Reply #15: IV-A refers to grants

[TygrBright]

According to the return, their income was entirely derived from "direct contributions" from individuals, which are not the same as grants. Nevertheless, you'll have a VERY hard time finding any experienced nonprofit fundraiser who won't roll around laughing at the notion of a cost per gift of .05%. ESPECIALLY in the first year of the organization.

Donor acquisition is usually a net INVESTMENT, not a net revenue, meaning it generally costs slightly more than the average gift to get the first gift from any donor. The point is the repeat gifts, which net out as revenue. Most established, experienced nonprofits who make their living off direct gifts from individual donors count themselves extremely lucky to keep their cost per gift in the 15%-20% average range.

The occupancy cost could easily be that low if they are getting space "donated" by some officer or director (say, a corner of someone's dining room) and they are just reimbursing that person for utilities or whatever. But yes, as part of an overall pattern, it rings the suspicious bell.

Generally payroll taxes are lumped in with total payroll costs on the 990. Payroll tax accounting is a quarterly function involving a whole different set of forms.

Clarifyingly,
Bright