Article from the Chronicle of Philanthropy website: Nonprofit Hiring Shows Signs of Recovery, New Survey of Employers Finds
Includes graphs "Percentage of Nonprofit Employers That Expect to Add Jobs in 2011" and "Why Nonprofits Say Jobs May be Cut in 2011"
by Herschell Gordon Lewis (The Nonprofit Times, March 15, 2011 on pages 25 and 30)
How would you maximize the possibility of success, when planning an expansion of fundraising activity by adding a paid director of development to a previously volunteer board of directors?
Visualize this scenario: A continuing care retirement community of about 700 residents has had moderate success in its fundraising. monies have come from bequests, from short-term promotions, and from special events implemented by the community's marketing staff. Now a major project is at hand - building a new health center, which will include both short-term and long-term facilities to care for residents.
The board, composed of intereste residents and a few outsider supporters, has decided to hire a director of development to add both a professional patina and aggressive promotions to the fundraising efforts. Impetus stems from dissatisfaction with the number of bequests in residents' wills. Education and motivation are prime factors, obviously not currently exploited enough.
What is the most effective way to recruit the right person? A substantial number of sub-questions are elements comprising the answer to that question. A few of these for example:
- Where do you advertise the availability of this position?
- Do you mention a salary range? Specify salary?
- How specific are you in describing what the job entails?
- What background and experience do you demand?
- Do you assign the title "Director of Development" immediately or use "Development Officer" to prevent an assumption of total control?
- Do you offer incentives based on total monies raised?
- Who is qualified to evaluate candidates for this position?
How To Do It Wrong
The president of the board holds this position because for several years he was vice president. That, inconcert with exposure to the overall operation of the gated community, is the extent of his administrative expertise.
Unilaterally, the president decides to place advertising for candidates - classified "help wanted" in local publications plus phone and email communications to nonprofits known to him. The ads are headed "Director of Development," and the direct communications to local nonprofit executives ask whether the recipients know someone who might qualify for this position. Salary range is specified based on a "guesstimate": $80,000 to $100,000 a year. Qualifications mentioned in the ads are "self-starter" ... "familiarity with Excel and MS Word" ... "supervisory ability" ... "strong verbal skills" ... "minimum bachelor's degree and three years experience."
Most of the applicants are in their 30s. When asked how they would raise money for a new health center at a retirement community, their answers range from generic to fuzzy and are oblique to the target. All applicants claim superior communications skills, but no samples reflect a fundraising capability.
Because the board president feels obliged to hire someone after having taken all the reins in his hand, he and the treasurer hire who they believe is the pick of the litter and instruct her to meet with residents, prepare inspirational materials for the weekly community publication, and issue written progress reports. No noticeable lift in contributions seems to result, and some residents comment on being contacted by a young person whose personality doesn't connect well.
The other half of the equation is frustration the development officer experiences. She wonders why she has to clear every move through board members who have no background in professional fundraising. Her attempt to include mailings to suppliers and contractors as a means of adding them to the potential donor list is shot down without discussion. Time passes without any sense of connection with residents.
Because the development officer has put in ample time, lack of response beyond what could have been anticipated without the new hire is a surprise to the board.
But it really shouldn't be.
A Different Philosophy
One of the most significant rules of all communication: Specifics outpull generalizations. What might we have done differently to attract a more directly qualified group of applicants?
For starters they should have advertised where fundraising professionals would see the ads. In both ads and discussions with confreres, they should have specified "fundraising professional," realizing that "development officert" has too many interpretations... They should have been more specific: "Retirement community wants a seasoned executive to take charge of fundraising. The immediate mission is a new health center, with more projects planned."
This would bypass beginners and career job-applicants, make salary a matter of negotiation, and remove the suggestion that fundraising is limited to residents.
Matching a maximum number of qualified applicants to a job isn't nuclear science but it is a science when evaluated against guesswork.
Even within some sophisticated organizations that have well-seasoned human resources or personnel departments, lack of specifics translates into both wasted time and a dearth of prime prospects.
Yes you want command of grammar and basic computer skills and the ability to speak in coherent sentences. These are givens. So also should be, "We're looking for a fundraising professional."
March 1, 2011
Taxable if not subject to a substantial risk of forfeiture
Many tax-exempt organizations and state and local governments (collectively referred to as covered organizations) find it necessary or desirable to maintain deferred compensation arrangements for their executives. Such arrangements can serve as a valuable recruitment and retention tool and can help executives better prepare for retirement.
However, covered organizations and their executives face a conundrum when establishing such arrangements.
Under IRC Section 457(f), such deferred compensation, other than certain limited amounts that can potentially be deferred under 401(a), 403(b), and 457(b) plans, is taxable when it is no longer subject to a substantial risk of forfeiture. This rule represents a substantial hurdle to overcome when establishing deferred compensation arrangements at covered organizations, and it places such organizations at a disadvantage when competing with the for-profit sector for executive talent.
Substantial Risk of Forfeiture
A typical service-based vesting schedule generally is sufficient to create a substantial risk of forfeiture under Section 457(f). For example, if a deferred compensation plan requires an executive to remain employed until age 65 to receive the compensation deferred under the plan, then a substantial risk of forfeiture would exist (and taxation would be avoided) until the executive turns age 65 while still working for the covered organization. If the plan provides that the risk of forfeiture will lapse upon death, disability, or an involuntary separation from service prior to age 65, then taxation would occur when any of these events occur.
When working with younger executives, the use of such a service-based vesting schedule can be problematic. Would a 40-year-old executive place much value on a deferred compensation arrangement if all of the deferred compensation is to be forfeited upon a voluntary separation from service prior to age 65?
Private letter rulings and IRC Section 83 provide some guidance regarding what might constitute a substantial risk of forfeiture under plans that use something other than simple service-based vesting schedules. The Section 83 regulations identify certain conditions that generally will not constitute a substantial risk of forfeiture.
A requirement that deferred compensation be forfeited upon a separation from service for cause;
A requirement that deferred compensation be forfeited upon violation of a non-compete covenant, unless the particular facts and circumstances indicate to the contrary; and
A requirement that deferred compensation be forfeited upon failure to fulfill a post-separation consulting obligation, unless the executive is expected to perform substantial post- separation services.
Some covered organizations use a "rolling risk of forfeiture" technique to provide maximum flexibility to their executives. With this technique, an executive postpones an upcoming vesting date, thus theoretically postponing taxation of the deferred compensation.
For example, a plan might require that an executive continue employment for two years to avoid the forfeiture of deferred compensation. After one year, the period of the substantial risk of forfeiture is extended for an additional year, so that a full two years of service is again required from that point forward to avoid forfeiture.
The Internal Revenue Service (IRS) generally opposes this technique on the premise that an executive would not be willing to accept an extension of the period of a substantial risk of forfeiture if such an extension truly increased the risk of forfeiture.
Some covered organizations and their executives attempt to avoid the Section 457(f) rules by structuring their deferred compensation arrangements as severance pay plans. Bonafide severance pay plans are exempt from the requirements of Section 457(f), so compensation under such arrangements isn't taxed until paid, regardless of whether it is subject to a substantial risk of forfeiture prior to payment.
Unfortunately, there is no formal definition of a bonafide severance pay plan. However, the IRS has stated that it will look at the substance of an arrangement to determine whether it constitutes a bona fide severance pay plan. Merely labeling a deferred compensation plan as a severance pay plan will not result in the arrangement qualifying as a bona fide severance pay plan.
In Notice 2007-62, the IRS indicated that it anticipates issuing new guidance relating to Section 457(f). Specifically, the guidance would include formal definitions of "substantial risk of forfeiture" and "bona fide severance pay plan." Notice 2007-62 anticipates that an arrangement will be considered a bona fide severance pay plan if
The benefit is payable only upon an involuntary separation from service;
The amount payable does not exceed two times the lesser of the employee's annual rate of pay or $245,000 (indexed annually); and,
The plan provides that payments must be completed by the end of the employee's second tax year following the year in which the employee separates from service.
Notice 2007-62 also anticipates that the definition of a substantial risk of forfeiture will be similar to the definition of a substantial risk of forfeiture that is contained in the Section 409A regulations.
As a result, it is likely that (1) a non-compete covenant will not constitute a substantial risk of forfeiture, regardless of the facts and circumstances surrounding the covenant; (2) a rolling risk of forfeiture will not constitute a substantial risk of forfeiture (as discussed above, the IRS generally has opposed rolling risks of forfeiture even before the issuance of the notice); and (3) a substantial risk of forfeiture generally will not be recognized with respect to compensation that is deferred voluntarily by an employee.
Although Notice 2007-62 was issued three years ago, the anticipated new guidance has yet to be issued. It is anticipated that the new guidance will be effective on a prospective basis.
However, pending the formal issuance of the new guidance, taxpayers are permitted to rely on the new guidance as previewed in Notice 2007-62. Even if, as anticipated, the new guidance is effective on a prospective basis, there still may be exposure with respect to the use of aggressive substantial risk of forfeiture techniques (for example, rolling risks of forfeiture) for periods prior to its issuance.
What To Do
Covered organizations that maintain deferred compensation arrangements should have those arrangements reviewed by a qualified professional to determine whether there may be Section 457(f) compliance issues. Covered organizations should also consider fully using other available deferred compensation alternatives in lieu of, or in addition to, establishing deferred compensation arrangements that are subject to the Section 457(f) rules. For example, it may be possible for a covered organization to defer amounts under a 401(a), 403(b), and/or 457(b) plan in addition to, or in lieu of, amounts deferred under a 457(f) plan. Benefits provided by these types of plans generally are taxed upon payment rather than upon vesting. The amount of compensation that can be deferred under these types of plans is limited. However, in certain situations, covered organizations may be able to provide some or all of the desired deferred compensation under one or more of them.
Tim Daum, CEP, CPC, CEBS, is a director with the Oak Brook, Ill., office of Crowe Horwath.
The Nonprofit Times
March 1, 2011
DONORS SAY ONE THING, DO ANOTHER
Education tops priority list but religion still gets the cash
By Paul Clolery
More than half of the money given to charity by Americans goes to religion, even though it ranks fourth when donors are asked which type of organization actually needs the money. They see education as the top priority but don't back up their words with their giving.
According to a national survey by The NonProfit Times and infogroup/Nonprofit, religion ranks fourth behind education, health and civic organizations when Americans were asked which type of organization is most in need of financial help right now. When The NonProfit Times asked the exact question in 1992, religion finished third behind education and health groups.
The complete list for 2010 was: education, 35 percent; health, 24 percent; civic or community, 12 percent; religion, 9 percent; overseas crisis/relief, 8 percent; environmental organizations, 7 percent; political organizations, 1 percent; other, none and don't know totaled 4 percent. Percentages were rounded up to reach 100.
By comparison, for 1992 the numbers were: education, 33.6 percent; health, 27.3; religion, 9.4; environmental, 7.5 percent; civic or community, 6.8 percent; overseas/relief, 4.2 percent; political, 2.8 percent; other, none and don't know totaled 8.4 percent.
But when you examine the Giving USA numbers, the annual compilation of American philanthropy, religion has received more than one-third of giving by individuals in all of those years from 1992 through 2009. For 2009, that number was $100.95 billion, compared to $77.9 billion in 1992.
When it comes to education, giving was $19.88 billion in 1992 and $40 billion in 2009, just 19.7 percent and 17.6 percent, respectively, of what was given to religious causes.
As for those who answered education in 1992, it was a nearly evenly split between women (50.8 percent) and men (49.2 percent). The percentage break this past December was 56.8 percent female and 43 percent male, which correlated to the increase in the number of females graduating from higher education institutions.
Female respondents in 1992 were more likely to answer religion than men (58.6 to 41.4 percent) as well as education (50.8 compared to 49.2). The most recent responses show 46.8 percent of those who answered religion were female versus 53.3 percent men.
People who answered religion in the 1992 survey were more likely to have a household income of less than $40,000 (66.5 percent) with 16.2 percent reporting income of more than $60,000. Fully one-third (33.9 percent) of those who answered education had household income of $40,000 or more. In the more recent survey 43.1 percent of those who found religion as important had incomes of $50,000 or more.
"I think a lot of this is people saying one thing and doing another," said Larry May, senior vice president for strategy of infogroup/nonprofit. "How many people actually give to their colleges? It's a very small number."
In fact, according to the Council for Aid to Education in New York City, the number to which May was referring for alumni giving is just 10 percent for 2009.
The exact question was: "I'm going to mention some types of nonprofit organizations. In general, which one of these types of organizations do you think is most in need of financial help right now?"
Melissa Brown, former editor of Giving USA and now a philanthropic consultant in Indianapolis, said there is some wiggle room for answers based on how the questions were posed. "Asking about which organizations are in need of financial support, is not the same as asking,"which one do you most want to support' or even"which one do you think does the most important work in the world.' It is really asking,"which one is in such bad financial shape that you notice?' I could argue that people perceive that congregations are not in need of financial support because something like 45 percent of the population gives to a religious charity."
She suggested, "This might be why less than 10 percent advance religious organizations in response to the question. They know they and most of their friends are giving to a religious group and probably that is the bulk of their charitable giving, so the funding stream at that organization, at least, is comparatively secure."
Unlike congregations, schools get little philanthropic support and a lot of ink and air time because of poor results or poor conditions, she said. "This is often attributed to failing budgets, at least these days," she said. The period when the question was first asked was the ebbing of a recession and the start of a presidential election cycle that keyed on education so it was on people's minds, Brown said.
Giving to education might not be what people think, either. "Higher education, of course, gets the bulk of the very largest gifts, but frankly, lots of that is for medical work. Broad (Institute), (Bill and Melinda) Gates (Foundation), David Geffen and others are only some of the donors who have given to university hospitals or medical schools," she said.
The racial breakdown when it came to education changed during the period, with 68 percent of the people who answered education being white in 1992 versus 61.1 percent now. Hispanic respondents increased during the period, from 11.2 percent to 17.6 percent. African-American responders were at 14 percent in 1992 and 12.7 percent now.
People's perceptions about the financial needs of health charities might be influenced by media coverage and people's personal experiences of health care generally as the single largest source of rising prices in the U.S., Brown said.
An interesting element of the results is how people have changed as they age. For example, the members of the 28-46 age group in 1992 aged and are now 45 to 64. People now 45 to 64 in the survey are more likely to see religion as needing financial report than people in that generation did 18 years ago. In 1992, 7 percent picked religion; in 2010, 10 percent did.
The percentages across the two surveys are similar for education and health, but the environment is less likely to be picked in 2010 (just 4 percent) compared with in 1992 by people in same age cohort, when 8 percent identified environment.
Most strikingly, according to Brown, civic and community organizations in 1992 were selected as most in need of financial support by 6 percent of the people then aged 28 to 46. People in that generation, now 46 to 54, were much more likely to pick this type of charity in 2010, with 16 percent identifying civic and community organizations as needing financial support.