Akron.score.org © 2013 Akron SCORE February 2015 Non-Profit Basics Serving Medina, Portage, Summit and Wayne Counties akron.score.org The Key Steps to

akron.score.org

© 2013 Akron SCOREFebruary 2015

Non-Profit Basics

Serving Medina, Portage,Summit and Wayne Counties

akron.score.org

The Key Steps to Buildinga Successful Organization

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© 2013 Akron SCOREFebruary 2015 2

Part 1 Intro to SCOREPart 2 What Is a Non-Profit ?Part 3 Governing the Non-Profit Part 4 Managing the Non-ProfitPart 5 Financing the Non-Profit

Part 6 Setting up the Non-ProfitPart 7 Next Steps

Non-Profit Workshop

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Our MissionFoster vibrant small business communities through mentoring and education.

Our VisionEvery person has the support necessary to thrive as a small business owner.

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• Our counselors are experienced men and women dedicated to giving back to the community for the success they enjoyed during their careers in business

• Over 45,000 clients have benefited from Akron SCORE business counseling since it began in 1965

• Sponsored by the U.S. Small Business Administration(SBA)

• We offer free confidential one-on-one counselingplus a variety of free workshops

A Few Facts about Akron SCORE

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Part 2:

What is a Non-Profit?

Non-Profit Workshop

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A Non-Profit isan organization

founded to furthera cause.

What is a Non-Profit?

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Types of Non-Profits

• Services organizations (Kiwanis, Rotary, Elks…)

• Educational organizations

• Scientific organizations

• Business leagues

• Chambers of Commerce

• Social clubs

• Labor organizations

• Charitable organizations

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Non-Profit Charities

Designated as 501(c)(3) organizations by the IRS:

• Public CharityExamples: Akron-Canton Regional Foodbank

Goodwill IndustriesSummit County Historical Society

• Public FoundationExamples: Akron Community Foundation

GAR Foundation

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NON-PROFITS vs. FOR-PROFITS

For-Profits:

Produce, market and sell products or servicesto make money for owners and investors

Non-Profits:

Produce, market and sell products or servicesto improve the community

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Characteristics of a FOR-PROFIT Business

• Privately or publicly (stock) owned

• Income/profit benefits the owners

• Governed by the owners

• May be bought and sold with profits of sales going to the owners

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Characteristics of a Non-Profit Business

• Community ownership. No private interest. No stock.

• No one may personally benefit from the earnings(board members, employees or volunteers)

• Income greater than expenses must go back intothe business

• Governed by a Board of Trustees/Directors (representatives of the community)

• Can never be sold for a profit. If the organizationgoes out of business, the assets must go to another Non-Profit

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► Decide• Will I be a FOR-PROFIT• Will I be a NON-PROFIT

► Define your reasons for the decision:• Wrong: Primary reason to start a non-profit

is toraise or obtain money

• Right: Primary reason is to better the community

► Incorporate as a Non-Profit only if you will rely on donations, government funding and/or foundation grants

► Charities must obtain at least 30% of their annual income from public support (donations, in-kind gifts, foundations, etc.)

NON-PROFIT vs. FOR-PROFIT

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Non-Profit Advantages

• Tax exemption– Non-Profits do not pay: Federal

taxesState taxesLocal taxesSales taxesCorporate

taxes

• Deductability of donations

• Grants

• Lower costs

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All Non-Profits Must Pay These Taxes

• Local assessments (water, street cleaning, etc.)

• Social Security taxes

• Medicare taxes

• Workers Compensation taxes

• Unemployment taxes

• Employee income taxes (withholding)

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Non-Profit Disadvantages

• Loss of control

• Limited purpose

• Lobbying activities are limited

• Public scrutiny / transparency

• Non-Profit reporting requirements are more extensive than required of For-Profits

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Non-Profit OrganizationsMust Follow For-Profit Regulations

• Occupancy Permit– Zoning– Facilities must meet local, state and federal

regulations

• Local, state and federal license & certifications, food license

• EEO (Equal Employment Opportunity)

• OSHA (Occupational Safety…)

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• Surplus income/profit must go back into services of the organization

• Surplus income/profit allows the Non-Profit organization to operate effectively

• Surplus income/profit allows the Non-Profit to reinvest in services

MYTH: Non-Profits may not make money.

FACT: Non-Profits not only can, but should make a profit/surplus income.

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Part 3:

Governing the Non-Profit

Non-Profit Workshop

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All non-profits must have a Board of Trustees /Board of Directors

• Boards represent the community

• Boards set the policies

• Boards have fiduciary responsibilities

• Boards conduct reviews and evaluations of the non-profit

• The Board is ultimately in charge


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For-Profit Organization Chart

Little Tots DaycareJane Goodmom – Owner

GOVERNANCE / OPERATIONS

– President: Jane Goodmom– Secretary/Treasurer: Mr. Goodmom

Jane Goodmom

Owner/Operator

Employees


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Non-Profit Organization Chart

Little Tots Daycare(Jane Goodmom – Founder)

OPERATIONS Executive Director

Employees

GOVERNANCE Board of DirectorsPolicy Board:

President – Betty InchargeVice President – Jim WannabeTreasurer – Penny MoneySecretary – Ida Rathernot3 Others

PoliciesDecisions

Executive Director – Jane Goodmom

(or another person)


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• Number– There must be at least 3 directors/trustees– Enough to do the work of the Board– Odd Number

• No relatives — No friends unless they can contribute specific expertise (be careful)

• Term limits for members of the Board– Staggered terms

Board of Directors/Trustees


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• Committed to Mission• Willing to give of their time, talent &

money• Able to influence others• Have community contacts• Knowledge of Non-Profit Board

operations• Willing to learn• Willing to raise money

Expectations of Good Board Members


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• Governance of the organization• Establishes agency policy, goals &

objectives• Hires/Fires the Executive• Sets salary of Executive• Establishes annual goals & objectives for

the organization (Business Plan)• Evaluates performance of Executive

againstset goals and objectives

• Decisions of the Board are collective decisions

Duties of the Board


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• Board members are going to make the rules — pick them carefully

• Board is the ultimate boss• Board hires and fires the executive• You cannot get rid of the Board — only

the Board can get rid of Board members• Avoid conflicts of interest/have a

disclosure policy and process

Selecting Board Members / General Principles


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• Try to find people who have experience withNon-Profit Boards

– Accountants – not the same person as the auditor– Lawyers– Bankers– Marketing– Public Relations– Insurance– Business– Mentors & Advisors– Involved Community Volunteer

Choose people who can contribute expertise


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• President• Vice President• Treasurer• Secretary

Officers


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• Governance Committees– Finance & Audit– Planning & Evaluation– Nominating

• Operating Committees– Marketing/Public Relations– Fundraising– Personnel

Board Committees


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• Clearly define (in writing) the roles of eachin the Bylaws

• Define the duties of each officer in the Bylaws

• Establish personnel policies

Roles of Board & Staff


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• Board should meet as often as is necessaryfor the work of the organization– Minimum number: 4 meetings per year– Could meet monthly — must meet

annually

• Date, time, place established to maximize attendance

• Agenda and supporting materials sent ahead of meeting

Meetings (written in the Bylaws of the Corporation)


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Part 4:

Managing the Non-Profit

Non-Profit Workshop

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Role of the Executive/CEO• Answers to the Board

• Does not serve on the Board other than as ex-officio — should not vote

• Implements Board policy

• Staffs all Board committees

• Implements agency programs and services

• Responsible for management issues

• Conducts or supervisesall daily agency operations

• Develops personnel manualand obtains Board approval

• Hires/Fires all other employees– Some employees may be

required to meet standards of certification/ license

– Must be citizens or documented residents

– Must be bonded– Professional liability

• Assures the bills are paid

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• Hire great employees– Job descriptions– Salary schedule

• Train great employees– Communicate the organization’s expectations

• Motivate and lead the employees– Pass on the passion and the dreams

Employees

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• Have a file or notebook of all policies established by the Board

• Written statement of policy• Procedures for implementation• Title/position of the person(s)

responsible for implementation• Date policy was approved by the

Board(also in the Minutes)

Policies


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• Organization money MUST be separate from any personal money

• Checking and savings accounts must be organization accounts — not personal

• Finance committee of the Board oversees organization finances

• Executive/CEO or other staff prepare budgets for review by the Board

Finances


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• Keep written minutes of all finance meetings

• The organization must operate within the budget. Executives should assure this. Board must review and affirm it

• Annual Audit — completed by outside accountant chosen by the Board

Finances (continued)


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• Salaries• Benefits• Occupancy• Insurance and legal• Public relations and marketing• Accounting and audit• Programming and operations• Fundraising

Budget Expenses


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Part 5:

Financing the Non-Profit

Non-Profit Workshop

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• Earned Income– Fees for services– Investment

income

• Donated Income– Individuals– Estates, bequests– Foundation grants

• Corporate– Business income– Contracts

Budget Income

• Foundation Income– Grants

• Government Income– Contracts– Grants

• Other Income– Crowdfunding– Special Events– In-Kind

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• Fees charged to persons who receive the benefit(s) of your programs and services– Estimate the annual income from these fees

• Donations– Must be designated as a charity 501(c)(3) by the IRS– Must register with the Ohio Attorney General– May be required to register with the city or county in which you

are doing business– Designated/restricted donations– Undesignated/unrestricted donations– General operating donations– Estimate the annual amount of donations you expect from

individuals


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• All donations must be acknowledged in writing

• Donations greater than $250 must be acknowledged by letter stating that nothing was given/received in exchange for the donation

• Information filed is public information


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• Foundation Grants (Gifts)– NO BUSINESS CAN BE RUN SOLELY ON

FOUNDATION GRANTS! (STOP NOW!)– Usually one-time contributions. Do not expect

renewal.– Always require a written proposal/request

usually in a format developed by the foundation

– Most often a written report to the foundation is required. Report the outcomes from using the grant money

– May require publicity of the grant


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• Proposal Writing– 20% success rate is good– Preliminaries are a must

• Develop written materials describing Mission, Program Description, Budgets, etc.

• Research foundation which fund your mission services and geographic area

• Make preliminary contacts, in person• Get to know the personnel at the foundation. Give the foundation

opportunitiesto get to know you and your organization

– Request only what might be granted– Assume you will be given less than you request– Follow foundation guidelines (Check the website. Ask the

foundation.)– Follow-up

• Letter of thanks• Written report on success of the project• Ask the reasons for denial, if a grant is not received• Foundations share information


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Foundations May be Local or National

• Local Foundations – Vary in size from very small to very large– Small foundation grants may be as little as a few hundred dollars

to a few thousand– Larger grants, up to $25,000 or $30,000 usually go to

well established organizations– The largest grants, in excess of $30,000 are given to

very large and very visible projects

• National Foundations– Not a likely resource for funds– Usually fund very large projects with a national or regional impact– Possible exception: Knight Foundation


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How to Find Foundations• Foundation Center

through the Akron-Summit County Public Library, Hudson Library and Twinsburg Public Library – Online searches– Printed directories

• Sources of Foundation 990 Reports– Foundation Center– GuideStar (www.guidestar.org)

• Other Sources of information– Bank trust officers– News publications– Event programs


990 Reports provide: Foundation size Contact persons Significant personnel Types of project funded Proposal guidelines &

format Submission deadlines Listing of previous

grants (to whom, purpose & amount)

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Foundation Requests

• Describe your organization• Describe your request• State how much you are asking• Explain the anticipated benefit from the

money• Send the number of copies requested —

no more, no less• IRS letter of 501(c)(3) determination• Do NOT send material not called for

(e.g., brochures)

What to include


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Researching Foundations• Legal name, address, phone, email, website address

• Contact person and information

• Areas of interest, focus of grants, types of project considered

• Types of recipients eligible for grants

• Geographic or other limits on grants

• Types of support considered, operating, capital improvements, scholarships, single-year grants

• Amount of grants in the last year or two

• Application information, format, calendar deadlines

• List of persons, officers or decision makers


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Challenge Grants

• Usually requires your organization to raise an amountfor the project equal to the amount of the grant

• Becoming more common, especially with larger projects

• Often to gain or verify community support for the project

Challenge Grant: A grant given when a stated challenge from the foundation to your organization has been met


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Contracts

• Competitive• Time limited — may or may not be renewable. Can, but do not

always, provide ongoing funds

• Always require a written proposal according to a published Request for Proposals (RFP)

• Sometimes they require attendance at an organizational meeting prior to submission of the proposal

• Lag time between delivery of service and payment• Contain a specific list of requirements (do’s and don’ts)• Open to public review• Materials and products often belong to the funding entity

Contracts (Government or Private: Agreement for a funder to buy specific services or products at a specified rate during a specific period of time according to specific requirements.


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Government Contracts/Grants

• Federal contracts and grants — unlikely

• County contracts are most common due to home rule

• Proposals can be more complicated than foundations

• Require political contacts


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• Fiscal Years vary (may differ from this)– City and County: February through December

– State: July through June

– Federal: October through September

• Unit Rates– May / May Not be negotiable

– Definition of the “Unit” varies and may be negotiable


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Part 6:

Setting up the Non-Profit

Non-Profit Workshop

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Define your Service(s) or Product

• What are you going to do?

• How are you going to do it?

• Where are you going to do it?

• For Whom are you going to do it?

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BEFORE Filing for Non-Profit Designation

• Prepare a business plan for a solid, unduplicated program to address a pressing community need– Mission Statement– Goals, objectives, activities– Assessment of current resources– A strategic analysis

• Define the services to achieve the Mission• Define the population of service• Put together your Board of Trustees• Develop a 3-year budget

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Define Your Mission

(Its Purpose & Key Activities)

• Research the community– Who else has a similar mission?– Is there any other organization/group with which

to partner?– Who is going to compete with you for money?– Are others providing the same or similar

services?

• What is your niche going to be?

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Define the Population To Be Served

• Population (adults, teens, children?)• Age• Geographic area(s)• Income status• Problems/Needs• What are the needs of your customer

base?• Where will they come from?• How are you going to make contact with

them?• Determine qualifications of staff needed

to serve the population

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Develop a 3-Year Budget

• Determine start-up funding needs– Non-profits are generally unable to raise money through loans

or investors — funds are typically raised through grants, donations, fundraisers and potentially crowdfunding

• Define annual expense needs

• Define sources of income

• From where will the money ($) come?– Be precise– Not “foundations” but list specific foundations and the

anticipated level ($) of support– Develop a realistic fundraising plan– Determine whether the organization will be financially self-

sufficient —will it generate a surplus from the operations?

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Required Legal Filings

• Ohio Secretary of State– Articles of Incorporation

• Define who you are and what you do

– Verify availability of business name

• Ohio Attorney General– Registration to solicit donated funds

• U.S. Internal Revenue Service (after the Ohio Secretary of State applications have been submitted)– Applications for tax-exempt status —

use Form 1023 or Form 1023EZ– Bylaws/Code of Regulations

• Define how the organization will be governed

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Non-Profits are Businesses

• Must file annual tax return with the Internal Revenue Service – Form 990, Form 990N or Form 990EZ

• When complete, this must also be filedwith the Ohio Attorney General

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Part 7:

Next Steps

Non-Profit Workshop

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Next Steps

• Attend SCORE workshop on the fundamentals of writing a Business Plan

• Develop a complete Business Plan

• Schedule personal, one-on-one counseling session

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Nonprofit Kit for DUMMIESby Stan Hutton & Frances Phillips How to Form a

Nonprofit Corporationby Anthony Mancuso

Reference

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Thank You for Attending

► NETWORK, NETWORK, NETWORK!!!► All of us at SCORE wish you success

► Remember to make an appointment with one of our Counselors

► Refer others to SCORE

330-379-31631 (877) akscore or 1-877-257-2673

[email protected]

www.akron.score.org

The material in this publication is based on work supported by the U.S. Small Business Administration under cooperative agreement SBAHQ-11-S-0001. Any opinions, findings and conclusions or recommendations expressed in this publication are those of the author and do not necessarily reflect the views of the U.S. Small Business Administration. SCORE services are provided without regard to race, color, national origin, gender, age and disability. Persons with disabilities may request reasonable accommodations with a two-week advance notice.”

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Serving Medina, Portage,Summit and Wayne Counties

[email protected]

330-379-31631-877-AKSCORE

Summit County Building, Suite 204175 S. Main StreetAkron, OH 44308

The material in this publication is based on work supported by the U.S. Small Business Administration under cooperative agreement SBAHQ-11-S-0001. Any opinions, findings and conclusions or recommendations expressed in this publication are those of the author and do not necessarily reflect the views of the U.S. Small Business Administration. SCORE services are provided without regard to race, color, national origin, gender, age and disability. Persons with disabilities may request reasonable accommodations with a two-week advance notice.”

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Akron.score.org © 2013 Akron SCORE February 2015 Non-Profit Basics Serving Medina, Portage, Summit and Wayne Counties akron.score.org The Key Steps to