For most nonprofit corporations (like 501(3)(c) organizations), maintaining tax-exempt status is paramount. In order to do so, make sure your nonprofit complies with a few special rules.
Donors are Looking for Organizations to Donate to Before Year End
Despite differences in behavior, all donor categories (individuals, advisors, and foundation grantmakers) want similar types of information from nonprofits presented in similar ways. Communicating and connecting with each group doesn't require a vastly different strategy or different information.
In terms of the type of information, all donors want to understand the full story of an organization, including:
- The financial picture, including how an organization spends its money
- That a nonprofit is legitimate
- The basics of the organization—its mission, approach, and make up
- The breadth and depth of the cause
- The nonprofit's impact
Some of the information donors want, such as financials, is fairly easy to come by. In fact, donors state they are able to find each of the first four items on the list without much difficulty. But donors also want information on a nonprofit's impact, which can be very difficult to obtain. This information—how effectively nonprofits achieve their missions—is the true "unmet need" of donors.
Presentation
Just as important as the information that donors want is how they want that information presented. All three groups clearly prefer an easy-to-digest report similar to what is produced by Consumer Reports. This format balances simplicity and thoroughness. It is easy to understand, while still allowing each person to make his or her own decision.
Descriptions of nonprofits without ratings also scored high; in fact, these descriptions—provided by a third-party site or by the nonprofit itself—scored higher than the simple "stamp of approval" approach that is so common today. It is not necessarily the case that donors don't want a perspective or star rating. They just want those perspectives to be conveyed in context, and with an eye on the full picture of the organization.
Trusted Sources and Location
Donors also have clear and consistent preferences on the source of information on nonprofits and where they want to find this information. On both dimensions donors give high ratings to nonprofit information portals and rating agencies as well as the nonprofit itself. It is important to know, however, that although donors say they like third-party sites, their awareness and knowledge of the ones that already exist today is very limited. The vast majority of research that is done by donors happens through direct contact with the nonprofit itself—be it the organization's Web site, materials, or staff.
How You Benefit from Offering Donors More Information
The bottom line of this research is that donors care about nonprofit performance, they want a complete picture of a nonprofit, and they want that picture presented in a clear, easy-to-understand way. Connecting with donors and communicating this information can help you access your share of the $15 billion in annual giving donors are willing to move to high-performing nonprofits. Best of all, collecting and communicating the information donors care about and want does not need to be an onerous, expensive process.
Corporate Records Requirements
All nonprofit corporations must keep good corporate records. These records help to preserve directors' limited personal liability and protect your organization's tax-exempt status. Good record keeping means preparing minutes of directors' and members' meetings and documenting important corporate decisions.
You'll want to organize these materials in a corporate records book, which should also contain a copy of your articles of incorporation, bylaws, and tax exemption determination letters from the IRS and your state tax agency.
In addition to keeping records of important decisions, your nonprofit corporation must record any financial transactions in a bookkeeping system and keep other financial records in order to file an annual corporate tax return. In the Commonwealth of Massachusetts if your Organization receives for than $200,000 in revenue in any one year it will also have a requirement to have the accounting records either reviewed or audited by an independent Certified Public Accountant and have formal financial statements prepared. Usually an audit is required if gross revenue exceeds $500,000.