Intro to Nonprofit Sector

Fundraising tools

In person appeals Telephone Door to door canvassing Email appeals Crowdfunding Social Media Applying for grants Sell products or services

Revenue for a Nonprofit

Majority of nonprofit revenue comes from fees for services from private and government sources, private contributions, government grants and investments. Only 501(c)(3) are exempt from federal and state tax---other IRS codes do not get this full benefit.

Size of Nonprofits

Nonprofits vary in size from very small to very large. Contribute over 9 million to the GDP.----Good for the economy 501(c)(3) comprise over 2/3rds of all registered nonprofits The large majority (34%) of nonprofits are social service nonprofits

Defining nonprofits mission/success

Reason for existence, clearly defined for efficiency Attract outsiders, public relations, mission must meet IRS criteria Who, what, where, when, how, why

Isomorphism Theory

Micro Theory

Cash Accounting

accounting methods: generating full reports about financial situation to submit tax returns

What is a charitable choice?

(1994) Welfare Reform Bill Religious orgs filled an important role to deliver significant amounts of public -services (Salvation Army, church-controlled secular corporations) 20% of US nonproprietary organizations are religious At present, they are still eligible for government grants

Theories of personal motivation

(Maslow) Hierarchy of Needs: needs progress from lower to higher, employees with different needs will act in different ways (McGregor) Theory X and Theory Y: X is the assumption that workers are lazy, resistant to change, not concerned with organization's needs, need to be pushed to be motivated, Y is assumption that workers are capable of self-motivation and self-direction and are supportive of organization's need, allowed more autonomy (McClelland) Three Needs Theory: managers have needs, need for achievement, need for power over others, need for affiliation or good relationships with others (Briggs and Briggs Myers) Myers-Briggs Type Indicator: personality types show how individuals gather process information, influence behavior (Herzberg) Motivators and Dissatisfiers: intrinsic motivational factors are motivators and satisfiers and relate to individuals feelings and nature of the job itself, extrinsic motivational factors are hygiene factors and dissatisfiers and relate to the environment and external to the work itself, managers should design work to reduce hygiene factors that create dissatisfaction and increase motivators related to the work experience

1800-1860

1800-1860: Previously non profits limited to local level, nationalization of political culture and economic expansion

1860-1920

1860-1920: Produces professionals in government and corporations, independent from government, dependent of wealth of industrial elite. Rise in grant-making foundations, political progressivism, philanthropists advocating reformist causes. Andrew carnegie, russell sage, rockefeller

1920-1945

1920-45: Expansion of the progressive idea. Believe economic, social, political problems could be remedied through application of scientific principles and expertise----1930 Great depression = New deal is formed because gov wants to revive the economy. More nonprofits created to encourage civic engagement and private donation.

1945-2000

1945-2000: Economic stability, Universal income taxation lead to boost in tax revenue, technology contributed to greater revenue. Increase in revenue means increase in social programs and funding for social causes. Internal revenue code was introduced in 1954 which gave 501 © 3 tax organization. Other 501 were added after that.

1960-1980

1960-80: Economy was good in the 60s so gov social programs progress because of the increase in public demand and the available money. But, due to the poor economy and budget cuts in the 80s the gov looked to privatization to contract out cheaper work.

1960

1960: Civil rights issues were a hot topic- Rockafeller urged philanthropic work to pursue social mission

1990

1990's Welfare reform bill (1994), religious organization fulfilled important role in assisting public. 20% of US non proprietary organization are nonprofits

Categories that fall under 501(c)(3) tax exempt

501 © 3 = federal and state IRS code that exempts organization from paying taxes. Also allows donations to be tax deductible Has to meet a specific purpose or mission that benefits the public: Religious, charitable, educational, and civic purpose Other organizations such as social clubs would not be 501(c)(3) 501(c)(4): Civic leagues, social welfare orgs 501(c)(7): Social and Fraternal clubs

Board of directors legal duties

Duty of care: act with care in making decisions and taking action (attend meetings, be informed...) Duty of loyalty: put organization's interests ahead of personal interests (rules against conflicts of interest of self-dealing) Duty of obedience: adhere to mission, bylaws, policies of org, relevant laws and regulations

Role of Executive director

ED not part of Board Oversees staff in day-to-day operations Implement board's plan and policies Manage programs, activities, and general operations Hire and supervise staff Monitor, manage finances and accounting Report to board Advise board on policy and program issues Assist committee with program and fiscal policy development Serve as liaison between staff and board Communicate with constituency and external actors

Tax exemption vs tax deduction

Eligibility depends on activities Only 501(c)(3) receive full tax exemption. Other nonprofits only and their donors only receive deductions of tax.

Nonprofits employment

Employed 13.7 million people Staffed by primarily professional workers and about 1/4th volunteers.

In house employees

Employees: subject to strict federal and state laws and taxes, work in house under nonprofit's rules and procedures

What is social Entrepreneurship

Entrepreneurs that act as change agents for society. Selling a product but uses a portion of the income to donate to a social cause. An SE will use its revenues to make income and pay their employees and shareholders, but have a business model that is engaged with a social cause. An example of this is Goodwill, OneWorld health and Sekem. In between of a nonprofit and for profit. Blending private and nonprofit goals U.N Millennium Development Goal encourages business to take this SE approach to support sustainable development. Is a new trend and the argument is that is it contradictory Forms collaboration and partnership with Private sector

Public Sector

Gov services, goal is was mission accomplished, accountable to political overseers and community. Executive office and legislation make decisions for public government organizations. Funded by taxes

Contractors

Independent contractors: more flexible and lenient, external workers who have own business, rules, and procedures, fewer rules to follow

Can nonprofits distribute excess revenue to employees and board members?

It is important to note that excess revenue for a nonprofit cannot just be distributed to shareholders and members in the organization like how a private sector would. Any remaining revenue MUST be used to further the mission because of 501(c)(3) tax exemption.

Market Failure theory

Macro Theory- Contract failure- breakdown in relationship between buyer and seller,

Government Failure theory

Macro Theory- Demand heterogeneity- no universal agreement about what goods and services the government should produce **Nonprofits assume roles that gov cannot

Theories of common

Macro Theory- Nonprofits produce a third type of good (common good), Private- consumed by individuals, Public- benefits everyone, Nonprofit- in between, benefits some people

Altruism and philanthropic giving Theory

Macro Theory-: Self interest- to atone for personal failing, gain recognition, Altruism- empathy, not necessarily rational

Supply-side theory

Macro Theory-Nonprofits usually motivated by faith or compassion rather than economic incentives, market failure is not sufficient to explain the existence of all nonprofits

Fundraising strategies

Membership drives: Provide benefit to pay dues, keep existing members Fund drives: Focus on donations, not members, good for nonprofits that cannot offer member benefits Capital campaigns: Large amount of money for big project, usually for large nonprofits with established base Planned giving: Requires expertise, lawyers, connections..

Organizational structure Theory

Micro Theory

Resource dependency Theory

Micro Theory

Individual organizations theory

Micro Theory-

Definition of Nonprofit

Organizations that are driven by a public mission or cause with a desire to bring about change in a society. Consist of like minded people committed to a common good.

What is nonprofit strategic planning?

Outline and then form a master plan: Keep in mind [Who, what, where, when, why] Define your mission- Addressing specific issue creating an ongoing process plan Outline of goals, objectives, activities Assessment of current resources Strategic analysis: SWOT factors (strengths, weaknesses, opportunities, threats)

Types and roles of volunteers

Spot volunteer: casual participation (EX one day commitment) Episodic volunteer: volunteer from time to time Regular volunteer: formality of regular paid jobs, attend on regular basis Marginal mandated volunteer: employees obligated by workplace to engage in regular community service activities (EX high school students, court-ordered service) Virtual volunteer: work from a distance using technology

Major sources of revenue

Top revenue sources: fees for services from private and government sources, private contributions, government grants and investments.

Accrual Accounting

accounting methods: generating full reports about financial situation to submit tax returns. More common method used by professionals

Private Sector

for profits, goal is how much profit was made, accountable to shareholders. President/CEO makes decisions. Funded through product.

Third Party Sector

public interest, goal is, "was the mission accomplished", accountable to board or directors, donors and their community. Board of directors make decisions for the nonprofit. Funded through grants donations and volunteers