Andrew Kakabadse, Professor of International Management Development in the School of Management at Cranfield University in the United Kingdom, recently conducted a study of over 1200 boards from around the world. Fully 75% of those boards reported not knowing how they contribute value to their organizations. While sad, I am not surprised by this finding. The culture of most boards precludes engagement. And, if there is no engagement how can we expect anyone to have even a sense of belonging, let alone of providing import to the organization?
For instance, when was the last time your board was engaged in a substantive discussion? I don’t mean that the directors were asked to vote on a recommendation or to discuss the merits of the two companies submitting bids to fix the roof. Rather, they were expected to ask “What if…,” to explore working in tandem with a group that has always been seen as the competition or to consider how to turn a risk into a unique opportunity to move the organization forward?
I routinely ask boards with which I’m going to work to share with me their typical agenda. Most follow a format that is strong on reports. How much value can board members bring if all they are doing is listening to reports? What’s worse: reports focus on the past. Nobody can change the past. If you want board members to feel they are bringing value to your organization, you must engage them – their excitement, commitment and unique talents – around issues that they can impact. This requires providing them with the information they need or request, turning them loose to grapple with the issues and supporting their conclusions. If you have grounded your board around your organizational vision and values you have nothing to fear and much to gain.
There’s an old adage that, “If two people in business think alike, one of them is unnecessary.” We need the diversity of thought that our boards bring to the table. Our decisions become better. Best, the process cuts both ways. People who have had the opportunity to offer input feel valued.
But, all of this is for naught if we don’t share with our boards the results of their efforts. Otherwise, for all they know, they wasted their time in merely a mental exercise. If we want our boards to feel valued, we have to demonstrate that their product – their intellectual capital and their efforts – made a difference. And, it doesn’t hurt to thank them for that, either!
Showing posts with label Ph.D.. Show all posts
Showing posts with label Ph.D.. Show all posts
Monday, February 22, 2010
Thursday, February 11, 2010
There's a New Normal in Town
I’ve been hearing it for awhile, now… we cannot hope to hang on until things return to “normal.” “Normal” has gone for good. There’s a new “normal” in town and it only promises to keep morphing. Regulations will become tighter. Technologies will continue to change the way we do business. Upcoming generations will want to mold projects and processes in their image. The community will demand increasing levels of participation, accountability and impact. Collaboration will emerge as something necessary, something real, something more than a “front” to satisfy funders. Creativity will rule. The sharing of knowledge will become the norm. And, so the list grows.
How can we deal with these shifting sands? People a lot smarter than I have failed to come up with a definitive answer. However, I do have some thoughts. We cannot look backwards with longing. We, like Lot’s wife, will be buried in that sand.
We must realize, as my friend and colleague Hildy Gottlieb says, that we are creating the future now, whether consciously or not, with everything we do or say. So, we need to define our desired future, claim responsibility for our actions, see the elements dropped in our laps as constructive and utilize them, moving quite deliberatively in the direction that will take us where we want to go.
We must have faith in the community – the combined intelligence and experience sets of diverse individuals, all with skin in the game – and embrace what it has to offer. This might mean flattening our organizations’ hierarchies, or at least encouraging people to build the networks they feel would be most effective without attention to reporting lines.
We need to stop viewing our organizations as turf that must be protected from trespassers and poachers at all cost. Thinking about the value easements on personal property offer to the owners of the property, as well as to the greater community, might help here. As a first step to breaking down the walls between “us” and “them” we could encourage that those in our organizations start talking to and working with individuals at all levels in other organizations, even other communities. And, we should start looking at how to leverage resources between organizations, as well.
We must encourage out-of-the-box thinking. In fact, we should be encouraging people to burn that damn box for once and for all! This might mean that we take a lesson from some Fortune 100 companies and give people time each week to work on projects unrelated to their jobs that are of personal interest to them. Incredible ideas have come out of such policies in the for-profit sector. Why aren’t we encouraging people to dream, then share what they are developing? My guess is that we’ll find things in these projects that will move organizations closer to not only their own visions, but to healthier, more vibrant communities.
It won’t be easy. Real change rarely is. However, there is a saying that “change is inevitable, only the struggle is optional.” Let’s embrace the new “normal” and together clean up Dodge.
How can we deal with these shifting sands? People a lot smarter than I have failed to come up with a definitive answer. However, I do have some thoughts. We cannot look backwards with longing. We, like Lot’s wife, will be buried in that sand.
We must realize, as my friend and colleague Hildy Gottlieb says, that we are creating the future now, whether consciously or not, with everything we do or say. So, we need to define our desired future, claim responsibility for our actions, see the elements dropped in our laps as constructive and utilize them, moving quite deliberatively in the direction that will take us where we want to go.
We must have faith in the community – the combined intelligence and experience sets of diverse individuals, all with skin in the game – and embrace what it has to offer. This might mean flattening our organizations’ hierarchies, or at least encouraging people to build the networks they feel would be most effective without attention to reporting lines.
We need to stop viewing our organizations as turf that must be protected from trespassers and poachers at all cost. Thinking about the value easements on personal property offer to the owners of the property, as well as to the greater community, might help here. As a first step to breaking down the walls between “us” and “them” we could encourage that those in our organizations start talking to and working with individuals at all levels in other organizations, even other communities. And, we should start looking at how to leverage resources between organizations, as well.
We must encourage out-of-the-box thinking. In fact, we should be encouraging people to burn that damn box for once and for all! This might mean that we take a lesson from some Fortune 100 companies and give people time each week to work on projects unrelated to their jobs that are of personal interest to them. Incredible ideas have come out of such policies in the for-profit sector. Why aren’t we encouraging people to dream, then share what they are developing? My guess is that we’ll find things in these projects that will move organizations closer to not only their own visions, but to healthier, more vibrant communities.
It won’t be easy. Real change rarely is. However, there is a saying that “change is inevitable, only the struggle is optional.” Let’s embrace the new “normal” and together clean up Dodge.
It's Time to Judge on the Basis of Impact
The end of the year is approaching and people are hastening to make their 2009 gifts. Some generous souls will respond to any organization that makes an ask. For most, however, the process involves either going through the stack of envelopes received from organizations to which they’ve given in the past, merely to decide how much to give this year, or logging on to a charity watchdog site, such as those run by Guidestar and BBB Wise Giving Alliance, to see which organizations serving a personal passion get high marks. But, are any of these means the best way to approach this important task?
A small but increasingly vocal number of people are suggesting we should be looking at impact when we make our giving decisions. Has the organization to which we’ve given loyally over the years really lived up to its promise to the community? I can hear the contingent that turns to watchdog groups saying, “But that’s why I check these groups out!” The problem with the watchdog groups is that the criteria upon which they’ve been rating organizations are criteria that are easy to measure. They are not necessarily criteria that speak to impact.
One of the key factors upon which high ratings have been given in the past is the maintenance of low administrative costs. However, nonprofits have rightly complained for years that it takes people, facilities and equipment to provide services and achieve impact. People, facilities and equipment cost. Other key factors that result in a strong ranking include the number of dollars that are spent to raise money and the period of time the organization could maintain itself without any further fund raising. While clearly related to good business practices, neither of these criteria speak to results. Frankly, even factors such as numbers of programs, numbers served or satisfaction levels speak more to busyness than they do to impact.
Ken Berger, the CEO of Charity Navigator – one of the foremost watchdog groups – bravely came out this month to say that Charity Navigator will be redesigning its rating system to focus on impact. He admits that it won’t be easy, but believes it is necessary and doable.
Until all the watchdog organizations do our work for us, I propose that we put aside emotion and analysis based on easy but less-than-meaningful numbers to do our own assessment of impact. Is, for instance, our favorite homeless shelter merely serving more people or is it putting the people it does serve into their own homes and providing them with the skills to pay the rent and take care of the maintenance?
We can also look at how well the organizations we identify play well with others. Does that homeless shelter insist on hiring its own case managers, building out and staffing its own kitchen, or collecting its own clothing to provide to clients when it could reach out to other organizations in the community who already have case managers, a kitchen capable of feeding those in the shelter or sufficient clothing to share?
Doing this sort of research will take time, but the rewards go beyond knowing that you answered the call to ensure the status quo. It will draw you closer to the organizations you ultimately select. It will intensify the feeling you get inside when you give. It will force organizations to make a difference or leave the marketplace. And, it will allow you to live in a healthier, more robust community.
A small but increasingly vocal number of people are suggesting we should be looking at impact when we make our giving decisions. Has the organization to which we’ve given loyally over the years really lived up to its promise to the community? I can hear the contingent that turns to watchdog groups saying, “But that’s why I check these groups out!” The problem with the watchdog groups is that the criteria upon which they’ve been rating organizations are criteria that are easy to measure. They are not necessarily criteria that speak to impact.
One of the key factors upon which high ratings have been given in the past is the maintenance of low administrative costs. However, nonprofits have rightly complained for years that it takes people, facilities and equipment to provide services and achieve impact. People, facilities and equipment cost. Other key factors that result in a strong ranking include the number of dollars that are spent to raise money and the period of time the organization could maintain itself without any further fund raising. While clearly related to good business practices, neither of these criteria speak to results. Frankly, even factors such as numbers of programs, numbers served or satisfaction levels speak more to busyness than they do to impact.
Ken Berger, the CEO of Charity Navigator – one of the foremost watchdog groups – bravely came out this month to say that Charity Navigator will be redesigning its rating system to focus on impact. He admits that it won’t be easy, but believes it is necessary and doable.
Until all the watchdog organizations do our work for us, I propose that we put aside emotion and analysis based on easy but less-than-meaningful numbers to do our own assessment of impact. Is, for instance, our favorite homeless shelter merely serving more people or is it putting the people it does serve into their own homes and providing them with the skills to pay the rent and take care of the maintenance?
We can also look at how well the organizations we identify play well with others. Does that homeless shelter insist on hiring its own case managers, building out and staffing its own kitchen, or collecting its own clothing to provide to clients when it could reach out to other organizations in the community who already have case managers, a kitchen capable of feeding those in the shelter or sufficient clothing to share?
Doing this sort of research will take time, but the rewards go beyond knowing that you answered the call to ensure the status quo. It will draw you closer to the organizations you ultimately select. It will intensify the feeling you get inside when you give. It will force organizations to make a difference or leave the marketplace. And, it will allow you to live in a healthier, more robust community.
Thursday, February 4, 2010
Asking for Donations? Be Sure You are Properly Registered
Q: Can you address what nonprofits must and should do about registering in their own and other states when they solicit donations? I am employed by a management support organization. Many of the nonprofits with which we work are not aware of the requirements and I would like to provide them with current information. I appreciate anything you can share with me on this matter.
A: You raise an issue that is getting a lot of attention today, especially from the states themselves and the IRS. The short answer is that organizations must be registered in the states in which they solicit funds. And, that might as well be every state if they have a “donate now” button on their website. While each state has different laws on the books – for instance, some allow for exemptions for such things as religious organizations, organizations receiving money from only a handful of individuals within the state or organizations receiving an insignificant amount of money from within the state – they are all looking for full compliance.
The registration requirements are not new. Organizations have long been obligated to register in those states in which they conduct a solicitation by any means – e.g., direct mail, email, raffle sales, telemarketing, personal visit and so on. This has been true whether or not the organizations have a physical presence in the state. Even the ubiquitous “donate now” buttons on websites can trigger registration requirements in states that argue that one of their residents could conceivably come upon one of these sites, see the button as a solicitation and be motivated to give.
Throughout the years, a number of organizations have received calls from states that proactively identified them as scofflaws, threatening fines and demanding immediate registration. In the grand scheme of things, it was not a large number. But, just because one of your organizations may have knowingly or unknowingly ignored these laws with impunity in the past, they do so now at their own peril.
Three situations have emerged to make this so. The first is the public’s growing unease over the scandals that have rocked both for-profit and nonprofit corporations, and the states’ corresponding desire to protect their citizens by, at the very least, keeping track of who is asking those citizens for money. Second, the poor economy has motivated states to look for every source of revenue they can find. Registration fees and fines for the failure to register contribute to states’ coffers. And third, the IRS did a major rewrite of the Form 990, which now requires nonprofits to report the states in which they must file a copy of their Form 990 and the states in which they are registered or have received an exemption from registering. These two questions allow the IRS to determine the states from which an organization has raised funds. Failing to answer is not an option. Answering falsely opens the leadership to charges of perjury. In either case, the leadership may be personally liable for civil and in some cases criminal penalties, which can bring fines up to $25,000 and potential jail time.
Ensuring one’s compliance to the filing requirements is not easy because each state has its own stipulations for registration. Some grant registration automatically if an organization files a copy of its IRS determination letter, along with a cover sheet that includes basic identifying information and any required filing fee. Thirty-six states, plus the District of Columbia, accept the Unified Registration Statement, version 3.20, which is available – with supplemental forms for 13 states – at www.multistatefiling.org. But, organizations still have to file this form separately in each state, along with the applicable filing fee. Still other states require completion of a unique registration form, plus any filing fee. The filing fees can range from $25 to $400. On top of this, registration is an annual requirement, with different filing deadlines in each state.
There are companies that will process all of an organization’s registration materials each year. They tend to run around $7500 in professional fees (exclusive of filing fees), with some a little less and some a little more. If an organization goes this route, it should be sure to ask what the fee covers and what level of accountability the company assumes if they miss a filing deadline or makes some other mistake.
Obviously, an organization can file its own registrations. It is my understanding that this takes an average of two weeks of dedicated attention, though not all at one time and each organization’s unique situation will impact the actual number of hours. Contact the states’ Attorney General or Secretary of State (the Department of Agriculture and Consumer Affairs in Florida and the Department of Consumer and Regulatory Affairs and the Office of Tax and Revenue in the District of Columbia) for specific requirements and to learn of any exemptions and penalties that might apply in the organization’s case.
While complex, registration is a task that cannot be put off. Get going today. Good luck.
A: You raise an issue that is getting a lot of attention today, especially from the states themselves and the IRS. The short answer is that organizations must be registered in the states in which they solicit funds. And, that might as well be every state if they have a “donate now” button on their website. While each state has different laws on the books – for instance, some allow for exemptions for such things as religious organizations, organizations receiving money from only a handful of individuals within the state or organizations receiving an insignificant amount of money from within the state – they are all looking for full compliance.
The registration requirements are not new. Organizations have long been obligated to register in those states in which they conduct a solicitation by any means – e.g., direct mail, email, raffle sales, telemarketing, personal visit and so on. This has been true whether or not the organizations have a physical presence in the state. Even the ubiquitous “donate now” buttons on websites can trigger registration requirements in states that argue that one of their residents could conceivably come upon one of these sites, see the button as a solicitation and be motivated to give.
Throughout the years, a number of organizations have received calls from states that proactively identified them as scofflaws, threatening fines and demanding immediate registration. In the grand scheme of things, it was not a large number. But, just because one of your organizations may have knowingly or unknowingly ignored these laws with impunity in the past, they do so now at their own peril.
Three situations have emerged to make this so. The first is the public’s growing unease over the scandals that have rocked both for-profit and nonprofit corporations, and the states’ corresponding desire to protect their citizens by, at the very least, keeping track of who is asking those citizens for money. Second, the poor economy has motivated states to look for every source of revenue they can find. Registration fees and fines for the failure to register contribute to states’ coffers. And third, the IRS did a major rewrite of the Form 990, which now requires nonprofits to report the states in which they must file a copy of their Form 990 and the states in which they are registered or have received an exemption from registering. These two questions allow the IRS to determine the states from which an organization has raised funds. Failing to answer is not an option. Answering falsely opens the leadership to charges of perjury. In either case, the leadership may be personally liable for civil and in some cases criminal penalties, which can bring fines up to $25,000 and potential jail time.
Ensuring one’s compliance to the filing requirements is not easy because each state has its own stipulations for registration. Some grant registration automatically if an organization files a copy of its IRS determination letter, along with a cover sheet that includes basic identifying information and any required filing fee. Thirty-six states, plus the District of Columbia, accept the Unified Registration Statement, version 3.20, which is available – with supplemental forms for 13 states – at www.multistatefiling.org. But, organizations still have to file this form separately in each state, along with the applicable filing fee. Still other states require completion of a unique registration form, plus any filing fee. The filing fees can range from $25 to $400. On top of this, registration is an annual requirement, with different filing deadlines in each state.
There are companies that will process all of an organization’s registration materials each year. They tend to run around $7500 in professional fees (exclusive of filing fees), with some a little less and some a little more. If an organization goes this route, it should be sure to ask what the fee covers and what level of accountability the company assumes if they miss a filing deadline or makes some other mistake.
Obviously, an organization can file its own registrations. It is my understanding that this takes an average of two weeks of dedicated attention, though not all at one time and each organization’s unique situation will impact the actual number of hours. Contact the states’ Attorney General or Secretary of State (the Department of Agriculture and Consumer Affairs in Florida and the Department of Consumer and Regulatory Affairs and the Office of Tax and Revenue in the District of Columbia) for specific requirements and to learn of any exemptions and penalties that might apply in the organization’s case.
While complex, registration is a task that cannot be put off. Get going today. Good luck.
Tuesday, January 19, 2010
Are You Prepared for When Disaster Strikes?
This past week news has centered on little other than the devastating impact of the earthquake in Haiti. The challenges of responding to this crisis are immense. More than one newscaster has claimed the task impossible, despite the outpouring of help from around the world, the hundreds of millions of dollars in donations and the fact that Haiti has over 10,000 NGOs of its own to mobilize – the highest number of NGOs per capita of anywhere in the world. True, this is an extraordinary situation. But, it should serve as a lesson to all organizations in our sector. We must be prepared for the unexpected, whatever form that might take. After all, experience teaches us it is not a question of “if” something untoward will occur, but “when.”
No area in the world is immune to natural disasters. Therefore, your organization is susceptible. Is your data protected and retrievable even if your computers are smashed, looted or swept out to sea? Do you have a staffing plan where people know who is to report, under what circumstances, and where to report if your physical space can’t be reached, is uninhabitable or otherwise compromised? Do you have a means of checking up on staff who don’t immediately report to be sure that they are okay? What about a plan for providing service when your normal operations are disrupted? How will you access critical supplies? How will you determine which programs have priority if you cannot, for some reason, provide them all? Do you have a process in place for communicating with your clients if basic telecommunications are disrupted? How will you triage their needs? Do you have agreements with other organizations to work together or even take over for you in times like these?
Then there are man-made disasters, which are even more likely to occur. Pick up a newspaper almost any day and there is a story about someone in the public eye who said something politically incorrect when out with “friends” or in front of a live microphone that was assumed to be off. It can happen to your executive administrator or a visible member of your board. What about a trusted staff member or volunteer who absconds with organizational funds? Or, a program that gets bad publicity? Perhaps someone associated with your organization is accused of sexual harassment. Or, your property is burglarized or significantly vandalized. The possibilities are endless. Are you prepared to handle them quickly and intelligently? Have you identified an organizational spokesperson who will serve as the (only) voice of the organization in these circumstances? Do you have a policy for whether you will be proactive or reactive in dealing with the press? A script by which you control the spin? What about procedures for staying in the public’s good graces?
While it is never possible to cover all contingencies, having risk and crisis management plans in place that deal with the most likely will serve you in good stead. Not only will you be able to quickly respond to the situations you’ve previously identified, you will have a plan from which to start – one you can adapt – when faced with the unexpected.
Few people like thinking about worst case scenarios – it’s why so many die without wills, despite the knowledge that we all will die. However, your organization made a commitment to the community when it opened its doors. You cannot afford to be ill prepared to meet that commitment. As such, you need plans that are updated as new situations reveal missing elements. Bring key stakeholders in today and start them brainstorming. Tomorrow may be too late.
No area in the world is immune to natural disasters. Therefore, your organization is susceptible. Is your data protected and retrievable even if your computers are smashed, looted or swept out to sea? Do you have a staffing plan where people know who is to report, under what circumstances, and where to report if your physical space can’t be reached, is uninhabitable or otherwise compromised? Do you have a means of checking up on staff who don’t immediately report to be sure that they are okay? What about a plan for providing service when your normal operations are disrupted? How will you access critical supplies? How will you determine which programs have priority if you cannot, for some reason, provide them all? Do you have a process in place for communicating with your clients if basic telecommunications are disrupted? How will you triage their needs? Do you have agreements with other organizations to work together or even take over for you in times like these?
Then there are man-made disasters, which are even more likely to occur. Pick up a newspaper almost any day and there is a story about someone in the public eye who said something politically incorrect when out with “friends” or in front of a live microphone that was assumed to be off. It can happen to your executive administrator or a visible member of your board. What about a trusted staff member or volunteer who absconds with organizational funds? Or, a program that gets bad publicity? Perhaps someone associated with your organization is accused of sexual harassment. Or, your property is burglarized or significantly vandalized. The possibilities are endless. Are you prepared to handle them quickly and intelligently? Have you identified an organizational spokesperson who will serve as the (only) voice of the organization in these circumstances? Do you have a policy for whether you will be proactive or reactive in dealing with the press? A script by which you control the spin? What about procedures for staying in the public’s good graces?
While it is never possible to cover all contingencies, having risk and crisis management plans in place that deal with the most likely will serve you in good stead. Not only will you be able to quickly respond to the situations you’ve previously identified, you will have a plan from which to start – one you can adapt – when faced with the unexpected.
Few people like thinking about worst case scenarios – it’s why so many die without wills, despite the knowledge that we all will die. However, your organization made a commitment to the community when it opened its doors. You cannot afford to be ill prepared to meet that commitment. As such, you need plans that are updated as new situations reveal missing elements. Bring key stakeholders in today and start them brainstorming. Tomorrow may be too late.
Wednesday, July 1, 2009
I Want to Raffle My House for Charity
Q: I have prime property that is facing foreclosure and I need to sell it – fast. I just heard of a nonprofit organization that recently held a $50 house raffle for a couple facing the loss of their home. The raffle was successful. The couple paid off their loans, the organization received a percentage of the money to benefit its charitable work and someone won a million-dollar home for $50.
I thought it was a great idea and would like to do the same thing, I was hoping you might be able to tell me what you know about doing this sort of thing. Is it legal? Can I do it myself without a nonprofit organization? I assume I cannot profit from it, but that’s okay. I would just like to pay off the loan on my home – and maybe cover the cost of improvements – before foreclosure. Any information, advice, web-sites, or companies that offer this type of raffle service legally, would be greatly appreciated.
A: As the real estate market has failed to bounce back as quickly as most would like, many are turning to creative ways of disposing of their property. Like you, I have read about successful raffles. Such publicity has generated a fair number of calls and emails from both individuals and nonprofits exploring this option. While I would begin by suggesting you consult an attorney with expertise in this area, I will share some initial thoughts.
Raffles are a form of gambling and gambling is highly regulated throughout the nation. To my knowledge, there are no states in which an individual can legally engage in running such a game of chance. The reason you have seen nonprofits linked to these home raffles is that in many states they are allowed to run “small” games of chance, usually including raffles, to raise funds to support their mission.
If I were advising the nonprofit, I would advise it NOT to participate in such an enterprise. Most importantly, if anything goes wrong – and there is often “fine print” in the state statutes even where such gaming is legal – the nonprofit could lose its tax-exempt status. However, even if that were not the case, I question whether the organization can make enough money to make the time and effort involved worth it.
Let’s look at some of the practical issues. Together, you and the nonprofit have to sell a LOT of tickets – especially at $50 – to bring in enough money just to cover the mortgage, let alone the real costs such as printing, promotion and accounting fees, and a return on investment for the nonprofit. And, your selling window is finite. You must let everyone know upfront the date of the drawing. This can’t get pushed back if you haven’t sold your minimum number of tickets. Some states require you specify the maximum number of tickets that will be sold. Many require that prior to the start of ticket sales the nonprofit have possession of the property or at least be able to guarantee that the winner will get the house. This puts the nonprofit at great financial risk.
Few organizations have databases that are large enough to generate sufficient ticket sales, considering that not everyone will be interested in buying a chance. Raffles are not tax deductible and only a relatively small portion of the total proceeds are likely to go toward the organization’s mission. So, unless the buyer actually wants your property, there is minimal incentive to purchase a ticket. And why would someone want to take a chance on an unknown entity – even for $50, plus sales and property taxes? That goes for speculators, too. (Realistically, how many of those are out there – especially today when the property could take a long time to flip?) Are you going to allow anyone who wants to, to traipse through your house? At a minimum you should consider setting up a virtual tour if you move forward.
Often those most willing to purchase the tickets are those closest to the project – the organization’s volunteers working to sell tickets. However, as the Cystic Fibrosis Gold Coast Guild in Florida found out when one of its volunteers won a home raffle it sponsored in the ‘90s, that can potentially result in a public relations nightmare. An accounting firm conducted the raffle for Cystic Fibrosis and certified its results, but that didn’t satisfy some ticket buyers who felt the organization’s volunteers should have been excluded from participating.
So how can you sell sufficient tickets? On the Internet? That raises a whole series of other issues. (See “A Raffle and the Internet,” July 2006) Even old fashioned friend-to-friend or snail-mail ticket sales can raise problems. Some communities do not allow raffles, even if the state and neighboring communities do. Some postmasters will allow raffle tickets to go through the mail and others won’t. (See “Should You Hold a Raffle?,” Nonprofit World, January/February 1995)
I’m sorry to put a damper on your idea, but again, my concern is for the nonprofits, and I do not think this is a good deal for them. Still, if you wish to pursue this further, you might want to look to websites like www.USAhomeraffle.com or www.charityhomeraffle.us, which match property owners with nonprofits and facilitate the raffle process. (Note: the mention of these websites should not be seen as an endorsement.)
I wish you luck in dealing with this very difficult situation.
I thought it was a great idea and would like to do the same thing, I was hoping you might be able to tell me what you know about doing this sort of thing. Is it legal? Can I do it myself without a nonprofit organization? I assume I cannot profit from it, but that’s okay. I would just like to pay off the loan on my home – and maybe cover the cost of improvements – before foreclosure. Any information, advice, web-sites, or companies that offer this type of raffle service legally, would be greatly appreciated.
A: As the real estate market has failed to bounce back as quickly as most would like, many are turning to creative ways of disposing of their property. Like you, I have read about successful raffles. Such publicity has generated a fair number of calls and emails from both individuals and nonprofits exploring this option. While I would begin by suggesting you consult an attorney with expertise in this area, I will share some initial thoughts.
Raffles are a form of gambling and gambling is highly regulated throughout the nation. To my knowledge, there are no states in which an individual can legally engage in running such a game of chance. The reason you have seen nonprofits linked to these home raffles is that in many states they are allowed to run “small” games of chance, usually including raffles, to raise funds to support their mission.
If I were advising the nonprofit, I would advise it NOT to participate in such an enterprise. Most importantly, if anything goes wrong – and there is often “fine print” in the state statutes even where such gaming is legal – the nonprofit could lose its tax-exempt status. However, even if that were not the case, I question whether the organization can make enough money to make the time and effort involved worth it.
Let’s look at some of the practical issues. Together, you and the nonprofit have to sell a LOT of tickets – especially at $50 – to bring in enough money just to cover the mortgage, let alone the real costs such as printing, promotion and accounting fees, and a return on investment for the nonprofit. And, your selling window is finite. You must let everyone know upfront the date of the drawing. This can’t get pushed back if you haven’t sold your minimum number of tickets. Some states require you specify the maximum number of tickets that will be sold. Many require that prior to the start of ticket sales the nonprofit have possession of the property or at least be able to guarantee that the winner will get the house. This puts the nonprofit at great financial risk.
Few organizations have databases that are large enough to generate sufficient ticket sales, considering that not everyone will be interested in buying a chance. Raffles are not tax deductible and only a relatively small portion of the total proceeds are likely to go toward the organization’s mission. So, unless the buyer actually wants your property, there is minimal incentive to purchase a ticket. And why would someone want to take a chance on an unknown entity – even for $50, plus sales and property taxes? That goes for speculators, too. (Realistically, how many of those are out there – especially today when the property could take a long time to flip?) Are you going to allow anyone who wants to, to traipse through your house? At a minimum you should consider setting up a virtual tour if you move forward.
Often those most willing to purchase the tickets are those closest to the project – the organization’s volunteers working to sell tickets. However, as the Cystic Fibrosis Gold Coast Guild in Florida found out when one of its volunteers won a home raffle it sponsored in the ‘90s, that can potentially result in a public relations nightmare. An accounting firm conducted the raffle for Cystic Fibrosis and certified its results, but that didn’t satisfy some ticket buyers who felt the organization’s volunteers should have been excluded from participating.
So how can you sell sufficient tickets? On the Internet? That raises a whole series of other issues. (See “A Raffle and the Internet,” July 2006) Even old fashioned friend-to-friend or snail-mail ticket sales can raise problems. Some communities do not allow raffles, even if the state and neighboring communities do. Some postmasters will allow raffle tickets to go through the mail and others won’t. (See “Should You Hold a Raffle?,” Nonprofit World, January/February 1995)
I’m sorry to put a damper on your idea, but again, my concern is for the nonprofits, and I do not think this is a good deal for them. Still, if you wish to pursue this further, you might want to look to websites like www.USAhomeraffle.com or www.charityhomeraffle.us, which match property owners with nonprofits and facilitate the raffle process. (Note: the mention of these websites should not be seen as an endorsement.)
I wish you luck in dealing with this very difficult situation.
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