Public Allies October 2010Non-Profit Basics

HistoryThe nonprofit sector grew out of pioneering

people a couple hundred years ago who saw a gap in what services offered to those around them. Schools were some of the first.

There are now more than one million nonprofits in the United States, most of which are non-partisan 501(c)3 organizations like most of the Ally Placements (some placements are government agencies).

Goodwill IndustriesSPCA

Main types of nonprofit groupings 1. Charities – which include groups like Public Allies, Inc.

even though people might often think of us as something other than a charity.

2. Foundations – there are 40,000 in the US. 3. Social Welfare Organizations – these are 501(c)4

groups. They can lobby. The National Rifle Association (NRA) and National

Organization of Women (NOW) are examples of such groups. Donors cannot note contributions as tax deductible.

4. Professional & Trade Associations – these are 501(c)6 groups. These are groups like chambers of commerce. Donors cannot note contributions as tax deductible but they can often write them off as business expenses.

Why are nonprofits tax exempt ?1. If there were no nonprofits, then the

government would have to pick up the slack.2. Every community benefits from nonprofits.3. It would be impossible to establish a fair

tax on services that are free or low cost.4. When it comes to faith-based groups: the

church and state are separate entities.

What does it take to be a nonprofit?

1. Provide a service for the public benefit that is response to a “need.”

2. Is private.3. Is governed by a board.4. Does not distribute profits.

Before you start1. Craft a vision statement and a mission

statement.2. Establish a staff, volunteer, & donor base.3. Build a board.4. Create day-to-day management

expectations.5. Locate a nonprofit incubator—a place that

can help you share resources so that you don’t have to start everything yourself such as internet, office space, etc.

IncorporationNonprofits do not have to incorporate, but most foundations will not donate

to unincorporated groups, and most will be unable to become tax-exempt.

Hire a lawyer for legal advice (perhaps pro bono). File the certificate of incorporation. Obtain a Federal Employer Identification Number (FEIN). Open a bank account and establish check signing procedures. File for federal tax exemption. Follow state and local nonprofit regulations. Find office space and obtain office equipment. Prepare a personnel manual. Establish a payroll system and procure necessary insurance coverage. Write bylaws and board policies. Secure proper financial reporting. Figure out your auditing firm. Familiarize yourself with filing requirements – there are about 30

different types of 501(c) tax-exempt organizations and they have different requirements.

FundraisingSpecial eventsCorporate donorsDirect mail & Individual Donor baseFoundations & Endowments & GrantsAnd the board?Why? We’re not selling anything AdvertisingPRThe Internet

Development & Continuation of Programs

It doesn’t help to have a great nonprofit if you don’t know what programs you offer.

The best programs are those that are not simple sets of activities that are done to people. Instead, they are systemic efforts that involve the communities with which you are working. In other words, they are truly sustainable.

The Program portion is what the fundraisers and marketing personnel will be using to garner funds—and they are the most public portions of a nonprofit.

Performance ManagementStaff and Programs will need continued

management and opportunities to shore up gaps in performance.

Establishing a set of standards by which staff and programs are critiqued is important to determine what it means to have success.

It is also important to continually celebrate what is done well and not just focus on the deficits in performance.

Other Staff RolesSomeone needs to manage board relations

and development.Someone directs the culture of the

organization.Someone manages the office.Someone handles finances.Other possibilities