If you’re planning a major fundraiser such as a dinner gala, you may be focused on the fun factors — for example, the venue, menu and entertainment. After all, providing attendees with a good time can help cement their allegiance to your not-for-profit. Even better, they may bring guests who become new supporters.

But don’t ever forget the key objective of your event: raising money. To make your fundraiser profitable, pay close attention to the numbers, even if it means substituting what you initially wanted with more affordable alternatives.

Set goals first

When you begin planning your event, start with a total fundraising goal. This should include funds received from event attendees, sponsors and any pre-gala solicitations.

Your financial objective should be realistic, based on your nonprofit’s experience with previous fundraising events. But consider a stretch goal — say from 5% to 20% more than last year’s big fundraiser.

Estimate expenses

Estimate expenses for items such as:

• Facility rental,
• Food and beverages,
• Prizes and decorations,
• Invitations and publicity,
• Outside event coordination,
• Speaker and entertainment fees,
• Special event insurance coverage, and
• Permits (for example, to charge sales tax or host a raffle).

Examine your list closely for expenses that can either be eliminated or reduced. If, in the past, you held your annual event at a luxury hotel, you might want to try a new venue that will discount the space for the opportunity to host your community’s leaders. Even if you receive discounts, be sure to include the original expenses in your budget should you need to pay the full amount for a future event.

Seek sponsors

Good sponsors are critical. Not only can they help defray expenses with donations of goods and services, but they can also raise your nonprofit’s profile by introducing your name to a new audience. Be careful, however, not to promise too much in sponsor benefits, such as free advertising — it could lead to unrelated business income tax problems.

In general, quality is more important than quantity. Target well-known names with a connection to your nonprofit. For example, children’s apparel companies may make ideal sponsors for a K-12 education nonprofit. A successful business book author might be a great fit for a trade association meeting. Board members can be particularly helpful in finding sponsors by working their connections.

30% rule

Obviously, you don’t want your fundraiser coming off as “cheap,” and sometimes it’s necessary to spend money to make it. Just keep in mind a long-held rule that says fundraising events shouldn’t cost more than 30% of net proceeds. For help making an efficient event budget and other revenue-raising ideas, contact us.

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Your not-for-profit may invest valuable time and effort in its grant proposals. So it’s understandable that you’d be thrilled when proposals are given the green light. But before you accept a grant, be sure to do your homework and ensure it won’t be more trouble than it’s worth. Unexpected consequences can include administrative burdens — and even IRS scrutiny.

Small support, big consequences

Smaller or newer nonprofits are at particular risk of unintended repercussions when they accept certain grants. But larger and growing organizations also need to be careful. As they expand, nonprofits usually enjoy more opportunities to widen the scope of their programming. This can open the door to more grants, including some that are outside the organization’s expertise and experience.

Even small grants can have big administrative consequences, such as extensive reporting requirements. You might not have staff with the requisite experience, or you may lack the processes and controls to collect necessary data. Grants that go outside your organization’s original mission can pose problems, too. For instance, they might prompt the IRS to question your exempt status.

Financial and opportunity costs

Before you accept a grant, review the potential costs. Your nonprofit might incur expenses to complete a program that may not be allowable or reimbursable under the prospective grant. As part of your initial research, calculate all possible costs against the grant amount to estimate its actual impact on your organization.

Also analyze the opportunity cost of the decision. For unreimbursed costs associated with a prospective grant, consider how your organization might otherwise spend that money. Could you get more mission-related bang for your buck if you spent funds on an existing program rather than a new one? Think about how the prospective grant will affect staffing, too. Do you have the people to handle the workload, or will you need to recruit additional staff or volunteers?

Look first

It may seem counterproductive to turn down any form of financial support. But if accommodating a grant’s terms requires staff resources that can be better deployed elsewhere or if the terms threaten your nonprofit’s exempt purpose, it may be better to take a pass. To help prevent wasted time, also consider implementing a more stringent screening policy before applying for grants. Contact us for advice on grants and growing your nonprofit’s revenue.

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For many people, autumn is a time to start fresh. Kids are back in school and adults may have more time to pursue new hobbies and interests before the rush of the holiday season. So if your nonprofit could use some helping hands, now’s a good time to recruit volunteers from your community. Consider these best practices.

Get to know your neighbors

Is your nonprofit familiar to businesses, residents and schools in the surrounding community? People often are drawn to volunteer because they learn of a worthwhile organization that’s located close to where they live or work.

Get to know your neighbors by performing an inventory of the surrounding area. Perhaps there’s a large apartment building you’ve never paid much attention to. Consider the people who live there to be potential volunteers. Likewise, if there’s an office building nearby, learn about the businesses that occupy it. Their employees might have skills, such as website design or bookkeeping experience, that perfectly match your needs.

Once you’ve identified outreach targets, mail or hand-deliver literature introducing your nonprofit as a neighbor and describing volunteer opportunities. Consider inviting your neighbors to a celebration or informational open house at your facility. And if you haven’t already, join local Facebook groups and set up a Nextdoor.com page.

Inspire community members

By making your pitches as informative and compelling as possible, you’re more likely to inspire potential volunteers to action. Specifically, explain the types of volunteer jobs currently available, the skills most in demand and the times when volunteers are needed. Don’t forget to emphasize the rewards of volunteering — and warn about possible challenges your volunteers may encounter.

When possible, incorporate photographs of actual volunteers at work, along with their testimonials. You can make it easy for people to take the next step by including a phone number or directing them to your website or social media accounts for more information and a volunteer application.

Ask stakeholders to wield influence

Develop a system to keep your stakeholders informed of your volunteer needs. Major donors, board members and active volunteers often are influential in their communities, so a request from them may be more likely to get people’s attention.

Stakeholders may even frame a request for assistance in the form of a challenge. For example, leaders might contribute a day of volunteer service and challenge employees of their companies or members of their social organizations to do the same.

Holiday season opportunities

As autumn gives way to the holiday season, keep up your recruiting efforts. Many people like to volunteer — particularly as a family or group of friends — during the giving season. Volunteer-supported events enable nonprofits to educate the community about their missions, programs and long-term volunteer needs. These are opportunities to turn one-off participants into lasting supporters.

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Even if your not-for-profit isn’t legally required to obtain independent audits, such audits can enhance financial transparency, increase accountability and help you build trust with your stakeholders. But how do you find a truly independent auditor? Ensuring independence requires more than hiring an outside firm. The American Institute of Certified Public Accountants (AICPA) Code of Professional Conduct can help guide you.

On the face of things

The AICPA code mandates that CPAs and their firms be independent in the performance of professional services, including audits. It requires independence in both fact and appearance. Independence in appearance calls for avoiding circumstances that would cause a third party to reasonably conclude that the auditor’s integrity, objectivity or professional skepticism is compromised.

The totality of the circumstances matters when assessing independence in appearance. Insignificant individual threats (for example, an auditor’s small contributions to a charity) can become an issue in the aggregate if other ostensibly minor threats are also in place.

When independence is threatened

The code identifies several examples of threats to independence that could arise during a nonprofit audit — and when the threat may be acceptable. An acceptable threat generally is one where a reasonable and informed third party would conclude that the threat doesn’t impair independence.

An example of a threat that could impair an auditor’s independence is advocacy. This happens if an auditor promotes the nonprofit’s client’s interests to the point of compromising the auditor’s objectivity. This could happen, for example, if an organization is pursuing a cure for an illness that afflicts an auditor’s family member.

“Familiarity” is another potential stumbling block. Be careful if a close friend or relative of the auditor holds a key position in your nonprofit. The auditor may be too close to this situation. An auditor who serves as a director or officer or who designs, implements or maintains the organization’s internal controls is also too close.

Additionally, avoid hiring someone from a firm that has previously performed nonaudit work for your organization — for example, if the firm has prepared your nonprofit’s financial statements or served as its accountant. Know, too, that auditors are required to excuse themselves if they face threats or pressures from anyone in your organization.

Other safeguards

An auditor’s firm, a professional organization or regulators can impose other safeguards, including:

• Education requirements,
• The potential for disciplinary action,
• External review of a firm’s quality control system, and
• Licensure requirements.

The AICPA code says that audit clients can implement safeguards that operate in combination with other safeguards. Your nonprofit could, for example, have an active audit committee that monitors decision-making, oversight and communications related to any independent auditor.

An auditor can implement safeguards, too, such as using different partners or engagement teams from separate offices. The auditor must document the identified threats and the safeguards applied.

Time and money

With limited time and money, your nonprofit likely wants to simplify the auditor selection process. But don’t let speed and financial constraints get in the way of hiring the right independent auditor. Contact us for suggestions.

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Should your not-for-profit apply for a loan? Perhaps you want to buy new equipment or build an extension to an existing facility. Maybe your nonprofit generates revenue unevenly or you need help to recover from a financial blow.

For-profit companies often borrow extensively to grow, but they also generally produce reliable cash flow with which to repay debts. Loans to nonprofits can be riskier for both the lender and the borrower. Before your organization commits to applying for a loan, anticipate lender scrutiny and perform careful due diligence.

Cons and pros

The primary drawback to any loan is that you must pay it back. And, of course, you’ll have to pay interest. Rates for nonprofit loans tend to be higher than those for businesses because nonprofits often pose greater risk. Also, other expenses associated with loans (for example, appraisal charges, closing costs and attorneys’ fees) can add up quickly. And your nonprofit may be required to make a significant down payment.

However, once you’re approved for a loan from a reputable lender, you know you’ll get the funds. Also, applying for a loan may require less time and effort than fundraising, wooing major donors or seeking grants.

Loan options

Your funding needs and financial situation will help dictate the type of loan you should apply for. Common options include:

Lines of credit. Does your nonprofit typically experience revenue peaks and dips throughout the year? This can lead to cash flow crunches. In such situations, a revolving line of credit may be suitable.

Bridge loans. Sometimes cash flow issues can arise less predictably. A previously reliable funding source might dry up or a natural disaster could hit when cash reserves are low. In such circumstances, consider a bridge loan, which typically lasts no longer than one year.

Long-term loans. Standard loans with extended repayment schedules can be an option for major purchases or projects. You may want to finance a project with a capital campaign. However, campaigns can take longer than anticipated. A long-term loan can help you avoid delays while you continue fundraising.

Sometimes, nonprofits encounter opportunities that require prompt action — for example, office space you’ve had your eye on suddenly becomes available or you want to merge with a mission-similar organization. Both bridge loans and long-term loans may prove useful to finance such opportunities.

Preparing your application

Once you determine your financing needs, you’ll need to apply for the loan. Lenders generally ask about plans for any loan proceeds. They’ll require you to provide:

• Several years of tax filings and audited financial statements,
• Reports of pledges, receivables, accounts payable and outstanding debt,
• A description of major funding sources, and
• A board resolution approving the loan.

You may also need to submit information about your organization’s history (including articles of incorporation and bylaws), management and board of directors, short- and long-term strategic plans, and programs. Lenders often ask for cash flow projections showing a repayment plan as well.

A demanding process

Obtaining a loan can be a long and demanding process, and some nonprofits simply won’t qualify. Higher interest rates also mean borrowing can be expensive, particularly if your lender considers your organization a risky bet. Contact us for help applying for loans and to discuss other, potentially more accessible, financing options.

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