Another New Nonprofit – Taking Baby Steps

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    The following is a recently received email. My comments/responses are the indented paragraphs.

    We’re a relatively young 501c3, at about 5 years old, but have relied mostly on dues from members up to this point. Last year we participated in our state’s annual nonprofit day of giving.

    It is my observation that memberships/dues are not the best ways to
    raise money. As an organization matures, it becomes easier to raise
    a lot more from contributions, because people who pay dues very often say,
    when asked for a contribution, that they’ve already paid/given for the year.

    We earmarked all of that income as Educational Scholarship money, to turn around and give to applicants from the local high schools (not our membership), and to each of 3 local university/college art departments (it was their discretion which student was awarded.)

    Simple enough. This year, we’d like to … fund those same scholarships again, perhaps in greater number, but we’d also like to spend some on educational opportunities for our own members – via workshops, visiting expert artists, etc. (Membership is open to anyone declaring themselves an artist, and we have 3 levels of membership with varying benefits.)

    Ethically, we wonder if just saying/advertising on social media that we’re “raising money for scholarships and education” is enough, or if we need to be more specific. (Like 80% to fund our scholarships and 20% to our own workshops. Spelling out the details on our donor page).

    Yes, you need to be more specific, but not in terms of percentages. Explain (briefly) about the scholarships you award and the educational programs you provide … and, how those scholarships and programs make a difference in the community. Phrase it in terms of how people benefit, not in terms of what a great job you’re doing.

    Ethics often equates to transparency, and for a nonprofit, that’s essential.

    Also, ethics requires that if you ask people for money for one-or-more specific purposes, and they give to specifically to support those purposes, you have to use their gifts specifically (only) for those purposes.

    Financially, we’ll track the funds separately. Not sure how that will effect our annual IRS info/bookkeeping.

    Tracking funds via the nonprofit equivalent of an income and expense statement is standard. BUT, you not only have to report to the IRS, you have to report to your constituency/community. Remember, pretty much nothing a nonprofit does is secret. And, if you budget wisely, spend wisely, and report your income and expenses properly, it’s good marketing, good community relations and a good basis for asking people to support what you do.

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