 join be joining us today from around the world or viewing us on an archive we are super excited to have Amina Bell from your part-time controller on to talk about the realities of donor restricted contributions this is gonna be a great conversation because it's one of those things that's fraught with a lot of challenges maybe I should say but Amina's gonna help us understand how it all works and how we can deal with it if we haven't met before I'm Julia Patrick CEO of the American Nonprofit Academy, Jared Ransom the non-profit nerd CEO of the Raven group is off today she's actually doing a board retreat I believe and so she'll be back with us tomorrow again we are here each and every day now marching towards 750 episodes because of our sponsors plain and simple and those friends of ours include bloom rang American Nonprofit Academy your part-time controller staffing boutique fundraising Academy at National University non-profit thought leader and the non-profit nerd if you would like to get to any of our archives whether you can join us on Sunday in your PJs while drinking some coffee or during work because you've got to figure out a problem you can find us on Roku YouTube Amazon Fire TV and Vimeo we have channels on all those portals and we also know have the non-profit show on podcasts so we started doing this this last year super excited that we I think achieved Amina 10,000 downloads in our first six months so queue us up and if you want to pop us into your ears we'll join you right there okay Amina Bell from your part-time controller we have you down here as associate but you have some exciting news because something big happens tomorrow right yes so thank you for having me here Julia I'm I'm super excited to be here yeah and I've been an associate with YPTC I've been with YPTC for 10 years now and I'm moving into a new role of strategic partnership so I'll still be doing client work but also helping out with our business development portion so I'm really excited to be involved with with that aspect of the business wow now your part-time controller works with nonprofits throughout the country where and they're they're all over including some folks in my community which by the way I was at an event on Friday night and sat in the table right next to the YPTC table nice in a giant ballroom okay but anyway where are you coming to us from what city I am coming out of the Houston area so in our Texas Louisiana Arkansas market wow okay cool wonderful well let's get into it because I have so many questions this is such a hot topic but I feel like we need to back up the bus a little bit and have you help us to understand what the definition of donor I started to say droner that Friday and flip donor restricted contributions are and how we should look at this before we move into the conversation absolutely I think that's a great place to start so a restricted contribution is a contribution where a donor imposes some type of parameter about how that contribution should be used and normally we kind of put it in two buckets it can be purpose restricted to the donor is indicating a specific use like I want my contribution to be used for kids backpacks or it could be for a specific program and then the second bucket is imposing a time restriction where the donor is placing so specified time period on when the donation can be used and that can be temporary or permanent in restrict in nature as as in the case of endowments but it donor restriction should be really contrasted with designations internal designations that sometimes management imposes such as a board reserve or if they get donations and they may designate the funds to be used for a specific purpose in terms of accounting the only restrictions that we count as a restricted contribution is one that a donor imposes so it must come from the donor so it's really what I hear you saying it's a world of two reckonings and that you have your accounting and the fiduciary aspect as well as then you have a management aspect absolutely yes but the management aspect can always be changed the restriction for a particular donor cannot be changed without permission from that donor so you know and this might be a little bit of a curveball but are you seeing more and more donors using attorneys in legal frameworks to make sure that they're asserting exactly what it is that they want versus just a conversation you know I I'm seeing not necessarily in my personal experience more attorneys but more documentation where the donor is spelling out their intentions or more language around hey if this is what you say you're gonna spend it on we're gonna kind of hold you in terms of your reporting to this is what you spent it on well so that really gets us into the part of this discussion calling you know honoring donors intent and it seems to me and in what we're living in this perfect world right now this example of COVID you know think of all the people that were like no my money's gonna go to XYZ and then COVID hits and then all of a sudden things changed because we had different needs how does that work in relationship to what that original intent was and how do we navigate that yeah so you know once a nonprofit decides to accept a donor restricted contribution they have they have a legal obligation to fulfill that donor intent and if for some reason because I had a few clients as well during COVID where the needs drastically change they just they went to the donor and they said hey because more often than not the donor is wants to support the mission they they want to support the organization having that conversation like these are where our changing needs can we can you release these restrictions and they were very successful in doing that and then just documented that in writing but if you don't get that you there could be potential repercussions there could be lawsuits from donors where even board members can be personally sued improper use of those contributions can cause penalties from the IRS even the loss of the taxism status even audit findings for organizations that have audits so it's really important to honor that intent even if it's just for the reputation of the nonprofit because it really could impact your future fundraising efforts and the donors trust and in your fiduciary responsibility you know I love that you you brought this back to that issue of you know your your community support how you're viewed and one thing that circles around my mind is the aspect that you said in the very beginning and it's also community it's communication you know you need to keep you need to keep in contact with these donors so that you can have that courageous conversation or explain how something's changed or how a need has evolved because I love what you said donors want to move things forward and when they want to help but they don't want to read about it on the front page of the newspaper so part and parcel to that and this is a big thing you know and again you are an accountant so no surprise there but help us understand a little bit more about tracking these restricted contributions because you mentioned something that was really interesting to me under the two buckets time and then I'll call it task like where you want the money to go how do we look at this with those parameters yeah so it's really important on the onset of a nonprofit accepting contribution to really evaluate how they're going to track these restricted contributions and a lot of it is driven by the donor or the funder's reporting requirements but also an important aspect to evaluate is your overall capacity of your accounting department so what what type of accounting system do you have I mean there's some that are really robust in terms of fund accounting but like many of our clients uses QuickBooks which isn't your traditional fund accounting software but it can be leveraged to use existing mechanisms tracking methods mechanisms so that you can get the reports that you need so you kind of need to evaluate how often am I tracking how granular should that tracking be am I tagging every transaction that we're expending to a particular donor or am I just doing periodic adjustments based off of the reporting requirements and so you know like I mentioned your your accounting department's capacity really comes into play when when evaluating how you're going to track then how often but it's really it can be a cost that should be evaluated at the onset of accepting that contribution so as we're going into looking at this even more when we're looking at evaluating restricted contributions and I mentioned in the green room chatter that we're here we're we're seeing this concept being rebranded as trust philanthropy meaning you know that we're going to say to our donors we're not going to be doing as many restricted donations and contributions as we are going to say you got to trust us and here's what our mission vision and values are and this is how we're going through it but talk to me about evaluating this because you brought up something that's a hard cost and that's just tracking it yes spending a chunk of our money on on the administrative sign absolutely I mean so a restricted contribution can be a very important source of support for furthering the organization's mission but it can have its challenges and so you know evaluating your current general and admin costs you know for an organization that may be struggling in just funding for overhead maybe this donor restricted fund isn't the best thing to accept right now if you don't have that capacity but also you know if you're evaluating whether this restriction really goes to further an important mission in your organization or some strategic plan so building up some type of infrastructure for your long-term goals it really should be evaluated on a case-by-case basis because if you're accepting a donation for kids backpacks but you know you're working on you know medical infrastructure that it might not be the right fit in terms of accepting that contribution so I think it's really important for accounting and development and the management to really have these conversations internally to make sure they're on the same page that there is a policy for accepting these types of contributions and that everyone's kind of understanding the implications on the overhead cost the personnel cost and can the organization really support out honoring this donor incentive right you know it's it's too makes me think of two things you know donor career mission creep that you you want to take the money and you see the money you see the check and so you're like oh yeah we can do that when really you can't and it but it's so hard for us we struggle so much to get money in the door and what you're saying is like it's it's like a tough it's a tough thing to hear amina but I think you're right and I really love that you said bringing in management development and accounting and having that be a you know a more robust conversation yeah definitely I mean it's a it's a tough fundraising world out there and there's a lot of competition for funds but even you know in terms of some things that I've seen as well is sometimes the organization can restrict funds unintentionally in terms of their solicitation of funds or their appeals that go out or even in their grants applications or budgets using wording that are too restrictive or not general enough you know when donors respond to that those funds are restricted so coming up with kind of a strategy in terms of like you said building that donor trust so that they're giving you funds that support that mission but are not very specific so that your your hands are tied with how you can spend those funds I'm fascinated by that because it seems to me that most organizations to your point marketing or having a drive or running a campaign probably don't think of it that way you know they probably think oh the money comes in I mean I've seen more and more organizations that will literally make a policy that says for every dollar in so much is going to go to this this this and that including in endowment and for a lot of donors that's kind of a scandalous thing because they don't want to fund endowment necessarily they want to put their money into action right now as opposed into the future I mean what are you seeing about that yeah and you know a lot of what I'm seeing now is nonprofits actually being open about hey there's a cost to programming you know these programs can run themselves we need buildings and lights and personnel to deliver these program costs and so incorporating a realistic even overhead percentage cost and being honest about that to donors educating your donors I think I've been seeing more and more so that donors are educated like those kids backpacks you know they have to get distributed somehow yeah and and and you guys need to help us with that um curveball but do you can you give us kind of a guideline for what you think might be a good way to look at this in terms of some of those percentages you know I think it depends um for some of my clients I've actually done analysis of kind of what their programs are and what the cost is to support those and really come up with the percentages based off of your actual data so I think it might it might depend on you know how much funding you already have that covers your overhead um because if you if you're well funded in GNA you know it may not be um a big deal to incorporate a high percentage when you're asking donors but if not you know having that conversation with donors and coming with a realistic percentage um not just a general you know 10% off the off the off the head but really doing that analysis to make sure that you know it's covering those personnel costs the percentage of you know the lights and the utilities or anything that you may need I like that you said that because I I also think it makes you more of a trustworthy partner for any uh philanthropist if you're you're like yeah this this is what it takes I mean most of us who donate to nonprofits we don't really have any idea what's going on I mean how hard the work is I mean how many of us you know maybe contribute to shelter services but have ever been in a shelter right so I mean I like what you're saying here and I think that's a valiant way to kind of look at this is to say this is going to go pretty far with our our trust factor and our communication factor and maybe even get more engagement from our donors I mean do you think that's realistic I do I do I think I think you know keep going back to that point that you made about communication and engaging with your donors I think they want to be engaged you know I'm a donor I want to know I want to know when there's a need that maybe isn't as sexy as a specific programming need um so that I can I can help and I think that um transparency really helps donors to feel like they're a part of providing what your your greatest needs are I mean and now as you know being a nonprofit accounting now I never restrict my donations okay that was my next question so funny because that was exactly what was bubbling up in my head I was going to ask you two things what are you as a private donor doing and then my second part of that was do you see this as maybe a cultural or a demographic issue so for example older donors versus younger donors donors maybe from different parts of the country um do you see any anything that might indicate that there's some swings there you know I don't I don't know if I personally have um notice any demographic uh differences I think that there's been a drive for evaluating nonprofits like the charity navigators and so you know there's there's been a historical push to we want to see high programming cost and low you know admin and fundraising cost and so that really drives donors to to want to see those high percentages but because I I know you know I've had a variety of nonprofit clients I know that you know the need there's a need there for just those overhead costs as a donor now I'm like whatever the greatest need is you know I do my research and if I trust the organization and the leadership then I trust that you know it's going to be used to deliver those services in the right way well you know like we were saying earlier you know this this new language of trust philanthropy it's getting people on board to understand that there are costs involved in doing these uh you know providing these services and the mission vision and values can be great and tug at your heart but there's a reality to delivering service absolutely yeah very very interesting you know it's it's uh seems to me as as well that um overall as a sector it doesn't seem to me that we're reporting enough or not reporting but maybe collecting data enough on how much of this is you know restricted versus non-restricted and I know that we will see in budgets that come out annual reports from organizations about that but is that something that we're not talking enough about or we don't understand it why why isn't this at the forefront that is a really good question um I think that more and more I'm seeing you know more nonprofits pushed back on this more philanthropists talk about this um in the recent uh recent news I don't know I don't know because it's it's a really important issue because you know I can't tell you how many organizations are well funded in the restricted funds and are struggling to to you know to to make payroll and so um so it's it's really um something that I think should be in the forefront and one one thing that I also wanted to mention you know when I do budgeting for for some of my nonprofits I try to separate out those specific nonprofit those specific donor restricted contributions and expenses okay from the general general and administrative budget to kind of give a clear picture to my clients on uh what are the cost of funding needs for our our gna versus you know you know how well funded we are here and and that can also inform the strategy of how you know uh they're getting funds or the funds that they're going after are willing to accept super smart because again that helps bring the conversation forward to let people even think about this because I don't think we I don't think we discuss this enough yes you know and it's somewhat of a mystery and then to your point you can be super well funded on one side of things and then scrambling on the other and yeah I also learned a lot today from you about the concept of really moving forward on that communication piece I loved what you had to say about most donors are going to want to help move the organization forward they just need to know how and if they can understand that maybe they're not putting their money to the best investment level they can make a change absolutely um and so I think I just think that um nonprofits sometimes can be afraid to have that conversation with them and and I think that um we just need to be more forthright and have in that conversation um because even you know I've I've advised the client before who created a specific budget for for a grant proposal and it was for a brand new program and the budget was delineated very specifically we're going to hire this specific staff person um and in the end the needs by the time the program was rolled out the needs changed and the donor would have been perfectly fine in just you know having a line item for staff salaries not a specific um you know staff position but because it was written that way you had to go back and you know make sure that it was okay with the donor um so you know I I just think that um donors are more on board um once they really understand and trust the needs of the organization and so I think it's really a cooperative effort between you know the development department and in accounting and management kind of having that unified strategy to get those funds yeah do you find that um because this is now the second or third time you've mentioned that do you find that development is coming back to accounting and saying well we got this before you're like wait a minute we talked about this I mean how do you navigate that yes that has happened um quite a few times um where development's like hey we've gotten this these funds now we can use it on this and we're like no we can't because look at how it was written or look at how it was funded and so I I think I mentioned it because it's really important to to discuss those things you know to discuss the analysis of the accounting and what what those actual percentages are before you know that solicitation is made um yeah definitely it's really interesting Amina because you know I think on the nonprofit show we are so blessed we get to talk to different people every day and finishing up our third year going into our fourth year it's been a lot of voices and we generally hear people talk and we talk about the relationship between the donor and development but we don't often spend enough time talking about that triad internally of management programming and development um because we're like so you know we got to get the money we got to get the money right right but I really like that you kind of brought this home to say no wait let's talk about this because we can go off the rails and then what a mess and I can see why development can really lose favor with accounting and then it's like ah they're not gonna let us do it or you know it right it creates a bad energy I guess right absolutely yeah so that communication needs to happen internally first definitely because it could be a really great partnership yeah yeah really could be and I think to your point and I loved what you had to see in the very beginning in that it's the trust factor from the get-go and so if you don't honor the intent and you don't um keep working on understanding the intent and navigating it as it might change you put so much at risk absolutely so much at risk it's amazing well wow you have been a delight to to meet and to have on and I've learned a lot today Amina I I would say this could be kind of like a hair on fire show for me because I was like oh wait I hadn't really thought of these things that way and so thank you thank you for bringing forward so many interesting ideas and in different ways of looking at this Amina Bell associate with your part time controller maybe you'll be working with her in the future on partnerships with the entire your part time controller staff Amina you've been a wealth of knowledge and it's been a lot of fun having you on so thank you very very much thank you so much for having me oh and Julia I it's been an honor truly well it goes by fast doesn't it I know even for me I gotta say again everybody I'm Julia Patrick CEO of the American nonprofit academy Jarrett Ransom the nonprofit nerd herself will be back with us shortly in the week again we've had an amazing conversation today with an expert such as Amina Bell because of our sponsors and they include our friends over at Bloomerang American nonprofit academy fundraising academy at national university staffing boutique your part time controller nonprofit leader and the nonprofit nerd these folks are with us day in and day out and it's a really exciting opportunity to learn things I have to say Amina I learn something new every day awesome I do too it's been great Julia it's been a lot of fun hey everybody as we end this episode we want to remind ourselves our viewers our listeners our guests to stay well so you can do well we'll see everybody back here tomorrow thanks Amina