What the Heck’s a DAF?

What form of charitable fund giving had the greatest growth in both total numbers and $ value of assets last year? AND the year before?

Private foundations? No. Charitable trusts, like CRTs or charitable lead trusts? No. How about pooled income funds? Nope, not them. And if you’re thinking corporate foundations, it’s not them either.

Give up? It’s donor advised funds (DAFs).

The National Philanthropic Trust reported that at the end of 2013 donor advised funds exceeded $45 billion in assets under management. And last year, contributions to donor advised funds totaled $13.7 billion, an all-time high, with over $8 billion being distributed to charities. That’s a lot of money.

We usually think of community foundations as repositories of donor advised funds, but they are also held at national foundations, like the National Philanthropic Trust and Fidelity Charitable Gift Fund, and single-issue charities, like Jewish Federations.

A few weeks ago, The Chronicle of Philanthropy reported that Fidelity Charitable, the biggest of the advised funds, will soon surpass United Way Worldwide and become the largest “charity” in the country.

Last December Mark Zuckerberg donated 18,000,000 Facebook shares to the Silicon Valley Community Foundation; that’s about $1 billion (his second such gift to them). Nobody’s saying whether he put it into a donor advised fund, but it makes sense. It was reported in the media that the foundation would “help him allocate donated assets in the coming years.” That’s a clue.

Simply put, donors can contribute funds to a donor advised fund and get an immediate tax deduction. Many people view them as acceptable alternatives to direct gifts and private foundations because they don’t have the rules private foundations do, someone else manages the fund for them, and they avoid the higher costs of private foundations.

Additionally, contributors to donor advised funds are not required to allocate a certain percentage of their funds to nonprofit organizations in any given year, unlike private foundations. However, there is an expectation that DAF funds will be used to make future grants. And history shows us that overall these funds contribute more than the minimum 5% required of private foundations. 

Nevertheless, Congress has been discussing requiring a minimum annual payout. The Chronicle article referenced above explores 5 myths about payout rules for advised funds. You can find the article here.

If fundraising is one of the ways your organization supports its programs and services, you owe it to yourself to be aware of donor advised funds and how they might be of benefit to you. If you haven’t already, contact your community foundation for more information. You'll be glad you did.

Nonprofit Fraud: Yes, It Could Happen

Last October, The Washington Post reported that “more than a thousand U.S. nonprofits have acknowledged losses of a quarter million dollars or more, because of theft, investment fraud, embezzlement or other unauthorized use of funds.”

And that’s just the tip of the iceberg.

Joe Stevens, a Washington Post investigative reporter, noted:

“A lot of these schemes involve insiders, executive directors, bookkeepers, very trusted long-time volunteers sometimes, and you find ten million here, ten million there, but it also goes all the way down to your neighborhood groups, boy scout groups, volunteer fire departments. . . nonprofits across the board are losing a lot of money.”

One estimate, by Harvard University's Houser Center for Nonprofit Organizations, suggests that fraud losses among U.S. nonprofits are approximately $40 billion a year.

Around the same time, Eugene Fram, Professor Emeritus, Saunders College of Business, Rochester Institute of Technology, reported on The Huffington Post website that vigilant nonprofit boards might prevent many of these losses.

He’s right. No pun intended, the “buck” stops with the board.

Every member of a nonprofit board, regardless of how large or how small, should know their fiduciary responsibilities to the organization and to the community it serves.

One of the key responsibilities of board members is to maintain financial accountability of their organization. I contend that it is the most important responsibility.

Ask yourself:

Does every member of your board know how to read and interpret your financial statements? If not, why not?

Does your orientation for new board members include a "deep dive" tutorial on your financial statements? Do you have an orientation for new board members?

Are financial statements reviewed at every board meeting? Is adequate time given to this process and do all your board members ask questions and participate in discussions before approving the financials?

Do they receive financials in advance of the board meeting?

Finally, and most importantly, do your board members understand the fiduciary and legal responsibilities – duty of care, duty of loyalty, duty of obedience – that go with nonprofit board membership? 

Do you?

Building Dreams on Foundations of Sand

The author T.F. Hodge said, “You cannot build a dream on a foundation of sand.” Unfortunately, too many nonprofits are doing just that.

The strength of any nonprofit’s mission and vision comes from the organization’s ability to make them a reality.

The phrase “no organization, no mission” is more than just lip service to the need to have “bench strength” behind your passion to achieve a better world.

I can’t say it any better than one of the nonprofit sector’s most compelling scholars and authors, Paul C. Light. In his book, “Sustaining Nonprofit Performance,” he wrote:

“I argue that the nonprofit sector suffers from. . . persistent underinvestment in its basic organizational infrastructure. Driven to do more with less, many nonprofits simply make do with the bare minimum, often denying (themselves) the training, technologies and support they need to do their jobs.”

I would add to that, all under steadily increasing pressure to perform and to achieve, resulting (in many cases) in a public downturn in confidence in our nonprofits and acute frustration inside these organizations. Not to mention burnout and all that goes with it.

“Great Programs Need Great Organizations Behind Them”[1]

The answer is organizational capacity building. The National Council of Nonprofits defines that as “an investment in future sustainability,” without which organizations put themselves in jeopardy of failing to meet their missions and achieve their visions.

What is capacity building? It’s whatever an organization (your organization?) needs to take itself to the next level of maturity: the right (enough) staff; sound internal controls; better technology; a better system of governance; and on and on.

I know what you’re thinking. . .”No one will fund capacity building.” How do you know?

·      When was the last time you explored a capacity building grant or gift?

·      When was the last time it even occurred to you to look for funding that wasn’t programmatic or capital?

I think it is ironic that capacity building funding is emerging. . .not from the nonprofits, but from the funders. Good grief!

The Foundation Center reports that, “Increasingly, foundations are providing grants to help nonprofit organizations carry out their missions more effectively. A wealth of literature has emerged as experts examine the impact of capacity building programs.”

The truth is that the idea of nonprofits needing to be “needy” comes from us. Donors and funders learned about and bought into the “nonprofit mentality of sacrifice and service” because of us.

It’s time to have the conversations, to begin to educate our donors and funders about the vital necessity of making our nonprofits strong so that the programs and services you offer will meet the growing needs in our society.
[1] National Council of Nonprofits

A Decade of Million-Dollar Gifts

Who doesn't want to receive a gift of $1 million or more? Particularly for community-based nonprofits, it represents a rite of passage, an acknowledgment that the work being done and the resulting accomplishments and outcomes have been validated in a most visible and affirming way.

Is your organization a candidate for a million dollar gift? Which organizations get them, anyway? The Lilly Family School of Philanthropy at Indiana University released a study in April 2013 to address these very questions.

The findings: 20,941 million dollar+ publicly disclosed* gifts were made in the U.S. between 2000 and 2011. Not surprisingly, higher education and private foundations were the top two recipients. Higher education received 48% of the gifts ($86 billion), while private foundations received 36% ($97 billion). Everybody else shared the rest. Don't be discouraged, though: that's still a significant amount of money flowing to nonprofits in all other sectors.

Primary sources of gifts include, first, individuals (both in numbers of current and deferred gifts and dollar amount); foundations; corporations; and other grant-making organizations.

Encouragingly, local donors (residing in the same state or region as the recipient nonprofit) gave roughly half of the gifts (and half of the $). More good news: charitable bequests of $1 million or more were more likely to go to local nonprofits.

What does this mean for you?

First of all, it indicates that any organization in any sector can attract gifts of this size.

Second, it points to the importance of individual donor cultivation and stewardship: the #1 motivator for very large gifts.

Third, it says (to me at least) if your organization doesn't have a planned giving program, you need to start one. This is so simple; and it requires little in the way of investment by your nonprofit. Call me; we'll talk.

Finally, take note of the fact that, as the report states, "a significant share of million-dollar-plus gifts came from local donors" in the same state or region as the nonprofit, making donor relationship development a key part of your resource development strategy.

Share your million $ gift story here.

*Resource: the Million Dollar List, a database of charitable gifts.

Some industry experts think there might be, as they verbalized in an Urban Institute panel discussion last year.

Takeaways from the discussion include:

*Funders might think there are too many nonprofits asking them for money.

*Nonprofits might think there are too many competitors for donors’ money.

*Politicians might think there are too many nonprofits depriving them of tax revenue.

Does there seem to be a theme going on here? Yes, money is important. In fact, it is, in just about everyone’s mind, the #1 item on the list of absolutely essential things a nonprofit needs. Ahead of good boards, ahead of staff, maybe even ahead of people to help and problems to solve in some cases.

How does that relate to having too many nonprofits? Well, in my experience money is also the thing that might keep nonprofits from working together to accomplish more than they could alone, maybe even merging.

Part of the Urban Institute discussion centered around nonprofit collaboration and consolidation and whether that would increase impact and provide better outcomes. Someone on the panel pointed out that, as nonprofits seeking financial support, we are obligated to see ourselves as unique entities, with unique programs and audiences, and we must sell the idea that if we go out of business (we feel) there will be a huge gap in services. 

So perhaps the question of whether there are too many nonprofits really comes down to whether there are too many to support with philanthropy and other funding sources. 

I still think there are just too many, because my real beef with all of this is the fact that. . .

It is too easy to start a nonprofit, and too many nonprofits are started for the wrong reasons  
(actually said to me over the years):

·      #1 Reason:“I need a job.” (Oh good grief, you can’t really think this is going to make money for you right off the bat, can you?)

·      “I can do things better than anyone else is doing them.” (Even though you’ve never worked at a nonprofit before? Never built a board? Never raised money from individuals?)

·      “I want to be somebody.” (Power’s fine, but what you really need is passion, for the mission AND for the management. It's not about you. This is a business.)

And the one I hear often:

·      “I want to make the world a better place.” (That’s great, if you are prepared to do more with less and move mountains in the process. Oh, and be one of the few who survive and succeed – because 90+% of all startups fail in the first year.)    

If for some reason all of this still sounds good, I applaud you and encourage you to make your dream happen. Your mind and your heart are in the right place. But before you apply for a (501)(c)(3), take a look around. Can you be more effective by helping and supporting another nonprofit whose mission is your mission? Can you seek out your local nonprofit center or volunteer organization and learn what it takes to create an effective board, how to position your organization for philanthropy, even how to write good bylaws that protect the organization and hold board members accountable, or (my favorite) how to read financials?

What do you think?

One parting word of advice: don’t put Mom and Dad, your cousin Sylvia and Uncle Fred on the board. You can’t fire your Mom when she turns out not to be board material. Well, you can, but you'll be sorry.   

Guest Blog: On the Yellow Brick Road…The Real Life of a Fundraiser

I, Deborah Peeples, raise money for nonprofit organizations.  I am credited with raising millions of dollars over my decades-long career.  When it comes up in conversation that I am a fundraiser, the most typical response is, “Oh my!  I could never ask people for money!”  

While I clearly have been deeply engaged in activities that directly result in the transaction of millions of dollars in charitable gifts, that aspect of my work -- asking for money -- is not how I think about what I do. Even though I am a “Certified Fund Raising Executive” – it’s not about the money!

So what is it about?   What can be said of people who labor as nonprofit fundraisers and development professionals?   Perhaps like me, most fundraisers understand that we are really matchmakers, dream weavers if you will. . .meeting wonderful people along the way, learning their stories and their vision and helping them achieve their passions.

My fundraising career has led me on many unexpected journeys. At times I have felt a bit like Dorothy Gale in the Wizard of Oz, tossed into the fast and furious pace of the nonprofit organizational workplace.  So much to do, so far to go, so little time and resources.  Fundraisers are a bit like Dorothy: ordinary people on extraordinary journeys.  And like Dorothy, good fundraisers are passionate, caring, levelheaded and human, seeking a better world over the rainbow. 

The Scarecrow tells Dorothy, when she reaches a crossroads and is uncertain which way to go…”well, you can go this way, or that way looks pleasant.  If you haven’t got a plan, any which way will do!”  

There in a classic children’s book is the recipe for fundraising success:  A heart, courage, brains and a plan!  And while the fundraiser’s journey can be fraught with wing-tailed monkeys, wicked witches and know-nothing wizards, in the end it is really propelled by many amazingly good and beautiful Glindas, who are always standing behind us.  The Glindas are those extraordinary boards, fundraising and campaign chairs, volunteers and donors who pave the way for us.

So, the next time I am asked what I do for a living. . . perhaps my answer will be, ”I journey on the Yellow Brick Road helping nonprofit organizations realize their missions and creating a better world over the rainbow."  Oh, and money…yes, it does follow along the way.  Share your journey and your insights with me at debpeeples@gmail.com or contact me through www.PartnerswithNonprofits.org.

Guest blogger, Deborah Peeples, CFRE.

Yep, this is THAT Deborah Peeples, the one who said 20+ years ago, "Let's go be fundraising consultants." Since she left me for the big city, she has directed and led major gifts and capital campaign fundraising programs for national, regional and local nonprofit organizations and is a proven leader in the field.

"The Essential Triumvirate"

In the last two blog posts, we explored the tensions among board leaders, executive directors and development directors. This is a vicious cycle, preventing nonprofits from realizing their potential to be great.

Penelope Burk, in her new book Donor Centered Leadership, suggests some solutions:

1. Hire* People Who Lead!

CEOs who. . .

• take a collaborative approach to fundraising management
• see fundraising as a core job and have the skills
• credit fundraising staff for their achievements
• support the board in their fundraising work

Board members who. . .

• are great advocates
• open doors
• create fundraising opportunities

Development directors who. . .

• are chronic over-achievers
• are team players
• are paid what they are worth

2. Get out of the way and let them lead!

Clearly, there is much more to Penelope's book. I urge you to read it.

*Yes,you do hire board members: looking for volunteers who bring essential skills and talents to meet core needs, are loyal to the organization and team-centered, willing to fulfill the most critical role: fundraising and donor development. Do you have a job description for the board and one for individual board members? You should.

Fundraising, Sex, Death and Mental Illness

Last week in this blog I reported on the recent study conducted by CompassPoint with support from the Evelyn and Walter Haas Fund. Their findings are a little depressing, but entirely valid. 











We all knew this; we just have no motivation to confront it, especially in our own organizations.

So, how do we begin to turn this tide before it carries us all out to sea? The study suggests the following calls to action, among them. . .

·      Embrace fund development. Easier said than done, particularly if relationships are strained to begin with. Perhaps we should each begin with ourselves. . .

What can we do personally to launch this seismic shift? For starters, according to the study, we. . .

·      Stop making fundraising a taboo subject. It’s not in the category of “sex, death and mental illness.” Philanthropy and fundraising are essential elements of the success of virtually every nonprofit; we need to elevate their importance.

·      Train our boards better. The study revealed that fundraising engagement among boards is “still woefully inadequate.” A culture of philanthropy may be launched at the staff level, but it is maintained at the board level and right now that’s not happening in so many organizations.

·      Set realistic development goals and share accountability for results. According to the study, “the development director’s success is inextricably linked to staff, executive director and board success. . .” Intellectually, we know this. Yet all too often development directors are like the infamous “bubble boy,” isolated from everything else that is happening in their organizations. It’s time to merge that position into the hearts and soul of our nonprofits. The ROI on that could be enormous.

These are just a few of the calls to action listed in the study, but they are a critical few. In my 22 years as a consultant to nonprofits of all types and sizes, I have been witness to the painful struggles that go on over fundraising and philanthropy. 

I observe it inside the organizations, and on the outside I hear from donors how damaging it can be.

Standoff: A situation in which one force neutralizes or counterbalances the other

Sound familiar? If you are an executive director, nonprofit board member or development director, you are likely nodding your head. Too frequently, the dynamics swirling around these three positions in almost any nonprofit are more than you signed on to handle.

Earlier this year, CompassPoint and the Evelyn and Walter Haas, Jr. Fund collaborated to determine why there is premature turnover among development directors, lengthy vacancies in that role and a seemingly thin pool of qualified candidates. The study included directors of development and executive directors in nonprofits of all sizes and types.

They want to encourage a national dialogue; there’s more than enough in this study to support that. I’ve seen it all myself on numerous occasions and it ain’t pretty. You can get the full report here.

For the next two weeks we will devote this blog to a summary of this vitally important study, reporting on the findings and calls to action identified through the research. Then in Week 3 we’ll look at highlights from Penelope Burk’s new book, Donor Centered Leadership: What It Takes to Build a High Performance Fundraising Team. Penelope has some serious thoughts about how to address issues raised in the study.

Challenges Identified Through the Research

A revolving door. . .There is a high level of instability and uncertainty in the development director position in nonprofits: high turnover, long vacancies, performance problems and the waning interest among development directors to build careers in their field.

Help wanted. . .The demand for qualified development directors is greater than the supply across the sector. The key word here, for nonprofit executives, is “qualified.”[1] Executive directors report they can’t attract enough qualified candidates; they aren’t happy with the performance of current DofDs; and they believe their development directors lack key fundraising skills.

“It’s About More Than One Person: Lacking the Conditions for Fundraising Success”

According to the report, signs that an organization is up to the task of creating a successful environment for fundraising include:

·      The organization invests in fundraising capacity and technology, and has a fundraising plan

·      The staff, executive director and board are deeply engaged as ambassadors and solicitors

·      Fund development and philanthropy are understood and valued across the organization

·      The development director is viewed as a key leader and partner and is integral to organizational planning and strategy

My viewpoint: This issue has been plaguing nonprofits, particularly community-based organizations, for far too long. We as a sector tend to use the challenges listed above as excuses as much as anything.

So much opportunity is wasted or never realized because of “the fear of fundraising” that dominates our thoughts and actions. Also, too often we suffer from an attitude of entitlement that projects itself as a “you got money, I need some of it” mentality. Yeah, “nonprofit” may be nothing more than a tax status, and I thoroughly support good business practices, but we exist to serve. We can be our own best friends or worst enemies in how we choose to make philanthropy and fundraising a key part of who we are and how we impact society.

Let me know what you think.

Next week: Calls to Action from the CompassPoint/Haas Fund study.



[1] Editorial comment: Assessing a DofD’s performance is tough when there are so many factors outside that person’s control that can influence fundraising success.

"Adapt, Change or Die"

For the last 4 to 5 years, I have been saying in my fundraising workshops and trainings that by the end of the century we would all look pretty much alike. I read that in a paper on the blending of America and was totally intrigued by it.

The 2000 U.S. Census was the first one to give Americans the option to select more than one race; and 7 million people took advantage of that opportunity. Today multiracial Americans are among the fastest growing demographic groups. And as that statistic is rising, so is the acceptance of multiracialism.

We could quote statistics all day long; it seems that today everyone is studying this trend. But the real change, the one that is going to make the lasting difference, is how we view each other. 

Today, we might look at people to see, first, what they are. By the end of this century, we will instead have the benefit of looking at people to see who they are. I’m trying to figure out a way to hang around long enough to be part of that. Cryogenics, maybe?

When I talk about this in my workshops, the emphasis is on nonprofits preparing now to be part of this extraordinary occurrence, and in a larger context, all the change that is going on. Coincidentally, The Chronicle of Philanthropy recently published an article, Raising Money In a Changing World, about how we are facing a demographic transition “that has the potential to transform the philanthropic landscape.”

The author, Nicole Lewis, points out the need for nonprofits to focus on burgeoning minority and multi-racial groups of donors. But she doesn’t stop there:

·      Women are becoming more economically powerful in their own right
·      LGBTQ donors are becoming more visible
·      Secularism “is on the rise,” particularly as the younger generations grow as donors and philanthropists
·      And more.

If your nonprofit organization isn’t considering how to reach out to a broader – and more diverse – audience of donors, you need to begin now. We as a sector are behind in adapting to these trends. As Emmett Carson, Silicon Valley Community Foundation president, stated in the Chronicle article: “This is adapt, change or die” for nonprofits going forward.