Raising Funds – Volunteers of America

How PSAs Can Support Fund Raising

Since fund raising is the lifeblood of non-profit organizations, any technique that can help achieve this objective is very important. To illustrate how PSAs can help support your fund raising efforts, we are using our work with Volunteers of America as a case history.

For this particular case, there are two stages:

  • Maximizing PSA media exposure
  • Taking advantage of a special accounting rule for non-profits that permits using PSA values as “in-kind contributions”

Maximizing Media Exposure

When we were retained to launch a national PSA campaign for Volunteers of America on the subject of aging, we were told we had to generate $10 million in Advertising Equivalency Value. Why that particular number? Their previous distributor had generated that amount of value, and they wanted a similar or greater value, because they had a set fund raising goal. Fortunately we had worked with them for 7 years previously, and we had managed to exceed this amount in the past with a three of their campaigns.

What we did not know is what this particular campaign would look like… how will they frame the issue… and who was producing it? Since the creative approach is extremely important to the success of any campaign, we were happy to learn that our client chose a great ad agency, Smith Gifford. They shot a PSA centered around Joan Rivers and her daughter Melissa, who are often shown on TV arguing about getting older. What resulted is a funny, upbeat message about aging, a subject no one likes to talk about. To view the PSA, go to http://www.youtube.com/watch?v=dJP5wYwt6SU.

Knowing we had to hit the ball out of the park, we developed an aggressive promotion plan to sell the campaign to the media which included:

  • Hiring a media outreach specialist, Margaret Kessler, to contact all the national TV and radio networks to pitch the PSAs to them and major magazines reaching the elderly community, such as AARP’s Modern Maturity Magazine.
  • Compiling a list of every website that reached seniors and sending them information on the campaign, asking them to pass the word to their own stakeholders.
  • Sending an interactive press release to 30,000 journalists reaching the online community and state broadcast associations via PR Web.

While it is sometimes difficult to evaluate the impact of outreach tactics, unquestionably our network contacts paid huge dividends as shown by this graph. It shows VOA received over $21MM in PSA support from 19 networks that would not have occurred without Margaret’s personal touch. Since it was launched, the campaign has generated over $34MM in value, or more than 3 times the amount generated by the previous PSA distributor..

In Kind Contributions

To explain how many organizations are using PSA values to help with their fund raising, it is necessary to dip into accounting practices for non-profit organizations. We will try to keep it as simple as possible because our point is how to use PSAs in different ways, not to teach accounting. Reading how this works may put you to sleep, but many non-profits do not know this accounting trick that could make a big difference in your fund raising.

There is an important, but widely unknown rule governing how “in-kind contributions” are treated by non-profits, which includes PSA air time value. The rule, issued by the Financial Accounting Board in 1993 called Financial Accounting Standard number 116 (FAS 116), is titled “Accounting for Contributions Received and Contributions Made.”*

This line item can be found in the non-profits’ 990 tax return. Only certain people are going to want to study these details which can be incredibly beneficial, and at the same time make your eyes glaze over, unless you are an accountant. On the other hand, if someone in your organization does not understand the technicalities of the rules, then your organization may not be getting full benefit from your PSA attainment.

FAS 116 is a quick and easy way for non-profits to legitimately manipulate their financial results. Those results, in turn, are open to the public and used by charity rating organizations such as GiveWell, Charity Navigator, or the Better Business Bureau, to evaluate non-profits. In this era of complete transparency, there are large and small donors who also look at this ratio to catch scams and identify the most efficient organizations.

This rule requires that non-profits recognize the value of all donated services on their financial statements, including free media advertising time/space. These donations must be added to cash and other donations in arriving at revenues, to show the full amount of resources provided to the organization. Then, the organization must show the amount of free services provided as an expense. (The expenses might be promotion expenses for a PSA campaign). These expenses are then classified as either “cause/mission related,” or “overhead.” PSAs are generally classified as cause related expenses. Generally speaking, a non-profit wants their books to reflect the maximum spent on mission related activities, and wants to minimize the amount shown as overhead or administrative expenses.

So where is the benefit for a non-profit? It comes in measuring the ratio of cause expenses to total revenues. In the case of a PSA, the expense is cause related because it provides the public with information about the cause and thus 100% of the PSA airtime generated, can be treated as a cause related expense. If a non-profit wants to increase the percentage of total revenue spent on cause related expenses – a key ratio by which non-profits are evaluated – adding PSA values to cause related expenses really helps.

But there is more. Because every dollar spent in PSA expenditures generates many more times what is spent in ad equivalency, PSAs become a powerful tool to improve an organization’s financial ratio. That is because ad equivalency has a multiplier-effect between the amount spent to produce and distribute a PSA and ultimate values generated, with 25, 50 and even 75 to 1 multipliers being common.

Most important of all, this is not an abuse of the accounting rule, but a required application of the rule. When this rule is applied to the aggregate value we have generated for Volunteers of America, it has made a very significant contribution to their overall image and fund raising program.

*The technical explanation was provided by a Certified Public Accountant with experience in PSA valuations.