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Foundation Math How to read 990s

Foundation Math How to read 990s. . . . 10 minutes from knowing how to read a 990-PF. Foundation Research Nirvana: Federal reporting for foundations. You are here. How corporation and foundation giving fits into a mature nonprofit’s fund-raising plan:.

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Foundation Math How to read 990s

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  1. Foundation MathHow to read 990s

  2. . . . 10 minutes from knowing how to read a 990-PF. Foundation Research Nirvana: Federal reporting for foundations You are here . . .

  3. How corporation and foundation giving fits into a mature nonprofit’s fund-raising plan: For more details, visit the Giving USA Foundation™ site at http://www.givingusa.org/ Gifts from corporations and foundations (16.8%±) Gifts from people - individuals & bequests (about 83.2%±) 2005

  4. Resources – how to read the 990-PF • GuideStar 990-PF tutorialhttp://www.guidestar.org/index.jsp • The Foundation Center 990-PF FAQshttp://fdncenter.org/learn/faqs/html/990pf.html • Form 4506-A: Request for Public Inspection or Copy of Exempt or Political Organization IRS Formhttp://www.irs.gov/pub/irs-pdf/f4506a.pdf Tip: Go to the IRS Web site at http://www.irs.gov/pub/irs-pdf/f990pf.pdf Print a blank 990-PF and then highlight the lines and sections that matter to you.

  5. Year covered, contact information (including telephone number) and fair market value: p. 1

  6. Gifts and grants total:p. 1, Part I, lines 25 and 26

  7. Beginning of the year and year end assets: p. 2, Part III, lines 1 and 6

  8. Qualifiers: Part VII-A, lines 1-15

  9. Officers, directors and trustees: Part VIII, line 1 (and look at line 2, too)

  10. Application process, deadlines and more:Part XV, lines 1-5

  11. Grants paid: Part XV, line 3, section a Future grants to be paid: Part IV, line 3, section b

  12. What the supplemental page listing directors looks like:

  13. What the supplemental page listing grants looks like:

  14. What the supplemental page outlining the foundation’s purpose or mission looks like:

  15. Free foundation information • GuideStar - http://www.guidestar.org • IRS Search for Charitieshttp://www.irs.gov/charities/article/0,,id=96136,00.html • FundsNethttp://www.fundsnetservices.com/quick_links.htm • GrantSmart - http://www.grantsmart.org/ • AG charities databases http://www.searchsystems.net/ • Your local library (see Foundation Center list of cooperating collections at http://fdncenter.org/collections/) • CharityVillage (Canadian foundations) - http://www.charityvillage.com/ • GuideStar UK http://www.guidestar.org.uk/

  16. Real Estate Research

  17. Real Estate as a wealth indicator First, a few observations: • Prospect researchers are not real estate appraisers. • Researchers do not evaluate real estate holdings expecting a prospect to give a home to a nonprofit (though that might happen). • It is nearly impossible to learn about all the real estate some prospects hold. Therefore, it is likely that the estimates made based on real estate holdings are low. • Real estate is often the only asset that a researcher learns about a potential prospect.

  18. A few real estate definitions • Market Value – the price determined by a willing buyer and a willing seller • Assessed Value – the value determined for tax assessment purposes • Appraised Value – the value determined by an appraisal professional, usually based on more than one method of valuation (i.e. replacement cost or value as a rental property) • Taxpayer’s Name – usually the owner of the property, sometimes the same as the individual’s given name, but can be the name of a company, partnership, trust or other entity

  19. Assessor’s record – sample search screen

  20. Sample assessor’s record

  21. Sample assessor’s record, cont’d.

  22. Sample Estimated Value Search

  23. Free real estate research resources • Portico – directory of assessors with online access http://indorgs.virginia.edu/portico/personalproperty.html • Christina’s Tax Assessor Database – collection of multipliers used for assessments http://www.pulawski.net/ • Zillow – market value estimates http://www.zillow.com • Bank of America Real Estate Center – market value estimates http://realestatecenter.bankofamerica.com/RePortal/homepage.aspx

  24. Philanthropic Capacity Rating

  25. Philanthropic Capacity: Bringing it all together First, a few definitions (and a word or two about ranges) • Total philanthropic capacity (TPC) is an estimate of the amount an individual will or can give to all charities over 5 years. • Net worth is the value of an individual's assets minus their expenses or debts. • Known assets are the financial points of information available to prospect research. This term is often used in place of “net worth” since researchers never have enough information to accurately estimate net worth (all assets minus all expenses). • Ask Rating is the solicitation amount appropriate for a specific project, based on the conclusions of the development officer who has been cultivating the donor for that major gift.

  26. Ranges • You decide. Base your decision on what your team, your database, and your work can manage. • For our purposes today, we will anchor ourselves to a number in the ranges. That does not mean we are suggesting you do the same. • Remember: Your conclusions will be best informed by your experiences.

  27. Fund-raising adages about net worth and philanthropic capacity: • "Salary represents 10 percent of net worth." • "Stock holdings represent 30-35 percent of net worth." • "Real estate holdings represent 20-25 percent of net worth." • "Prospects have the capacity to give about 5 percent of net worth (or known assets) to charity (in a single gift or over five years)." • "An annual fund gift represents about 10-20 percent of a prospect’s major gift capacity." • "Prospects have the capacity to give 10 percent of the value of stock options of $1 million or more to charity."

  28. TPC based on net worth Net worth x 5% = Total Philanthropic Capacity This definition usually implies giving over 5 years Example: Net worth of $10 million x 5% = TPC of $500,000

  29. IRS study of estates of $600,000+ (<1995) * Multiplier: conversion of a percentage or fraction into a whole number equivalent Example: Using the stock percentage above: $150,000 ÷ .385 = $389,610 Using the equivalent multiplier: $150,000 x 2.6 = $390,000

  30. Updating the old IRS studies • New information indicates slight changes. Changes are often related to the whims of the economy. Stock market strong? More assets in the market. Real estate investments showing a good return? Ditto. • Your task: Develop a link to the current information and tailor your analysis to meet the changing tides. Or, at least, determine if you can reliably continue on the course you’ve chosen.

  31. What researchers have to be tuned into • Where the wealth began • Life stage • Degree of wealth • Gender • Location, location, location

  32. Life stage theory: Constituents give at different rates, depending on life stage.

  33. Capacity and private company ownership Company value or annual sales x ownership percentage x giving percent (or age multiplier ----------------------------------------------- = Total Philanthropic Capacity Example: A 70-yr. old prospect is a 30% owner in a privately held company with $25 million in sales. $25 million x 30% x 5% = $375,000 (TPC)

  34. Capacity and salary Premise: Net Worth can be estimated at 10 times annual salary. Annual Salary + Bonus x 10 x giving percentage (or age multiplier) ---------------------------------------------------- = Total Philanthropic Capacity Example: Prospect earned $250,000 in salary and a bonus of $50,000 last year. ($250,000 + $50,000) x 10 x 5% = $150,000

  35. Capacity and stock holdings Stock holdings (no. of shares x share price) x portion of estate from IRS or other studies x giving percentage (based on age or not) -------------------------------------------------- = Total Philanthropic Capacity (TPC) Example: A 55-yr. old with $2 million in stock $2 million in stock x 3 x 3% = $180,000 (TPC)

  36. Capacity and Real Estate Holdings Real estate estimated value x portion of estate from IRS or other studies x average giving percentage (or a multiplier based on age) = Total Philanthropic Capacity Example: A 55-yr old owns home with an estimated value of $1.5 million. Real estate holdings are estimated to be ¼ of the estate. $1.5 million home x 4 x 3% = $180,000 (TPC)

  37. Other capacity formulas • Consistent annual giving x 10 or 20 = TPC • Largest foundation gift x 5 (years) = TPC Example: $100,000 gift x 5 (years) = $500,000 (TPC) • $5,000 in political campaign donations in a cycle = $100,000 in philanthropic capacity • Planned giving prospects: Known assets x 75% -100% = TPCExample: $2 million x 75% = $1.5 million

  38. Other Capacity Indicators • Collections • Hobbies • Toys • Lifestyle • Philanthropies

  39. Who is difficult to capacity rate? • Downsizers • Inheritors • Stumpers • Internationals • Who else?

  40. Capacity Rating Chore List • Establish a philosophy. Share it with your team (via a white paper or a special meeting). Listen to their feedback. Make a plan for dealing with their objections. • Establish a capacity rating approach for your entire team. Decide which formulas work for your team. • Establish a process, including back-up. Be prepared to be challenged. • Prepare to review capacity ratings as new information emerges through contacts and cultivations. • Be consistent. • Keep up with trends. Talk to other researchers. Adapt as changes unfold.

  41. Capacity Rating Resources • “Capacity Ratings;” presented by Lisa Howley, 2004 APRA Conference. • “Understanding Compensation Practices & Estimating Income.” presented by Jill Meister and Debra Westerberg; 2005 APRA Conference. • “Assessing the Value of Real Estate;” by Cliff Anderson; 2005 APRA Conference. • “Estimating Net Worth: One Organization's Search for Truth;” University of Virginia Research Department; 1998; http://www.usc.edu/dept/source/NetWorth2.htm. • “How Much is that Donor in Your Records?” by Roger R. Millar; CASE Currents; 1995.

  42. How to contact us David Lamb Prospect Research Consultant Blackbaud david.lamb@blackbaud.com Cecilia HoganDirectorUniversity Relations ResearchUniversity of Puget Sound, Tacoma, WAchogan@ups.edu

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