Basics of Nonprofits Corporations

What is a Nonprofit?

Over 1 million nps in US

Over $300 billion contribution to economy

Nonprofit status determined by IRS and by states

Basic self-explanatory definition – nps are organized to not make money.

NPS are incorporated and have a structure.

Public service as a primary goal rather than the making of profit

Money

Basic elements of a nonprofit include:

A public service mission.

Organized as a charitable corporation.

Governance structures must preclude self-interest and private financial gain.

Exempt from paying federal tax.

Gifts made to them are tax deductible.

501©3

The Mission Statement

The Organization

Duties of Trustees

Determine the organization’s mission and set policies for its operation, ensuring that the provisions of the organization’s charter and the law are being followed.

Set the organization’s overall program from year to year and engage in longer range planning to establish its general course for the future.

Establish fiscal policy and boundaries, with budgets and financial controls.

Provide adequate resources for the activities of the organization through direct financial contributions and a commitment to fund raising.

Select, evaluate, and, if necessary, terminate the appointment of the chief executive.

Develop and maintain a communication link to the community, promoting the work of the organization.

Governing documents that Trustees work within

Policymaking

Articles of incorporation (charter)

Bylaws (detailed and specific procedures affecting the trustees themselves)

Trustees should not:

Engage in the day-to-day operation of the organization.

Hire staff other than the chief executive.

Make detailed programmatic decisions without consulting staff.

Planning

The short term (the next year)

The medium term (the next five years)

The long term (the next decade

Action or implementation plan developed by the staff

Activities that a board should generally consider in the planning area:

Appointing a planning committee.

Holding periodic retreats.

Establishing goals and objectives in advance of every new year.

Reviewing the operational and financial consequences of these goals and objectives.

Fiscal Responsibilities

Liability

Who will approve invoices and sign checks?

Will individual staff members who are responsible for finances be bonded?

Will the treasurer be bonded?

Should the organization allow first person checks that are not countersigned?

Should the books be audited by an outside examiner?

Fund Raising

Advisory Boards

Advisory committees can be permanent or temporary.

Typical functions of an advisory committee:

Fund raising

Addressing political problems

Handling public relations

Reviewing programs

Serving as advocates in the community

Community feedback

Evaluating performance

Technical expertise

Liaison with another organization

Providing an independent, unbiased sounding board

Questions to consider when creating an advisory committee:

What is the purpose of the committee?

What will the organization expect the individual members of the committee to do to achieve the above purpose?

To whom will this committee report?

Who will have the authority to select its members?

Who will provide the staff?

How will the organization recruit members?

How large should the committees be to carry out its purpose?

What is the nature of the relationship between the governing board, the staff, and the advisory committee?

What are the financial costs for the committee on an annual basis?

To what extent are the executive director and the officers of the governing board in favor of the committee?

Will the committee members need liability insurance?

Common problems with Advisory Committees:

Lack of clarity in purpose, role, or scope.

Ignorance about or lack of commitment to mission of parent organization.

Unclear expectations of individual members.

Lack of leadership and support from the executive director or other key staff members.

Improper or inappropriate composition.

Weak organization and structure.

Lack or interaction with and feedback from the governing board or appointing authority.

Under-utilizating of advisory board members.

Overstepping advisory role.

Absence of orientation and/or continuing education programs.

Haphazard selection process.

Formed to `fix’ an organization in crisis.

The Chief Executive

Volunteers

Volunteer coordinator