book, The 11 Questions All Donors Ask.

We also know donors give when the project is relevant, makes a difference, has dramatic and emotional appeal, and most of all, is urgent.

Wrap all of that up in Freud's description and you have a winning combination.

Say I'm a development officer, maybe new on the job. Give me one good piece of advice that will serve me well.

Pay close attention to donor attrition. If it's anywhere above 45 percent, you need to be concerned.

We did a study recently of a hospital that was hemorrhaging donors. Among those who didn't renew, we found that 24 percent didn't remember giving, 19 percent didn't feel their gift was important to the organization, and 14 percent didn't feel that the funds were used wisely.

Shame on that staff! I scolded them. Every single one of those donors could have been saved. It simply would have taken good stewardship.


© 2013, Emerson & Church, Publishers

Jerold Panas is the executive director of one of the premier firms in America and co-founder of the Institute for Charitable Giving. His popular books include Asking, The Fundraising Habits of Supremely Successful Boards, and Mega Gifts.



Q&A: How Financial Analytics Are Helping One Nonprofit

The following is an interview conducted by Peter Kramer, Senior Associate, Nonprofit Finance Fund, with Otis Bullock, Executive Director, Diversified Community Services. This is a cross-post from the Nonprofit Finance Fund blog. To read the original post, go here.

Illuminating Financial Dynamics for Improved Nonprofit Management: An Executive Director’s Experience

Otis Bullock tells me that it can be a challenge “to pair a great business model with great programming”. As the executive director of Diversified Community Services (“Diversified”), an organization that serves children and families in the Point Breeze neighborhood of Philadelphia, he knows firsthand the challenges of balancing the abundant needs of his community and constituents against the constraints of limited or uncertain public and private funding.

It’s a balancing act that requires the relentless stewardship of financial assets and continual monitoring of financial and program data. Otis knows well that sound financial management is grounded in access to reliable and timely information about his organization’s annual performance, revenue and expense dynamics, balance sheet health and liquidity. He has found Financial SCAN, a comprehensive new standard for financial health analysis, to be a helpful tool in his financial management toolbox.

Here, Otis shares his experience using financial data and analysis to guide his organization forward in challenging times.

PK: How does Diversified achieve its mission?

OB: Rooted in South Philadelphia and embracing the philosophy of the settlement house movement, our mission is to enable children, youth and families to realize their fullest potential and achieve self-sufficiency in safe neighborhoods. We’re recognized as the “go-to” organization in South Philadelphia because we bring people together regardless of religion, race, or ethnicity in a spirit of friendship to make our neighborhood a better place to live.

We believe in and act for economic and social justice so that people have the opportunities to advance economically, socially, educationally, and personally. Our community-building efforts promote physical, economic, and social development – improved housing and safety, as well as increased financial resources for individuals and the community as a whole.

PK: As the new executive director of Diversified, what are the biggest obstacles your organization faces in effectively connecting money and mission?

OB: Our biggest obstacle in effectively connecting money and mission is a past inability to pair a great business model with great programming. Diversified is very well known for its work in the Point Breeze community, especially our work in early childhood education and youth development. However, we have not yet figured out a way to make it profitable; mostly because the word "profits" was never in our vocabulary. As a result, great programs with tremendous impact on the community could become significant drains on the budget.

PK: That’s certainly a reality that most nonprofit leaders face. What financial planning and management strategies have you employed to overcome these obstacles?

OB: One of the things that we have done, with the help of NFF, is look at our budget more strategically. We’ve become more proactive about our financial and programmatic priorities. We started breaking our budget down by programs, instead of solely analyzing overall revenue vs. expenses. This allowed us to see the profitability of each program that we provide. If programs are losing money, we are forced to make tough strategic decisions as to whether we should keep them and whether they are core to our mission. Breaking the budget down this way forces us to make tough (but important) decisions to keep the budget in balance with our mission.

PK: You’ve recently used our Financial SCAN tool. How have you incorporated it into Diversified’s financial analyses and management?

OB: I used Financial SCAN to create a snapshot of Diversified's fiscal health before I took my current position as executive director. I then used it to easily explain our fiscal health to the board. It can help an organization to think strategically about its finances, as well as programs. I'm able to compare my organization's fiscal health to that of peer organizations. I'm able to use Financial SCAN to easily explain to my board and financial staff why profitability is important – even for “nonprofits”. My organization never thought about strategically and proactively planning its financial future until I presented them with Financial SCAN.

PK: You mentioned the peer analysis function of Financial SCAN. What have you learned about your financial condition relative to your peers’?

OB: Compared to my peers, I've found that my organization is in good shape. However, our position is very volatile. The report helps illustrate that 85% of our revenue comes from government sources, which leaves us in a very vulnerable position considering the constant threat of government budget cuts. Liquidity in our organization is pretty good. But in looking at our SCAN, I see that our organization does not have the means to weather another government budget-cutting season. For that reason, we're becoming much more proactive.

PK: What can you tell us about your future plans? What’s next for Diversified?

OB: We have begun a complete assessment of our entire organization. As a part of our internal strategic planning process, our future fiscal health is front and center in those discussions. That hasn't happened in the past. For many organizations, conversations about desired impact happen with little regard for past financial history and the budget. Financial SCAN has helped my board assess the business and financial implications of our future plans.


Otis’ insights illuminate the kinds of challenges many nonprofit leaders face in balancing the demands of money and mission, as well as some of the strategies and tools that have helped his organization succeed. Learn more about how Financial SCAN can help your organization here. Find more information about Financial SCAN for funders here.

What's your opinion on the charitable deduction?

Although this month's "Fiscal Cliff" legislation retained the charitable deduction, the question of eliminating or restricting it has by no means been decided. Nor are opinions in the sector about the issue unanimous. We reprinted differing opinions from two respected organizations, Independent Sector and the Nonprofit Quarterly, in our newsletter:

What Does Giving Back Mean to You?

The following is by Cody Cassady, GuideStar's marketing associate.

The Next Wave of Performance Measurement: Peer Performance Exchange for Youth Career Development Organizations

The following is a guest post by Anne Radday, Senior Manager of Research, Social Impact Research, at Root Cause, a GuideStar expert partner.

New Year for Nonprofits: 4 Steps To Achieving Lasting Cause Marketing Partnerships

The following is a guest post by Ashley Halligan, nonprofit analyst at Software Advice.

INFOGRAPHIC: How do gender, program, and location affect nonprofit CEO salaries?

Check out our new infographic below that shows how gender, program area and location affect CEO salaries. Did you know that female nonprofit CEOs tend to earn less than their male counterparts? Or, that science and technology nonprofits typically pay their CEOs more than other program areas? And, in DC, nonprofits have the highest median compensation?

Research Reveals Strong Bay Area Nonprofits working in Education and Arts and Culture

“Education is a precondition to survival in America today.” Marian Wright Edelman

Follow-up to Year-End Fundraising Webinar

Happy New Year from all of us at GuideStar! We hope that 2013 is happy, healthy, and prosperous for you and yours. The GuideStar Blog took a brief hiatus but now we're back to business. As we continue to shape our content, we hope to hear from you. Please email if you have suggestions or would care to submit a blog post. Cheers!

The GuideStar Newsletter Top 10 for 2012

Welcome to our second annual roundup of the GuideStar Newsletter top 10, the articles you read the most in 2012. There are actually 14 articles in the list, because we had ties in 1st, 9th, and 10th places.

ECFA Commission Concludes No New Rules Needed on Unreasonable Nonprofit Compensation

About two years ago, Senator Chuck Grassley (R-IA), ranking member of the Senate Finance Committee, asked his staff to investigate media-based ministries and make recommendations about how to address self-dealing and questionable executive compensation levels and practices. Their recommendations were pretty dramatic: change which organizations are given nonprofit status by IRS, expand penalties on self-dealing, and establish new regulations to make sure that nonprofits, particularly religious organizations, did not reward their leaders in an extravagant and excessive manner.

Provisions in Fiscal Cliff Legislation Affect Exempt Organizations

Reprinted from Exempt Organizations Advisory