Staying relevant and other successes
Having just come through our successful annual giving season, I thought it might be useful this month for me to share a few of the conversations I often have with companies and individuals who are considering donating to United Way. The questions I get when “on the road” are often very telling of what donors are concerned with and looking for in a nonprofit, and I enjoy these conversations since they challenge me to think more deeply about how our nonprofit can stay as relevant and effective in 2020 as we were in 1930, the year of our founding. My hope is by sharing some of these conversations with you, that you will be better positioned to be an “educated consumer” of the nonprofit product.
What is your product? The first question I always must answer is what we do. That’s what a donor is “purchasing” with their donation. Donating to a nonprofit is not like buying a pair of shoes or a screwdriver but let there be no doubt: a donor is purchasing something. What they are purchasing is a feeling – a notion – that they are changing the world in some way that matters to them. Perhaps it’s the feeling that they are helping to end homelessness. Perhaps it’s the feeling that they are protecting vulnerable children. Perhaps they are saving the environment. The important lesson for a donor is that the organization you are considering giving your support to should be able to very clearly articulate how your donation will help them to change the world in the way you desire. When I’m speaking with a potential donor, I’m likely to say something like “what we do is to ensure that our community has a strong safety net which guarantees that no person gets left behind and that every person as access to the educational, health, and economic building blocks for a better life.” I might use different words, but that’s the basic concept. If your nonprofit cannot clearly and succinctly articulate this… well, I would suggest that you look elsewhere.
Are you sustainable? The concept of sustainability basically addresses whether the organization can continue to generate the resources necessary to be effective for the long term. I would caution you not to use past success as a measure of future performance in this area. The fundraising landscape has changed dramatically over the past few years, and it will certainly continue to change in the future. You shouldn’t be afraid to ask this question about sustainability, because you really don’t want to donate today to something which won’t be effective tomorrow. For us at United Way, we have spent decades depending in large part on workplace giving, and while that is still an important source of revenue, we have also seen challenges in this type of donation as companies have turned more and more to online platforms and more targeted types of support. To meet this challenge, we have diversified our revenue sources to include individual giving outside of the workplace, planned giving tied to estate planning, corporate sponsorship support, different types of grants, and lots of innovative types of fundraisers. Who would have thought that United Way would raise significant dollars by sleeping in a box, rappelling off a building, running an obstacle course race in the snow, or for the first time this May, skydiving? In fact, every time I suggest one of these “crazy ideas” to my board, they first give me the “are you crazy look” and then quickly pivot to enthusiasm. The key for you as a donor is to ask the nonprofit where the bulk of their revenue comes from. If they seem heavily dependent on a single source of revenue, then they might be vulnerable to changes and outside influences.
Are you efficient? This is a tricky one and I feel somewhat problematic. Donors want their giving to generally support the mission of the organization. If a donor wants to support veterans causes, and they give $1,000, they want to know that almost all of that goes directly to helping veterans, and not to paying staff salaries, marketing expenses, and other types of overhead. In the past few years we’ve all heard stories about nonprofits which have spent as much as 50% or more of their budgets on these non-mission expenses. I would caution you that each organization is different when deciding what is good or bad on this measure. That said, with our United Way we have worked very hard to ensure that most of our expenses are for programs and the mission. It’s also easy for you as a donor to determine where the nonprofit you are looking at stands on this. Most nonprofits (there are a few exceptions) must file a 990 tax return with the IRS every year. On the 990 is a section called “Statement of Functional Expenses” (section IX) which breaks down all the organization’s expenses between the portion for the mission and programs and the portion for overhead. These numbers are prepared by an accountant and in the case of any nonprofit of a reasonable size, are subject to review by an auditor. In our case, for example, by focusing on reducing non-necessary overhead expenses, we’ve managed to get to the point where 86% of every dollar we spend is for the work our donors want us to do. In our case, we’ve done this in large part by doing a lot of our work through volunteers. For example, we have a fantastic volunteer maintenance crew which over the past year has replaced our lighting with LED’s, done maintenance around the building, and redone much of our insulation. We couldn’t afford to pay for this work, but our volunteers have been able to do it, which has also generated energy savings. The bottom line is, ask the nonprofit for a copy of their 990, or look it up online, and check out section IX. Be sure to ask the nonprofit about this section if you have any questions or concerns.
Are you accountable and transparent? The final question I get a lot has to do with the “trust factor.” Accountability and transparency are very important in nonprofit organizations. We’ve seen plenty of cases of fraud associated with nonprofits and donors need to really trust that the organization can be believed. Fortunately, there are two nonprofits which rate other nonprofits in this area. These organizations, GuideStar and Charity Navigator, measure all other nonprofits in areas like financial performance, effective policies and procedures, and accurate reporting. Based on their findings, a rating is issued. With GuideStar, a nonprofit either has no rating, or is bronze, silver, gold, or platinum (the best). With Charity Navigator, a nonprofit goes from not rated to a rating of 1, 2, 3, or 4 stars (the best). With each of these organizations, you can set up a free account and check out any nonprofit. Be sure to read the whole report and not just the rating, as there is often important detail and explanation there. In our case, we’ve used the evaluation criteria of these two organizations as a process improvement tool and have found that as our ratings have improved, so have our processes. We’re proud to have achieved great ratings, but for me, the big advantage is that it has forced us to get better, be more efficient, and be more accountable.
So, what’s the bottom line to all of this? In my opinion the important lesson is to do your research, ask your questions, and don’t be afraid to challenge nonprofit representatives to explain themselves. It is, after all, your money. Equally so, if you are volunteering, it is your time that you are giving, and you want to make sure it’s well spent. Last but very not least, please be generous with your time and money, because we have so many great nonprofits doing fantastic work for our community, and together with your help, GREAT THINGS HAPPEN WHEN WE LIVE UNITED!
Mike Apfelberg is president of United Way of Greater Nashua.