Foundation Math How to read 990s

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Foundation MathHow to read 990s
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. . . 10 minutes from knowing how to read a
990-PF.
Foundation Research Nirvana Federal reporting
for foundations
You are here . . .
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How corporation and foundation giving fits into
a mature nonprofits 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
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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.
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Year covered, contact information (including
telephone number) and fair market value p. 1
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Gifts and grants totalp. 1, Part I, lines 25
and 26
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Beginning of the year and year end assets p. 2,
Part III, lines 1 and 6
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Qualifiers Part VII-A, lines 1-15
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Officers, directors and trustees Part VIII,
line 1 (and look at line 2, too)
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Application process, deadlines and morePart XV,
lines 1-5
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Grants paid Part XV, line 3, section a
Future grants to be paid Part IV, line 3,
section b
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What the supplemental page listing directors
looks like
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What the supplemental page listing grants looks
like
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What the supplemental page outlining the
foundations purpose or mission looks like
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Free foundation information

• GuideStar - http//www.guidestar.org
• IRS Search for Charitieshttp//www.irs.gov/charit
  ies/article/0,,id96136,00.html
• FundsNethttp//www.fundsnetservices.com/quick_lin
  ks.htm
• GrantSmart - http//www.grantsmart.org/
• AG charities databases http//www.searchsystems.ne
  t/
• Your local library (see Foundation Center list of
  cooperating collections at http//fdncenter.org/co
  llections/)
• CharityVillage (Canadian foundations) -
  http//www.charityvillage.com/
• GuideStar UK http//www.guidestar.org.uk/

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• Real Estate Research

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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.

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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)
• Taxpayers Name usually the owner of the
  property, sometimes the same as the individuals
  given name, but can be the name of a company,
  partnership, trust or other entity

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Assessors record sample search screen
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Sample assessors record
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Sample assessors record, contd.
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Sample Estimated Value Search
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Free real estate research resources

• Portico directory of assessors with online
  access http//indorgs.virginia.edu/portico/persona
  lproperty.html
• Christinas 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.co
  m/RePortal/homepage.aspx

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• Philanthropic Capacity Rating

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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.

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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.

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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 prospects major gift capacity."
• "Prospects have the capacity to give 10 percent
  of the value of stock options of 1 million or
  more to charity."

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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

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IRS study of estates of 600,000 ( 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
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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 youve chosen.

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What researchers have to be tuned into

• Where the wealth began
• Life stage
• Degree of wealth
• Gender
• Location, location, location

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

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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

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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)

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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)

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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

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Other Capacity Indicators

• Collections
• Hobbies
• Toys
• Lifestyle
• Philanthropies

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Who is difficult to capacity rate?

• Downsizers
• Inheritors
• Stumpers
• Internationals
• Who else?

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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.

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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/N
  etWorth2.htm.
• How Much is that Donor in Your Records? by
  Roger R. Millar CASE Currents 1995.

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How to contact us

• David Lamb
• Prospect Research Consultant
• Blackbaud
• david.lamb_at_blackbaud.com

Cecilia HoganDirectorUniversity Relations
ResearchUniversity of Puget Sound, Tacoma,
WAchogan_at_ups.edu