Not-For-Profit
Insider
Insights & Observations for Not-For-Profit Organizations
In This Issue
Capital/Major Gift Giving
Campaigns and
Fundraising Trends........ 1,2
Tax Update: Is Your
Non-Profit Organization
Complying?..................... 3
Trends in Reporting
Operating Metrics........4, 5
The Price of Federal
Funding: More
Reporting.....................6, 7
Volume 6 :: Issue 1
Capital/Major Gift Giving Campaigns
and Fundraising Trends
The most successful capital/major gift giving campaigns are perpetual in nature for many Not-for-Profit
(NFP) Organizations. How do they do this and what are the methods, tools and techniques that get
results? Also, what are some of the recent trends on who gives, how they give and when they support
charities?
First, I would like to acknowledge and credit Mr. Jim Radford, President of Holmes, Radford & Avalon,
who presented several ideas and concepts on this topic at UHY’s Nonprofit Roundtable Series in St.
Louis in November 2010. Some of those ideas included:
•Value of Feasibility Studies – a process to gain input and fresh, independent ideas that
translate to the possible, the potential and the probable. It can be used for strategic issues and
planning, campaign, annual fund, planned giving and relationship building. It shapes vision,
provides a roadmap to the future, and inspires and creates destiny. The study process can take
8-10 weeks, and may involve up to 40 people in personal, confidential interviews. It will identify
local and regional funding possibilities.
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Capital/Major Gift Giving Campaigns and Fundraising Trends Continued from Page 1...
•Value of Capital Campaigns – a process that provides
numerous benefits including: transformation and change,
exponential revenue stream, encourages donors to “Think
Big”, builds volunteer leadership fundraising veterans,
increased visibility in the community, and enables donors
to pledge over several years to give larger gifts. The
campaign can take six months on readiness, eight months
on leadership gifts and four months of community gifts.
•Value of Engaging Donors – a process of building
lasting relationships, building a force for good, opening
doors and creating opportunities. The value is creating a
joyous process for everyone.
To further expand on the critical aspects of fundraising, the
focus on relationship building with the donor is the single most
important factor. A quote from Marshall Howard’s book “Let’s
Have Lunch Together” states….”Without powerful relationships,
it’s a constant uphill battle to develop a stronger board, impact
major giving, expand grants, increase event income, or drive a
successful capital campaign”.
Mr. Marshall’s book illustrates the power of relationships and how
donors who are valued and understood give ten times more than
other donors. Donors want to establish relationships with people
they trust. Do you know the donor personally, including family
and children? Mr. Howard states, “People decide emotionally
and justify logically”. Many NFPs believe that donors give based
on the mission and the wonderful programs. Yes, many do give,
but the larger gifts are from people that have strong relationships.
Finally, I would like to recap trends on how people donate (Giving
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Volume 6 :: Issue 1
Channels – last 2 years) from a study from the NonProfit Times in April
2010 “Haiti Donations Seen as Tipping Point for Mobile Giving” :
•52% Checkout Donation
•49% Check by Mail
•32% Gift Shop
•31% Website
•27% Fundraising Event
•26% Honor/Tribute Gift
•20% Third Party Vendor •14% Phone •14% Monthly Debit • 8% Mobile/Text • 5% Social Networking Site Other research indicates that most charities receive 50% of their
annual online donations during November and December. Younger
donors are increasingly likely to make contributions via websites or
social networking sites.
Action idea: Utilize the expertise of independent consultants to
review your approach to fundraising and related activities.
For more information, please feel free
to contact Patrick Rohrkaste, Partner, at
(314) 615-1221 or [email protected].
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Tax Update: Is Your Non-Profit
Organization Complying?
Although FASB ASC 740-10 formerly knows as (FIN 48) Accounting for Uncertainty in Income Taxes has been applicable to
non-public and non-profit corporations for fiscal years beginning
January 1, 2009, many non-profit organizations should still
examine whether or not they are actively complying with the
standard.
As a refresher, the guidance provides a methodology to analyze
tax positions in order to create uniformity in accounting for income
taxes. The purpose of FIN 48 is to promote transparency for the
reader of financial statements. As a result, its application goes
hand-in-hand with the recent changes in the Form 990, which
promotes the same theory of full disclosure for the reader of the
exempt organization tax return.
Citing their income tax exemption status, many non-profit
organizations consider the guidance irrelevant to their
organization. While this may be true in most circumstances,
exempt organizations should still consider reviewing their
operations to discuss areas where the organization may miss the
application.
While a tax position is basically a position taken on a tax return,
it may also include making the decision to refrain from reporting
certain items or from filing certain tax returns. This would include
the application of state as well as federal tax laws. For a non-profit
corporation, it is important to note that the tax exempt status of
the entity itself is considered a tax position.
For example, entities that claim tax exemption under section
501(c)(3) should have the documentation to substantiate their
tax exempt status. In addition, the organization should document
its activities that support its stated purpose or the mission of its
exemption. In this regard, the organization should review whether
any political activity or significant lobbying activities could rise to
the level of where it could affect the tax exemption. In addition,
consideration should be made whether the level or conduct of
certain business activities may also affect tax exempt status.
nexus with other states that requires compliance with various state
tax regulations.
The activities of related entities such as taxable subsidiaries should
also be considered. There are many tax positions that can be created
by such relationships which may result in taxable income such
as rents, royalties or interest. Investment by a tax exempt entity
made through partnerships or limited liability companies can lead
to unrelated business income tax issues that may have not been
considered.
The activities undertaken by the flow through entity affect the nonprofit investor as reported on the Form K-1. The exempt entity should
ensure that the flow through entity is providing sufficient information
to determine if the unrelated business rules apply. Caution should
also be exercised in the area of debt financed property, which the
organization may own directly or through investments, in flow
through entities that may lead to unrelated business income issues.
After an analysis is made of any tax issues, such as those previously
mentioned, it must be determined whether there are any material
amounts that may have to be recognized on the financial statement
of the non-profit as the result of an uncertain position that was
taken. Consequently, there could be a significant impact on the
financial reporting of the organization.
This discussion should prompt organizations to consider whether
or not they have actively pursued or thought of the reporting
requirements or have simply ignored them on the basis that they
do not believe it affects them. The non-profit should coordinate the
application of ASC 740-10 with their public accountants to ensure
compliance with the requirements.
If you have any questions or concerns regarding the applications of
ASC 740-10, contact your UHY Advisors professional.
For more information, please contact
James Daniels, Partner, at (518) 4493166 or [email protected].
Another major tax position category for a non-profit organization is
in the area of unrelated business income. The organization should
review its activities to conclude whether or not it has unrelated
business activities. If so, the non-profit should review whether
it is properly complying by filing Form 990-T. The organization
should also analyze its activities to conclude whether it may have
Volume 6 :: Issue 1
Not-For-Profit Insider
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Trends in Reporting Operating Metrics
Present Data, Figures and Pictures to Maximize Action!
In the past decade, Not-for-Profit (NFP) entities have been
dealing with numerous regulatory and accounting changes,
including the revisions to IRS Form 990, increased reporting
demands of charity watch groups and accounting changes for
endowments. As a result, the nature and volume of information
are comprehensive, but based on the traditional reporting
formats most information is presented in figures without
percentages and visuals (graphs, charts, clipart, etc.).
Operating metrics vary from basic to advanced presentations.
The more advanced metrics include correlations between
financial and nonfinancial operational data and incorporate
pictures and graphics for those individuals who are moved/
motivated by visual data. Information on program services,
employees, board of directors, and volunteers that is linked to
financial results can be used to showcase the activities of the
entity that can be leveraged into more grants and funds. So,
let’s review some of the best practices and trends in reporting
operating metrics:
1.Measurement Data….are you telling your
story?
a. Cash position – unrestricted, designated by the
board for operations (3-6 months of annual
expenditures) and restricted.
b. Net assets – unrestricted, temporarily restricted (time,
program and expenditure) and permanently restricted
(endowments under control and endowments held by
third party trusts).
c. Statistics – program, fundraising and administrative.
d. Donor – cash and noncash (dollars, number of,
segmented by giving levels).
e. Volunteer data – numbers, junior boards, volunteer
hours, impact on programs and fundraising.
f. Historical results – recommend five years to illustrate
trends on revenues, expenses and nonfinancial data on
# of people served on programs.
g. Program successes – quantify statistics on effectiveness
of programming (for example, pre-service data
compared to post-service data).
h. Key targets – financial, program and capacity.
i. Research and development – investment in new
program initiatives/activities.
2.Reporting Techniques – Master Scorecard &
Dashboard (keep it simple & limit to 1-2 pages)
a. List top three strategic directions of the entity with
the planned metrics. The metrics that are reported on
a quarterly basis illustrate actual performance for the
quarter and year-to-date with benchmark data for the
prior year and the target for the current year.
b. List bar charts of overall revenues and expenses for
actual, budget and prior year. Also, supplemental
charts of key revenue and expense components and/or
operating funds (excluding endowments or significant
restricted funds) may contribute to the presentation.
c. Pie charts of revenues by category (United Way,
Monetary, Services, and Investment) and expenses by
functional area (Program and Supporting Services)
will demonstrate that the Entity is accountable and
transparent. Additionally, communicating the trends
on volunteers, people served and the impact of the
program effectiveness is extremely valuable.
d. List other benchmarks that address the key concerns
of watchdog groups. For example, BBB compliance,
unqualified audit, employee and/or customer
satisfaction.
Action Idea – Review current reporting systems, databases, Form
990, annual reports, grant proposals for ideas on information and
how it is presented. Do you need to expand or curtail information
to improve your story?
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Volume 6 :: Issue 1
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Illustrations of Dashboard Reports to the Board
For more information, please feel free to contact Patrick
Rohrkaste, Partner, at (314) 615-1221 or prohrkaste@
uhy-us.com, or Jody Lurk, Senior Manager, at (314) 6151217 or [email protected].
Volume 6 :: Issue 1
Not-For-Profit Insider
UHY LLP 5
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The Price of Federal Funding:
More Reporting
If you had just become used to hearing the term ARRA without
having a panic attack, there is now a new potential source of
anxiety: FFATA. FFATA, the Federal Funding Accountability and
Transparency Act, is not new legislation, per se; it was signed into
law on September 26, 2006, by President George W. Bush. The
reason FFATA is starting to make headlines again is that many of
its provisions became effective on October 1, 2010.
FFATA is similar to ARRA (the American Recovery and
Reinvestment Act) in its intent to make the government
transparent and accountable for its spending decisions by using
the newest information technology resources, but it goes beyond
the ARRA reporting in several aspects. To begin, the provisions
of FFATA affect all entities that receive federal awards (direct
and first tier sub-recipients) regardless of the type or amount of
federal funding received, and are applicable for all new awards
effective October 1, 2010.
The other major difference is that FFATA reporting is going to
be monthly (not quarterly, as with ARRA). The first reporting
was due November 30, 2010, for the month ending October
31, 2010. The collected information on federal awards is then
published and accessible through a searchable website: www.
USASpending.gov.
The term federal awards used in FFATA is quite broad and includes
grants, sub-grants, loans, awards, cooperative agreements and
other forms of financial assistance as well as contracts, subcontracts, purchase orders, task orders and delivery orders.
ARRA grants, awards that involve classified information and
benefit payments, and other awards to individuals who apply
for or receive the awards as natural persons are excluded from
reporting under FFATA. Other transactions that are presently
exempted from reporting include individual transactions below
$25,000 and credit card transactions before October 1, 2008.
Who is affected?
FFATA affects a spectrum of entities: for-profit and nonprofit
corporations, associations, partnerships, limited liability
companies, limited liability partnerships, sole proprietorships, any
other legal business entities and states or localities. Entities with
gross income of less than $300,000 for the previous tax year
(from any source) are exempted from reporting.
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Not-For-Profit Insider
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Additionally, not-for-profit entities that do not meet the threshold
subjecting them to the federal Single Audit Act may still be subject
to the provisions of FFATA.
All recipients of federal awards (grants and/or contracts) are required
to register in the Central Contractor Registration system at https://
www.bpn.gov/ccr/. In addition, prior to submitting FFATA reports,
the prime awardees must register in the new FFATA Sub-award
Reporting System (FSRS) at http://www.fsrs.gov.
FSRS was created to collect the required data from the federal
awardees for reportable sub-awards (grants or contracts greater
than $25,000) and executive compensation. In a memo to federal
agencies, the Office of Management and Budget (OMB) clarified
that awardees would be required to submit data only on first-tier
sub-grants and sub-contracts.
Reporting requirements
All awardees should have implemented the requirement to
collect sub-award data prior to October 1, 2010. Awardees and
sub-awardees (recipients, sub-recipients, contractors and subcontractors) should be prepared to report on applicable awards
(grants, contracts and orders greater than $25,000) as soon as
practicable after the sub-award, or a subsequent change to the subaward, has been made, but no more than 30 days after that event.
The prime awardee has a responsibility to inform the sub-awardees
at the time of the award of all reportable data elements and to
monitor the completion of those requirements on a monthly basis.
It is the sub-awardee’s responsibility to report to the prime awardee
all information required by FSRS.
The reporting requirements are phased in for federal contracts and
sub-contracts and are effective as follows:
• For contracts greater than or equal to $20,000,000, reporting
started July 1, 2010,
• For contracts greater than or equal to $550,000, reporting
started October 1, 2010, and
• For contracts greater than or equal to $25,000, reporting starts
March 1, 2011.
There is no phase-in of the reporting requirements for federal grants
and sub-grants.
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Sub-award reporting
The sub-award information reported in FSRS is very similar to what
is being reported under ARRA at http://www.FederalReporting.gov:
• Name of entity receiving award
• Amount of award
• Funding agency
• NAICS code for contracts/CFDA program number for grants
• Program source
• Award title
• Location of the entity (including congressional district)
• Place of performance (including congressional district)
• Unique identifier of the entity and its parent (if owned by
another entity)
can sort and filter their worklist by type, i.e. contract or grant,
by awarding agency and by other filter terms. Awardees will be
able to see, by award number, the FFATA sub-award reports filed
against that particular contract and/or grant.
Now, even though FSRS reporting is not specifically addressed in
the latest A-133 audit guide, OMB considers this to be required
reporting and, as such, the awardees’ timeliness and accuracy
of FSRS reporting will be audited, and any non-compliance will
result in a finding.
Summing things up, sub-recipient monitoring and reporting and
timeliness of the reporting are expected to be the major issues
in the FFATA implementation process.
Compensation and names of top five executives (prime and/or
sub-awardee), limited to entities that have met all three of the
following requirements:
Please contact Nelly Gizdova,
Manager, at (410) 423-4800 or
[email protected] for more
information.
• More than 80% of annual gross revenues are funded by the
Federal government,
• Annual gross revenues are greater than $25 million in the
previous fiscal year, and
• Compensation information is not already available through
reporting to the SEC or some other public source (IRS Form
990).
For ARRA-funded contracts subject to FFATA reporting, the
prime recipient will be required to report the contracts to both
FederalReporting.gov and FSRS, if required by the contract.
However, for ARRA-funded grants subject to FFATA reporting, the
prime recipient will not be required to report the grants to both
FederalReporting.gov and FSRS. ARRA-funded grants will continue
to be reported to FederalReporting.gov only and all non-ARRA
funded federal grants will be reported to FSRS.
Making things a little easier
Some prime and sub-award information will be pre-populated
in FSRS with data from the Federal Assistance Award Database
System (FAADS), the Federal Procurement Data System (FPDS)
and the Central Contractor Registration System (CCR) to ensure
quality data and minimize unintended data entry errors by subrecipients. The federal agency making the award will pre-populate
the prime award recipient information by reporting it in FAADS
for grant awards and in FPDS for contract awards. FSRS interfaces
with the above three systems (FAADS, FPDS and CCR) to make the
information available to the general public in USASpending.gov.
FSRS takes an “awardee-centric” approach, allowing the prime
awardees to manage and report against multiple contracts and/
or grants awarded to their registered DUNS number. The awardees
Volume 6 :: Issue 1
Not-For-Profit Insider
UHY LLP 7
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