Nonprofit Costs Questioned Accounting Practices Distort Fundraising Expenses

By Langhorne, Thomas | Evansville Courier & Press (2007-Current), May 20, 2012 | Go to article overview

Nonprofit Costs Questioned Accounting Practices Distort Fundraising Expenses


Langhorne, Thomas, Evansville Courier & Press (2007-Current)


It is an idea that, on the face of it, seems patently absurd. How can area nonprofit organizations generate thousands or millions of dollars in revenue and incur no fundraising expenses?

A Courier & Press/Scripps News Service analysis of area nonprofits' most recent available reports to the Internal Revenue Service found they collectively generated $51.2 million with virtually no fundraising expenses at all. Some of the organizations reported receiving the bulk of their money in government grants, without reporting grant-writing expenses as fundraising. Other sources of funds - fees for services rendered, membership dues, rental income - do not conjure visions of robust fundraising campaigns.

Some reported zero fundraising expenses for the simplest of reasons - they use an affiliated organization to raise their money for them. Others acknowledge they work at soliciting donations, but say they don't incur expenses. There are perhaps as many explanations as there are nonprofit organizations themselves.

The accounting techniques or organizational structures result in disclosure statements that indicate more money goes into programs and less into administrative costs such as fundraising.

A decades-old fixation on the percentage of revenue nonprofits spend raising money is forcing the organizations to minimize administrative and fundraising expenses to the detriment of their missions, said Jamie D. Levy, president of JDLevy & Associates, a Jasper, Ind., consulting firm.

"There is this reverse model of organizational growth in which, because of the pressures to see low overhead, that organizations are creating organizational structures that starve the heart and infrastructure of the organization," he said, citing a Stanford University study that makes a similar argument.

Lynnville, Ind.-based Bread of Life, which provides donated food, clothing, toys, diapers and other items to the needy and to local food pantries and community groups, reported receiving more than $4.1 million in "noncash contributions" in 2010 and almost $250,000 in all other contributions.

"We mainly use (AM 1540 WBNL) radio station. I go on there in the afternoon show a lot, and talk about the ministry and what our needs are," said Executive Director Bill Carlisle. "Then we send out newsletters. Now, that would be (reported) under 'postage,' though."

Carlisle pointed out he earned $8,880 in 2010 as head of Bread of Life, which is confirmed by the organization's annual Form 990 income tax statement to the IRS. Shirley Carlisle, his wife, was paid $9,648 as the nonprofit's secretary.

"I go out begging, just like I go out to businesses," Bill Carlisle said. "I went to Princeton, Ky., not long ago and got a large corporation to donate over $200,000 in food to us. Most of my fundraising is through gasoline to go in my vehicle, to the vehicle that we use to go out and solicit."

On the other end of the nonprofit spectrum, Complete College America Inc., reported no fundraising expenses because it received almost all of its $2.3 million in revenue in 2010 from five national nonprofit foundations.

Complete College America, which has a satellite office in Zionsville, Ind., and an office in Washington, D.C., bills itself as a national nonprofit that works with states to increase the number of American college graduates and close attainment gaps for traditionally underrepresented populations.

Cheryl Orr Dixon, a senior vice president at Complete College America, said the organization started in 2009 with a six-month startup grant and obtained two-and four-year commitments from its funders. In 2010, Dixon said, no fundraising was necessary and staffers focused on their work.

Of the $2.289 million that Complete College America reported receiving in 2010, about $1 million was spent on salaries, benefits and other compensation for seven employees. Dixon said the compensation is competitive for national nonprofits of similar reach. …

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