Nonprofit 101 training 3 2011


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  • Photo licensed under Creative Commons – attribution cmaccubbin
  • What drives them? How are they governed? How do they evaluate success?Photo licensed under Creative Commons – attribution only
  • From the citizen media law project website. there is no legal definition of a nonprofitdistribute property, excess funds, or shares to individuals
  • Main idea – Orgs are deemed nonprofit by state law; Tax-exempt status is conveyed by federal governmentEarned income? Differentiating between 501c)3 and the other 501c) statuses (Donations are only tax-deductible for 501c)3Make IRS 990 a linkIdealist: How do I incorporate an organization as a nonprofit?
  • Earned income? Differentiating between 501c)3 and the other 501c) statuses (Donations are only tax-deductible for 501c)3Make IRS 990 a link
  • nonprofit is any organization that files Nonprofit Articles of Incorporation with the Corporations Division of the Secretary of State. A charitable organization is any individual or entity that fundraises for a charitable purpose in the state. nonprofit organization (abbreviated NPO, also not-for-profit) is any organization that does not aim to make a profit, and which is not a public body. In the United States of America, nonprofit organizations are formed by incorporating in the state in which they expect to do business. The act of incorporating creates a legal entity enabling the organization to be treated as a corporation under law and to enter into business dealings, form contracts, and own property as any other individual or for-profit corporation may do.PNODN an example, ask Duane
  • Earned income? Differentiating between 501c)3 and the other 501c) statuses (Donations are only tax-deductible for 501c)3Make IRS 990 a link
  • Source? What does “directly accountable” mean?
  • Problems with Board members acting as staff volunteers they are no longer acting in the role of Board member, they report to the STAFF , responsibilities and authority are not the same.
  • EL-1 Global LimitationThe Executive Director will not do anything illegal or unethical.EL-3 Treatment of Staff, Volunteer Staff, and VolunteersWith respect to the treatment of staff, volunteers and volunteer staff, the Executive Director will not cause or allow conditions which are unfair, undignified, disorganized, or unclear.
  • Getting what we pay for: How low overhead limits nonprofits effectiveness
  • Nonprofit 101 training 3 2011

    1. 1. Nonprofit 101FOR 501 COMMONS CONSULTANTS
    2. 2. Nonprofits exist to pursue a mission 2 provides nutritious food to hungry people statewide in a manner that respects their dignity, while fighting to eliminate hunger.
    3. 3. Evaluating Success: For Profit vs. Non Profit 3 A sustainable for-profit  A sustainable nonprofit should be socially and should make a financial environmentally profit, but to be responsible, but to be a successful it must success it must deliver deliver on its social or a financial profit environmental mission Photo credit: Craig Maccubbin
    4. 4. Profit Management: For Profit vs. Non Profit 4 For-profits can pass  Nonprofits must along profits, reinvest profits in property, or shares to pursuing the individuals who organization’s manage or govern the mission organization or invest  Passing profits in the profits, property or organization shares to individuals is illegal Photo credit: Nick Wheeleroz
    5. 5. What makes a nonprofit a nonprofit? 5 Pursue a community benefit Nonprofits adhere to corporate law & regulations unique to this sector Names and Acronyms for Nonprofits Non-governmental Organizations (NGOs) Nonprofit Organizations (NPOs) Not for profits Voluntary sector Social sectorPhoto credit: Chuck CokerAdditional ResourcesCitizen Media Law Project: What is a nonprofit?Idealist: Who can benefit from a nonprofit‟s activities?Idealist: Nonprofit Regulations
    6. 6. Organizations are deemed „nonprofit‟ by state government, „tax exempt‟ by federal government 6 Nonprofits with federal tax- Nonprofit exempt statusInformal Groups (incorporated in state) (incorporated in state(not incorporated) AND meets additional federal requirements) WA Secretary of State - Nonprofit Incorporation IRS - NonprofitsSimplest Most Complex
    7. 7. 7 Examples: Community groups, Coalitions, Neighborhood associations, etc. Informal Legal Responsibilities: minimal Groups Legal Privileges: no group privilegesA small group of Advantages: Accomplish a shared goal with minimalindividuals who come requirementstogether to pursuejoint goals, but do not Limitations: Informal groups can NOT -register as an • Have a group bank account,organization • Ask for contributions • Win grants or contracts • Hire staff • Earn income Photo Credit: John Spooner
    8. 8. 8 Examples: most neighborhood groups, professional organizations, new organizations that haven‟t received federal tax-exempt status yet. Nonprofits Legal Responsibilities: Must provide social or community benefit, follow charitable solicitation rules in fundraising, pay state, local and federal taxes, have aA group that registers board of a nonprofit with theSecretary of State Legal Privileges: Can enter into business dealings, form contracts, own property, similar to state- incorporated businesses, plus can: • Ask for contributions (if registered for charitable solicitation with Secretary of State) • Receive grants or contracts from some funders Advantages: Earns business privileges with moderate need for extensive recordkeeping and reporting Limitations : Contributions are not tax-deductible, Ineligible for some grants or contracts
    9. 9. 9 Examples: most nonprofits you can think of! 501 Commons, Goodwill, YMCA, UW, churches, etc. Tax-exempt Legal Responsibilities: All responsibilities of a state Nonprofits nonprofit, plus must file IRS 990 financial reporting form annuallyA nonprofit that Legal Privileges: Exempt from federal corporate taxesregisters with the (but may pay state and local taxes), additional privilegesSecretary of State and depends on specific type of tax-exempt designationapplies for and earnsIRS tax exemption Advantages: Tax exemptions, eligible for more grantsstatus and contracts Limitations: Must follow complex reporting and recordkeeping rules Photo credit: Valentin Ottone
    10. 10. Common Challenges of Nonprofits 10
    11. 11. Nonprofit Board Governance 11 Board powers are  Family members of staff defined in should not be on the  Articles of Incorporation Board (conflict of  Bylaws interest) Board is directly  Board must have at least accountable for actions 4 people and meet at and policy of least 4 times a year organization  Most Boards have about Board members can be 15 people held financially liable for  Board may limit the the actions of the number of years a organization member can serve
    12. 12. 12  Lack of clarity on which decisions made by the Board and which areChallenges made by the Executive Directorwith the (ED.)Board  If lack of clarity leads to a passive board, the Board might not challenge the ED enough.“Very competentindividuals can come  On the other hand, a very involvedtogether to form a very Board, may not give the ED theincompetent board.” freedom to make day-to-day decisions without consulting the board.John CarverBoards that Make aDifference Nonprofit Executive Director = CEO
    13. 13. 13  Boards should decide the end resultsWhat is the or long term goals a nonprofit shouldBoard’s Job? pursue  Executive Director is responsible for achieving those goals  Boards should define any limits on the Board Executive executive. Examples: Director  Don‟t do anything illegal or unethical ENDS/ GOALS MEANS  Don‟t treat clients, volunteers or staff unfairly  Don‟t get into debt 501 Commons‟ Board Best Practices
    14. 14. 14  Similar to small business, nonprofit staff wear many hatsChallenges  Executive director often has programwith staffing and management responsibilities and is the chief fundraiserStaffing is typically  Office manager is often responsible fora nonprofit‟sbiggest expense, finances, HR, technology, facilities, etc.but understaffing  Staff may not have special knowledgeis common or training for some aspects of their job  Unique to nonprofits  Program staff may be primarily volunteers or AmeriCorps members with time-limited terms Nonprofit Program = For Profit Lines of Business
    15. 15. 15  Grants and contracts are often for oneChallenges year onlywith money  Donors can restrict contributions to a certain programNonprofits have limitedaccess to capital and  Contracts and grants restrict theface restrictions on howmoney is spent. percentage that can be use for administration  Impact:  Significant staff resources spent tracking spending of donor funds  Funding restrictions can make it difficult for a nonprofit to invest in technology, staff training, and other capacity building projects Getting what we pay for: How low overhead limits nonprofits effectiveness
    16. 16. 16  Limited staff resources, constantChallenges fundraising, and lack of investment inwith time administrative systems leads toKnowing when to say burnout“enough”  Staff are driven to achieve the mission despite limited resources  Measures of success are often unreachable  How can the food bank manager go home, at the end of the day if there‟s still a line around the block?
    17. 17. How important are volunteers to nonprofits? 17 Myth: Volunteers do only low value tasks
    18. 18. Reality: Volunteers are a critical resource 18 All nonprofits are required to have Boards of Directors who are volunteers Volunteers help nonprofits serve more clients  In homeless organizations, it‟s estimated that 40% of services are provided by volunteers Volunteers extend the reach of the staff  For example, the Girl Scouts use their network of 928,000 adult volunteers to serve 2.4 million girls Volunteers are much more likely to donate than non- volunteers
    19. 19. 19  501 Commons Web Site Tools and Best PracticesWant to  501 Commons Best of the Weblearn  Other recommended Websites‟s Nonprofit FAQmore?   Seattle University Executive Master of Nonprofit Leadership Helpful Resources Ten Websites All Nonprofits Could Use
    20. 20. 20 501 Commons IntranetWant to  Log in from  User name: volunteer  Password: washingtonmore ?  Practice Areas  Topical list of articles, sample documents, templates and online resources  Consultant Tools  Project management templates and tools
    21. 21. Appendix 21Facts and figures about the n o n p r o f it s e c t o r
    22. 22. 501 Commons works mostly with 501c(3) organizations 22501c(3) organizations can ask for contributions & donors can take tax deductions More information on Federal Tax Exemptions
    23. 23. 23Most Common Distribution of 1,536,134Tax Exempt Federally Tax Exempt USStatuses Nonprofits (2008 data)501c)3 : religious,educational, charitable,scientific, and literary Otherorganizations 501cs 22%501c)4: civic leagues,social welfare 501c(4)organizations, and 7%professional 501c(3)associations 71% Data Source: Urban Institute
    24. 24. How Many Nonprofits in Washington? How Big? 24 Number of Nonprofits in  Most nonprofits are Washington State (2009) small60,000  Median budget size -50,000 $100,00040,000  90% reported revenues of30,000 302,000 or less20,00010,000 0 All Nonprofits 501c)3Data Source: Nonprofits in Washington 2009 Data Source: Nonprofits in Washington 2008
    25. 25. How do Nonprofits earn money? 25Myth: Most nonprofit revenue is from charitable contributions
    26. 26. Reality: Most contributions come from individuals 26 2008 Charitable Contributions $308 Billion by Source ($ in Billions rounded) Bequests $23 8% Foundations $41 13% Corporations $15 5% Individuals $230 74%Data Source: Giving USA
    27. 27. Reality: Most revenue is from earned income 27 Sources of Revenue for Reporting Public Charities, 2005 data Other income Investment 3% income 5% Private contributions 12% Government grants 9% Fees for services and goods from Fees for services private sources and goods from 51% government 20%Data Source: Urban Institute