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Posted: July 17, 2012

Get organized about giving back

How to keep the wheels turning

David Houghton

Our small engineering firm is a for-profit company, in theory (always) and in practice (often). We believe in supporting the  nonprofits in our community and have structured an organized way to do this. Here’s how it works, and why you should consider something similar.

As individuals, we often make donations to worthy groups that do things like preserve open space, help those in need, save the whales, or whatever. The exact causes are less important than being involved in what matters to you and your community. This involvement doesn't have to take the form of money—you can volunteer, offer pro bono services, serve on advisory boards, etc. But money is the coin of the realm and is always welcome for those in the  nonprofit sector.

Spending a few years working at a nonprofit research institute gave me perspective on this sector of the economy. Although it might seem like these groups do a lot of asking for support, they really give much more to the community than they take. Nonprofits fill the interstitial gaps that support the entire edifice of our society. They help keep people productive (even those at the margins), protect our environment (counterbalancing the for-profit sector, which generally wants to exploit it), and think big thoughts about how our world could work better (spawning plenty of for-profit potential).

Back at the institute, we worked for small pay because we believed in the mission. This is fine and good, but it was sometimes distressing to see how much of the  nonprofit's effort and time went to fundraising, so they could do the things they were really meant to do. I began to see the value of ongoing connections—including funding—between the for-profit world and the  nonprofit world. We really do depend on each other. So why not make it official?

Once our company decided to get organized about giving, the original idea was to form a new 501(c)3  nonprofit to accept and hold funds for disbursement to recipient  nonprofits. We planned to donate a certain amount (1-2%) of gross revenue per year, and then give away about half of that amount, thereby accumulating a small but growing endowment for longer-term donations. Eventually, the interest on the endowment could fund the annual disbursements, and new funds from our company would just grow the endowment.

Setting up a new nonprofit takes money, effort, and time. As we were getting ready to jump through those hoops, a friend at Peak  nonprofit Consulting steered us toward an easier solution. It’s called a Donor-Advised Fund (DAF), and it gets administered through an existing 501(c)3  nonprofit, in our case the Community Foundation of the Gunnison Valley (CFGV). Setting up the DAF required a few pages of forms and only took a few days to complete—we essentially borrowed a piece of the existing  nonprofit foundation.

So now we're following the original plan, but through our local Community Foundation instead of creating and maintaining our own  nonprofit. When recipient groups get on board with our fund, they generally continue to receive money from us every year. Our company gets the tax break for donating as soon as we push the money into the DAF. We control (technically, "advise") the disbursements from the fund; the foundation sends out the checks and takes care of the endowment. Investments are geared toward preservation of capital, but can also generate interest income—this can also be influenced by the DAF advisor (us).

We also use the fund to support  nonprofit clients. As an alternative to giving out “free” services, we bill for our time and then make a significant donation. We protect the value of our services, get credit as a cash donor, and the  nonprofit books the donation. Even better, we usually continue to support that  nonprofit for years to come.

In contrast to local “one percent” programs that tack a surcharge onto goods and services—also a laudable idea that we do not wish to compete with—we don’t increase costs to our clients. Our donations come out of our bottom line, and are largely invisible in the normal course of our business. (We do gratefully accept thanks and public acknowledgement from the nonprofts we support.)

We are convinced that this is a good long-term strategy that benefits our company both directly (by getting our name into the public sphere and creating goodwill) and indirectly (by helping to fill those gaps and maintain a strong community).

Our vision is that if more for-profits set up DAFs for ongoing contributions, the  nonprofits can spend more time fulfilling their mission and less time fundraising. We heartily encourage other professional firms to set up something similar. For more information, contact Brian Krill at Peak  Nonprofit Consulting (970-349-2830), or look up your local Community Foundation.

David Houghton, P.E., is the founder and one of two Principal Engineers of Resource Engineering Group, a regional firm that provides structural, mechanical, electrical, and energy engineering from their offices in Western Colorado. REG is focused on engineering excellence, innovative thinking, and clear communication. Go to: www.reginc.com or email houghton@reginc.com.

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Readers Respond

I am not sure if "any" 501c3 can carry the DAFs. It's a fair amount of work and that organization would need to provide the services to a number of fund advisors. Getting your 501c3 designation is also not a slam-dunk. For these reasons we went to the existing one. This is a good question for Brian Krill at Peak NonProfit Consulting, referenced in the article. Thanks, By Dave on 2012 07 17
Interesting idea, David, and I learned something today -quick question, can an entity set itself up as a 501(c)(3) and immediately make itself available for businesses to "tag along?" I belong to a business networking group and we are interested in applying as a 501c3 - seems like we could make it available to businesses along the lines you suggest, thus enhancing the appeal - and the reason to go thru the mechanics and cost of applying especially if it faciliates the giving part. By Vicki on 2012 07 17
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