Dear Nonprofiteer, If a tree falls in the forest, does it make a charitable sound?

Dear Nonprofiteer:

The hiking/environmental nonprofit on whose board I serve has been quarreling over our Mission. Trying to expand our offerings, most of which are extended hikes, we find ourselves competing with glitzy commercial providers. We’ve been chasing a leisure demographic that doesn’t like to pee in the woods or sleep in tents.

I have no problem with anyone’s tastes, but I’m getting offended, frankly, by our operating this way as a nonprofit. It’s not that we’re raking in cash. We’re in decline, if customer revenues (so to speak) are the metric. I just don’t think what we’re doing is charity.

At meetings when we contemplate our numbers, all of which have been dropping, we hear two views. One camp (“Granola”) says we should grow by fundraising and start offering fresh-air-fundish outings for low-income children. The other (“Well Heeled”), which dominates the Board, says we need to promote our excursions better, and set spreadsheet goals of bringing in more paying participants.

I’m getting tired of hearing the same arguments as if they were new. Will the discussion ever reach resolution? From your postings, I think you’re more in the Granola camp. I know I am. But is there something fresh to say about the merits of Granola, to persuade the Well Heeled? And if I’m wrong–that is, Well Heeled is right or has a point–tell me how to synthesize what it wants into a real nonprofit mission.

Signed, Strife-Worn in Hiking Boots

Dear Strife:

“Tired of hearing the same arguments as if they were new”? Welcome to the Nonprofiteer’s world! The split you’ve described has two components, in her judgment: the ostensible and the actual. Ostensibly the Well Heeled want your agency to pull itself up by its bootstraps and operate more like a business, but actually the Well Heeled want not to have to do any fundraising. It’s easier to tell staff what to do (“Do better PR on the tours!”) than to do anything oneself, especially when the “anything” is that yucky work of appealing for alms. The Well Heeled don’t like to beg–they think it makes them look like poor people, than which there is no more appalling outcome they can imagine.

This is a mindset that’s hard to change. But if it hasn’t already been said a hundred times (and maybe even if it has), you might quote to the Well Heeled a recent IRS ruling (reviewed yesterday at Charity Governance.com) that an organization was not entitled to its exempt status at least in part because it “is funded almost entirely by fees and lacks the donative element necessary to characterize its activities as charitable.”

In other words, raising money is not an optional activity of nonprofits–not something to be done in case the marketing plan doesn’t work out. Raising money is a necessary characteristic, and its absence will suggest to the IRS that the agency should be stripped of its tax-favored position, with the result that the Well Heeled (as well as the Granola) will have personal liability for owed back taxes. That should get their attention.

Of course, a lack of fundraising isn’t by itself sufficient to result in loss of exempt status–even if you get caught, which is relatively unlikely, as some Well Heeled soul is bound to point out. The real issue is whether the group is organized for a charitable purpose. Fundraising (though the IRS didn’t say this) is a surrogate, because if you can’t explain to anybody why they should consider your organization in their charitable plans it suggests very strongly that what the organization is doing isn’t charitable.

Raising environmental awareness is a charitable purpose (“charitable,” in this context, doesn’t have to mean “benefiting poor people”); but you’d better be prepared to show how each of your activities promotes that purpose. You may be able to do that by subsidizing the cost of the hikes, so people who wouldn’t otherwise become environmentally aware will be tempted by the low price to participate and learn; you may be able to do that by providing supplementary educational materials with each hike; you may be able to do that by promoting hikes only in locations which will be undamaged by your patronage; you may be able to do that by offering low-cost hikes to city children otherwise lacking access to the great outdoors; but you have to do that. And, again, the best way to find out if you’ve done it is to make the case to someone whose charitable money you want, and see whether they fork it over.

The Nonprofiteer’s suggestion: before you try talking again to the Well Heeled, talk to your fellow Granolas and make sure they understand and can present the issue as a business matter: “We are a nonprofit; therefore we have to have a charitable purpose and the ability to demonstrate donative intent; therefore we have to do fundraising, regardless of the success or lack thereof in appealing to wealthy people with our hikes. If we don’t, we’re all going to face a bill from the IRS.”

Admittedly it isn’t fair that Granolas have to learn to speak Well Heeled when the Well Heeled don’t seem to be making much effort to learn Granola. But it should be some compensation that when the conversation is through, you and the other Granolas will have won on substance. Why is the Nonprofiteer so sure? Because she knows you’ll either win or walk away, leaving the Well Heeled holding the bag–a bag full of financial and legal risk. Who says Granolas can’t be practical?

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One Response to “Dear Nonprofiteer, If a tree falls in the forest, does it make a charitable sound?”

  1. Jeane Goforth Says:

    This is wonderful. You just cleared up something I’d been puzzling over lately. As a founder, I know we have a charitable purpose. But reading so much about ‘social entrepreneurs’, I’ve been wondering if we were going to be expected to show (for grants, our board, etc.) we can support ourselves with fees. If so, the charitable aspect is done–and then what’s the point?

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