Fundraising
VIII. A. Principle–Funding Essentials
No funding, no program. Funding is central to achieving the mission successfully.
Practices
- The board and staff are responsible for securing the funding needed to carry out the organization’s programs.
- A strategic plan must include a specific financial plan as to sources of funding, individuals designated to secure funding, timetable for funding, and review of funding status at every regular meeting of the board.
- Diversity in funding sources increases organizational financial stability. Most charitable organizations derive their funding from a combination of sources including private contributions, earned income and government.
Fundraising Fundamentals (2002), by James M. Greenfield.
Frequently Asked Questions about Fundraising
A donor should not attach the written acknowledgement from the recipient organization to the donor's individual income tax return. Instead the donor must keep the written acknowledgement to substantiate the contribution.
Tax exemption under IRS code §501(c)(3) has two primary benefits: 1) the donor making a donation to the nonprofit gets a tax deduction, and 2) there is no income tax on related earned income. This is true for purposes of federal income tax and Iowa income tax. Other benefits include the ability to issue tax-exempt bonds for capital projects, qualification for tax-exempt retirement plans (403(b)), and special postal rates.
A cause-branding program is a program for corporate charitable giving by which a company commits itself to a specific charitable cause. For instance, the cosmetic company Avon has committed itself to raising breast cancer awareness, and ConAgra Foods has committed itself to fighting child hunger in the United States. Companies involved in cause programs contribute more than just money. They contribute experience, business sense, and talent. Through such associations, businesses improve their reputations, strengthen employee loyalty, build business networks, and even increase sales. Charitable organizations realize an increase in donations, enjoy increased support both inside and outside of the businesses with which they are associated, and benefit from the resources corporate sponsors can offer. An example is ConAgra Foods' commitment to alleviating child hunger.
There are a number of ways that a 501(c)(3) moves from private foundation to public charity status. If the nonprofit is a church, school, or hospital, or tests for public safety, it will be a public charity. The nonprofit can also get its funding or support primarily from the general public, receiving grants from individuals, government, and private foundations. If one third of the organization's support comes from these public sources, it passes the "public support test". There are a variety of such support tests. For more information about them, see page 32, Qualifying as Publicly Supported in IRS Publication 557 - Tax Exempt Status for Your Organization. On the Form 1023 application for exemption Part X, you work through factors to determine if the nonprofit can get public charity status. After receiving exemption, Form 990 filers will then use Schedule A to calculate that fiscal year's public support.
A donor may only take a contribution deduction to the extent that the donor's contribution exceeds the fair market value of the goods or services the donor receives in return for the contribution. This means that recipient organizations must provide written disclosure statements to donors who make a payment exceeding $75 when that payment is partly for contribution and partly for goods and services provided by the recipient organization. This type of contribution by a donor in exchange for goods or services is known as a quid pro quo contribution.
According to the Association of Fundraising Professionals (AFP), these terms are all concerned with the donor’s intent. The AFP offers these definitions. Planned giving frames a donation within a structured system. The donation is usually transmitted through some sort of legal instrument, such as a trust or a will. Many planned giving programs include some elements of deferred giving. A deferred gift is a gift that has been pledged to a nonprofit but will not be available until some future date, such as the donor’s death. A major gift is a significant gift to an organization. The amount before a donation is classified as a major gift is left to the discretion of the organization.