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Before You Seek A Grant
- 4. Characteristics of Successful Nonprofit Organizations http://flickr.com/photos/jeffhester/2434283985/
- 5. Key Elements of Getting Started http://flickr.com/photos/basegreen/205733912/
- 22. Start-up and Nonprofit Viability Checklist
- 23. Thank you for coming! Andrea Snyder Grants Collection Enoch Pratt Free Library State Library Resource Center [email_address] (410)396-5320
Notes de l'éditeur
- Welcome Brief introduction to the course (Emphasize that the course is geared to the needs of community groups without nonprofit status OR new nonprofits inexperienced in foundation fundraising. This course is to help them to self-diagnose their readiness for foundation fundraising. While the focus is on foundation fundraising, much of the content is also relevant to governmental fundraising.) Introduction of presenter Reminder : Sign-in; Handout pickup; Library tour at the end; Turn off cell phones Review of handout packet : Copy of slides; training calendar; resource list; evaluation form Audience survey : Nonprofit status; fundraising experience in general; foundation fundraising experience
- As the course title indicates, the purpose of the course is to help you determine whether you are ready for foundation fundraising. We will employ a step-by-step checklist approach so that you will be able to determine your own readiness. There are three main topics we will cover today. You will learn: The Characteristics of successful nonprofit organizations: These are what funders look for when they review grant applications. In other words these are the goals you will strive to attain as you work on building successful nonprofit organizations. 2. The key elements of getting organized so that you will become successful nonprofit organizations yourselves. 3. Resources available here at the Foundation Center and elsewhere.
- I’d also like to take time before we begin to introduce the concept of nonprofit lifecycles. A fully-functioning, effective nonprofit doesn’t just appear out of thin air. There are several stages of organizational development: Idea stage (no formal structure) Start-up stage (set up legal structure, recruit bd of directors) Growth stage (growing programs, defining reputation, becoming more formal/professional) Mature organization (board is governing bd, professional staff, well-established, well-run programs, solid finances) (Reference: Stevens, Nonprofit Lifecycles —on resource list) We are about to go over the characteristics of effective organizations, so if you are in one of the first stages, you may still be building up to these characteristics of successful nonprofit organizations.
- Let’s review the characteristics of successful nonprofit organizations: A vital mission : This is a statement of the needs and problems your organization exists to address. The mission statement answers the question, “Why.” Along with it, you will also include general goals and objectives for your organization, the “what” and “how.” Capable leadership: Governance : the board of directors is responsible for governing your organization. How well do they exercise appropriate oversight? Management: your paid staff and other volunteers who run the organization day-to-day. How qualified are they? Programs and Services : Your organization’s programs should be relevant to the needs of the community you serve; they have to be in high-quality and well-regarded by the community; and they have to be in line with your organization’s mission statement. Operations and support systems: How well does your organization deliver its programs and services? Do you have the necessary support systems in place to assure the effective delivery of these services? Successful nonprofits regularly examine whether they are meeting desired goals and objectives. Constant planning and evaluation are just part of the process of Organization Rededicating Itself to its mission and services. Facilities : need to be adequate for the organizations scope and the nature of its work Finances : Nonprofits today require reliable and diverse revenue streams and a sound accounting management system. History of the organization: This may present some problems for new nonprofits because you have no or very little track record. But foundations look for successful organizational history. Then how do you deal with this issue? One way is by demonstrating you have a strong and committed board with solid track records and a sound financial plan. Another way is to have an executive director with experience and credibility. All of the above are the key characteristics of successful nonprofit organizations. Again, when you approach foundations for funding, they will look for those characteristics in your organizations. Without them, they are not likely to fund you regardless of how strong your proposal is. Starting from the next slide, we will go over in greater detail some pertinent issues so that you can begin to assess your own readiness for foundation fundraising.
- This section addresses the elements of getting organized so that your own organization can become strong and successful—and “grantworthy.” There are many administrative details we will bring your attention to in this segment. Please keep in mind that as a new start-up you may not have the capacity to have all these items in place. This course is not to discourage you from starting an organization. Rather it is to help you to think it through before you begin the process. I don’t want to dim your enthusiasm about starting an organization--people love to have their own organizations--but when you decide to start one, you’re embarking on a complicated legal path. If you don’t know what’s involved, it can be a little like walking through a jungle at night. We hope that what we cover today will serve as a path through this jungle. With this guide we hope that you see the peaks and valleys, swamps and beasts in advance so that you can start planning.
- For a new nonprofit organization, developing a mission statement is a critical first step in defining what the organization plans to do and in explaining how it differs from similar organizations. Clarifying an organization's mission can be a complex and difficult process. The mission statement answers the question, “Why ( purpose ).” Along with it, you might also include general goals and objectives for your organization, the “what” and “how ( service or business of your nonprofit and beneficiaries of your work).” John Carver summed it up by saying that your mission tells the world “ What good for whom?” No matter how clear the mission seems in your head, plan to talk it over with people and to test out whether there are other things you need to convey in the mission statement. After all, t hese are the words that will draw people to your organization and motivate them to get involved. Some say your mission statement should be so simple and succinct that you should be able to fit it on a business card, or that you should be able to say it in a short elevator ride. But length as not the key issue—you are striving for clarity in your mission. [ask for a volunteer to share a mission statement; and ask the audience to pick out purpose, service/business, and beneficiaries from the statement] If no volunteers, share this sample: “ Our Human Service Agency works to improve the quality of life for low-income children and families at risk in inner city (city name) by providing emergency assistance, daycare, social services, and recreational activities.” --purpose (improving the quality of life) --beneficiaries (low-income children and families at risk in inner city of a certain city) --service (emergency assistance, daycare, social services and recreational activities)
- BoardSource , a nonprofit whose mission is providing information about boards (on your resource list) has outlined basic responsibilities of nonprofit boards including: Determining the organization’s mission and purposes Select, Support and Assess the Chief Executive Ensure Effective Organizational Planning (Translating a broad mission into measurable goals and objective that can be accomplished) Ensure adequate resources and see that they are managed effectively Determine, monitor and strengthen the organization’s programs or services Ensure legal and ethical integrity and maintain accountability Assess Board performance Board members are the public and legal stewards of the nonprofit. The “3 D’s” outline their legal obligations: Duty of care (running the nonprofit according to law and responsibly); Duty of loyalty (to the organization); Duty of obedience (to the mission)
- Your board members are the public face of your organization, and they are the ones ultimately accountable for your organization. Too often a founder thinks of the organization as his. Whether you are around or not, the nonprofit you create should be able to exist in perpetuity. The people who are supposed to make it happen are the board members. So how do you find desirable Board members? The essence of a good Board member is someone who is really interested in the organization’s mission, has the ability and willingness to work in a group and, will make a financial contribution and find others who will. One common description of desirable attributes for a Board member is called “ the three T’s .” They are Time, Talent, and Treasure . They are also called “the three W’s”— wisdom, work and wealth . Time or Work refers to willingness to put in time doing all sorts of things that can be helpful to the organization. Especially in the idea/start-up phases, boards tend to be working boards. Talent or Wisdom refers to someone who’s knowledgeable in the particular field in which your organization functions and who’s able to guide your organization. Also professionals such as accountants, lawyers, or people who are savvy about real estate or insurance matters. Having them on the Board can save you a lot of money and aggravation because you can call with questions and get free answers, quickly. Treasure or Wealth refers to ability to write large checks or ability to raise funds. It’s not so easy to find all three types in one board member. But they can serve as helpful reminders for you to find right composition as you recruit board members for your organization. But please keep in mind that the most important attribute all your board members should have is passion for your mission. Another thing to consider is having members that represent the community’s diversity and/or your constituents. As you build your board, you are likely to begin with people you know or are related to. If that’s the case, it is a good idea to have in place a Conflict of Interest Policy for your board that basically requires board members and officers to let everyone know about interests they may have that may conflict with the interests of the organization and that sets up a procedure for disclosing those interests and screening interested parties from decision-making. For example, if your cousin owns an insurance agency and your nonprofit is considering buying insurance from that agency, it is extremely important for the Board to know about this relationship so that it can get other bids, to help assure that you don’t look like you’re siphoning tax-exempt, charitable money off to your cousin. When money is given to a charity, it’s the charity’s money; it is not the donor’s money. It really is a sacred trust for the organization it is given to, and that is terribly important. The donor presumably got a tax deduction for the contribution, and now the charity holds the money. Thus, it is important that every penny be spent in a way that is entirely appropriate and above-board.
- Next to your board members, staff are another group of people vital to the success of your organization. What the grantmaker wants to know is that you have paid staff in place. We all know that volunteers are wonderful and dedicated workers. The reality is, unfortunately, that some in the funding community believe that volunteers can be less reliable and committed than paid staff. If you rely very heavily on volunteers, the foundation may wonder: How solid is the staff? “ Finding competent staff” is also extremely important , and in some ways is even harder than finding the right Board, because normally your staff, initially at least, will be smaller than your Board, and the staff is going to need, in some way, to encompass all of the qualities that you are looking for in your Board as a whole. You will want as your staff leader someone who is charismatic, articulate, organized, a good manager, a good fund-raiser, well-connected and has excellent knowledge of your program goals and how to implement them. That kind of person is often not so easy to find. It is therefore crucial to pay attention up front to defining the qualities most needed in senior staff. For example, it has been common in a number of social service organizations to have a social worker move up the line and become the head of the organization because that person has been with the organization for years, knows all about it, and is terrific in developing programs. That may or may not be the best model for the organization because maybe what the organization needs as its head is not a wonderful social worker, but a great manager, who may not be a great social worker, and maybe the program part should have its own “program director”, and the social worker should be the head of the “program services.” Once you have staffing in place, you need to prepare a personnel manual . Obviously, you’re going to have a happier staff to the extent that people know the terms of their employment. What are the vacation days? What’s the sick leave policy, etc.? While having a personnel manual is not super crucial, it is likely to save you headaches in terms of dealing with people, especially as you get past the one and two person stage. You’ll want to have consistency in your policies. The equality issue may be much greater, I think, than the issue of how much are people getting. If you’re not paying people much but you’re paying them all in a way they perceive as fair, you’re probably going to be better off than if you’re paying them more, but paying them in a way they perceive as unfair. A related point is that paying “reasonable” compensation is fine. In other words, using a donor’s money to carry out your charitable purpose is fine, so paying an executive director a reasonable salary is fine. Paying an unreasonable salary is a problem and could bring unwanted scrutiny from the IRS.
- Now let’s talk about key legal steps involved in creating a nonprofit organization. For the steps listed here, you can do most of the paper work yourself, but it is extremely desirable to have a lawyer as one of your Board members or otherwise hook up with a lawyer to provide legal services, ideally for free, to help you get started. The Certificate of Incorporation is a legal document normally a couple of pages long. You file it with the Secretary of State (or relevant agency), and that creates a legal entity: a corporation. You don’t have to be organized as a corporation, but you would normally want to be a corporation in terms of limiting liability. Even before you file your Certificate of Incorporation, you would want to reserve the name you want to give to your organization with your State’s Secretary of State. Form 1023 is a multi-page form you file with the IRS to seek tax-exempt, charitable status and the ability to receive contributions that will be tax deductible by your donors . You also need to qualify under section 501c3 to receive grants from institutional donors. It is also a useful Q&A for you, a checklist, if you will, of things to pay attention to, and most all of it can be filled out readily by a layman. Form 1023 can be found on the Internet (IRS url in handout). The IRS is not wildly picky in reviewing these forms. Basically, they want to know what you’re going to be doing and how you’re going to do it. Do the best you can with Form 1023 and then the IRS will come back and give you a chance to fix it. Dealing with the IRS on exempt-organization matters is quite different from dealing with the IRS as you think of it. For nonprofits, the IRS is supervising a regulatory scheme. It is not a tax collector, except to a very limited extent. You can expect the turnaround to be 3-6 months, on average (could be less depending on the volume). You have 27 months after setting up your organization to file the 1023—if you do it within that time frame then the status is automatically retroactive (meaning donors could go back and claim tax deductions), so it doesn’t make sense to delay. Finally, once you get the main federal tax exemption, you then apply for various state tax exemptions, such as the state corporate tax exemption, the sales tax exemption, the real property tax exemption, if you own real estate, and perhaps other exemptions under applicable state law. You can also start thinking about the complex world of nonprofit mailing status and bulk mailing, which is a whole world unto itself in terms of special rules. The post office, by the way, is eager to help you with understanding those rules.
- By-laws explain how your organization will operate in a procedural way. They are the rules governing your internal operations , describing such things as the rules for calling Board meetings, how and when Board members are elected and how officers are elected. They explain what the jobs of the officers are. There are many samples available— refer to that section of the resource list . One thing that nonprofits can have or not have is what is called “members.” The main job of members is to elect the directors. Lots of organizations have members where that’s just a name for PR/fundraising purposes. “Members” of public TV stations do not vote for the directors, but they’re called “members”. I’m talking about members in the legal sense: in your bylaws you can state whether you will have members, describe the classes of members, and decide whether they will be voting or non-voting. Voting members normally vote each year at the annual meeting to elect the Board of Directors. Having voting members has pros and cons. You may have some crucial people involved who want to be the members because they want the power that comes from picking the Board. Well, that’s something to think about, because maybe you need their support, and so you may be willing to give them that power. If you’re in an organization with hundreds of members, the power is much more diffuse. It will depend on your relationships with the various people involved in your community and in starting your organization as to whether you want to consider having members. It makes life somewhat more complicated, but it can have great advantages. Suppose, for example, that there are several existing community groups that are big and important and they want to be the members who elect your directors. Having them affiliated with your organization and feeling that they have a kind of ownership involvement may be terribly important, and it may make it very desirable to make them the members. It just depends on the situation that you’re in.
- The next couple of slides discuss some aspects of financial controls to consider. You need to open bank accounts. For that, you will need your own Tax Identification Number, which you can get easily by filing Form SS-4. You will also need to establish financial control procedures. Advice from an accountant is very important in this regard. The basic idea is to spread the finance work among several people so that no one person is in charge of all aspects of finance for the organization. Take the receipt of cash. One person should receive and tally it, and give a list of it to someone else. That second person should take it to the bank. So now you’ve got two people involved and that means that the person who gets the cash is not making the record and taking it to the bank, which can be tempting and will not impress your auditors or funders. As to the bank statements, it’s desirable for the executive director to receive them, sealed. He or she looks at them to see that his or her name (or another check signer’s name) is on all of the checks and that the signatures look familiar. Then the statement goes to the person who was doing the checkbook and she or he does the reconciliation and sees whether all the checks have been written for appropriate expenses. By proceeding in this way, you are getting several people involved and setting up a system of checks and balances, and your auditors will be pleased. On all of these things, in terms of getting funding, the cost of mistakes and problems is just immeasurable relative to the cost of taking the time to have something set up so you don’t have mistakes and problems. If you have a problem with financial controls, you will be explaining it for years to come.
- Payroll arrangements . This is a classic trouble spot. Suppose you are short of money. You withheld for taxes but you haven’t sent the money in and you need to pay to repair the copier. So you use the withholding money to do it. This kind of act is an enormous problem that, at the moment you do it, seems to make perfect sense, but you’re likely to spend a lot of time and, in many cases, pay substantial penalties and interest, to straighten it out. Organizations can get completely diverted from their mission in dealing with this kind of non-remittance of withholding. Federal/state government get their money to pay their bills primarily from withholding taxes. They take it very seriously, and you can be personally liable for amounts owed, so when the moment comes up, somehow do without the copier and send the money where it is supposed to go. “ Independent contractor” or “employee”. This is another big problem area. In essence, independent contractors are normally working for themselves. They figure out how to do what they do, and they do it. Lawyers and accountants are classic examples. They are outside folks, you pay them to get the job done, and they figure out how to do it. Employees are people who are working under your direction, broadly defined, including where you may not direct them but you have the power to direct them. They’re employees, and the IRS wants you to withhold taxes and remit the tax money. Independent contractors are responsible for their own taxes. So if you’ve been paying someone as an independent contractor, and that person is, in fact, an employee, you can owe back taxes and penalties. It’s a fuzzy area and has plagued employment relationships for years, in the for-profit as well as the nonprofit sector. If you have any doubt about a person’s status as an employee or independent contractor, talk to an accountant or lawyer and try to get it straightened out up front. The IRS web site offers guidance on this issue (search under “independent contractor”) as well.
- There are various insurance requirements that you are required to have as determined by state/federal law. Workers’ Compensation provides compensation to your workers for job injuries. Unemployment insurance helps them if they become unemployed. Disability covers disability. Most all of these are employer expenses, except for small amounts. Your State will insist that you have these coverage. Obviously, if you’re using automobiles, you’ll need automobile insurance, and you may need some other kinds of special insurance if you’re doing special activities, like taking care of kids.
- Another type of expert service provider that it is great to have within your organization’s network is an insurance broker --someone who knows his stuff and will look for the best deal for you, and is someone you trust. Getting insurance for small nonprofits can be tricky. A good broker can be very helpful as to the three key insurance issues of (a) what coverage to get, and how much, (b) cost of this coverage and (c) risk management, which, of course, involves running your organization with care so as to avoid claims. (Refer to Nonprofit Risk Management Center) “ Property/casualty ” insurance is for damage to your property and theft. “ Errors and omissions ” insurance is for screw-ups, where people perhaps get injured or money is lost. “ Directors and officers liability ” insurance is basically to protect directors and officers against suits against them alleging improper acts, such as mismanagement. In many cases, people going on Boards, who are knowledgeable, will want to know that you have that kind of policy to protect them. Their view will be: “I’m not getting paid and I’m happy to do this for free, but if there’s a problem, I don’t want to be sued and, particularly, have legal defense costs without being covered for them.” Some people’s own, individual policies do cover membership on Boards without compensation, but you can’t count on your Board members having that kind of insurance. So D&O insurance is ordinarily desirable, and often necessary as a practical matter. We recommend getting it. Please note also that certain laws limit liability of uncompensated Board members in some respects.
- Health insurance is health insurance. It is an important and desirable benefit. Not everybody offers it, but you would certainly hope that you would have the resources to be able to afford it. (Mention group buying programs available through membership associations—i.e. associations of nonprofits may have group coverage for members.) A retirement plan is, of course, another highly desirable benefit. Plans vary as to who puts the money in--the employees and/or the company. A lot of small nonprofits do not have retirement plans. Vacation/holiday/leave policy . Again, that’s information to be disclosed in the personnel manual. What matters most is fairness and consistency in how you treat people and good communication as to what the rules are. Long-term disability insurance provides payments in the event of protracted disability. Reimbursement policy can deal with things like travel expenses, such as what’s your policy in covering hotel costs and parking expenses. Here, again, the communication element is just crucial so that employee expectations relate to reality.
- During our board discussion I mentioned real estate as an area of desired expertise, and here’s why. Each of these bullets covers many complexities. Finding office space is a real challenge. Lease negotiations are crucial and leases ordinarily contain many complexities. Is power included? What happens when power rates go up? These are negotiable points and they can significantly affect costs in ways that are not always obvious. For example, take cost-of-living increases. The landlord will ordinarily charge you for the cost of the building maintenance people on some cost-of-living formula. What’s the formula, and how does it work? Over a 10-year lease, that formula can significantly affect your total occupancy costs. In-office construction , known as “build-out”, can be very costly. Who pays for it: you and/or the landlord? On what basis? Obtain office equipment . One big question is whether you should rent or buy. Obviously, when you buy, you have the up-front cost, or financing costs, and when you rent, you are less committed, as you are usually signed up for a shorter term. In addition, one of the complexities in obtaining office equipment is that what matters is not just the quality of the equipment but the service contract and cost. In many cases, you may not be able to afford the technology (as in computer programs). Paying only for technology you will actually use is obviously a good idea. One option when you’re starting out is to sub-lease space from another nonprofit. Not only can this be cheaper for the rent, you often will also have access to equipment like copiers and fax machines. Not to mention the networking opportunities! (If appropriate, mention local sources – associations, newsletters – to learn about sub-lease opportunities)
- You have to file annual reports in those States where you have an office as well as the state of incorporation (if different). When you set up operations in a state other than where you incorporated, you must register as a foreign corporation. So you may wonder whether it makes sense to incorporate in a state with less restrictive nonprofit reporting requirements and regulations, even if it’s not the state where you will actually have an office. Lawyers will tell you that it usually makes the most sense to incorporate in the state where you are actually located. This is because, since you will still to need register as a “foreign” corporation to do business, many States will take the position that, if you have an office there, their law applies to most of the things you do. (Here I am not getting into the rules that relate to reporting with respect to outside people and organizations hired to do solicitations. Many States have special registration and reporting rules applicable to outside solicitors.) There is an annual report due to the IRS if you have, in general, receipts of over $25,000. It is filed on Form 990. Almost all of Form 990 is available for inspection by the public, and more and more donors are asking for the 990 as a key document to evaluate your organization. So even if you are under the $25,000 threshold it is a good idea to get in the habit of filing anyway. There are substantial penalties if you fail to file Form 990. If you have income from a “business” that is “unrelated” to the purpose for which you were granted tax-exempt status, you will have to report that income separately and pay tax on it, if the activity shows a profit. (Some States also tax such “unrelated business income.”)
- The next element your organization must consider to be a viable nonprofit is financial stability of your organization. Especially in these uncertain times, it is even more important that you have diverse and reliable funding streams. Relying on one funding source may put your organization in jeopardy. Although we focused earlier on what foundations look for in grantees, the other funding sources such as governments and individual supporters will look for much the same things as foundations. As long as you demonstrate the key characteristics of successful nonprofits, you can approach other funding sources with equal confidence. Earned income is an especially important category for new nonprofits because without a track record of successful service delivery you’d be hard-pressed to convince foundations or governments to support you. Fee-based services or membership dues are some revenue sources you can rely on not only to generate some money but also to establish your organization’s name in the community you serve. Foundations will appreciate knowing you have other stable and reliable funding streams. New nonprofits try small-scale fundraising events such as bake sales or small functions. We are emphasizing small because many inexperienced event planners can get in over their heads and spend a lot of money upfront to have a “gala” event—and then lose money. The leadership team for your organization will have to determine the overall funding needs, and also develop a plan to reach that level of funding. Make sure your overall organizational fundraising plan includes as many diverse funding streams as possible. (Refer to Securing book and other references on fundraising; classes on fundraising planning)
- We have just covered a myriad of administrative details that are involved in starting and running a nonprofit. Do you still want to create a nonprofit organization? Let’s take a step back and go over some of the advantages and disadvantages of forming a nonprofit organization. Advantages include: Tax exemption: Those organizations that qualify as public charities under Internal Revenue Code 501(c)(3) are eligible for federal exemption from payment of corporate income tax. Once exempt from this tax, the nonprofit will usually be exempt from similar state and local taxes. Tax exemption is not automatic for those agencies that incorporate as nonprofits; they must apply to the IRS and to appropriate state and local governments for tax-exempt status. Eligibility for public and private grants: Nonprofit organizations are allowed to solicit donations from the public. Contributions to public charities offer tax benefits/deductions to individuals. Many foundations and government agencies restrict their grants to public charities. Formal structure: Although a person or group of people created it, a nonprofit organization exists separately from those individuals as a legal entity in its own right. Incorporation puts the mission and structure of the nonprofit above the personal interests of individuals associated with it. Limited liability: Under the law, creditors and courts are limited to the assets of the nonprofit organization. The founders, directors, members, and employees are not personally liable for the nonprofit’s debts. (There are exceptions. A person cannot use the corporation to shield illegal or irresponsible acts on his/her part. Also, directors have a fiduciary responsibility; if they do not perform their jobs in the best interests of the nonprofit, and the nonprofit is harmed, they can be held liable.—hence directors & officers insurance) Given these advantages, why wouldn’t you not want to incorporate as a nonprofit? The disadvantages include: Cost: Creating a nonprofit organization takes time, effort, and money. Because a nonprofit organization is a legal entity under federal, state, and local laws, the use of an attorney, accountant, or other professional may well prove necessary. Aside from legal or other consultant fees, incorporation in most states, including the application for federal tax exemption, costs $200–$400. Paperwork: Because it is a legal entity, a nonprofit organization will be required by the state in which it is incorporated to keep detailed records. Certain documents—articles of incorporation, bylaws, annual reports, financial records—must be prepared in a specific manner and filed with specified agencies by certain deadlines. The nonprofit may also have to file Form 990 with the IRS annually. Shared control: Although the people who create nonprofits like to shape and control their creations, personal control is limited. A nonprofit organization is subject to laws and regulations, including its own articles of incorporation and bylaws. In some states, the nonprofit is required to have several directors, who in turn are the only people allowed to elect or appoint the officers who determine policy. Ongoing administrative details: We are not going to belabor this point since we just spent an hour discussing what they are. Public scrutiny: A nonprofit is dedicated to the public interest; therefore, its finances are open to public inspection. The public may obtain copies of a nonprofit organization’s state and federal filings and learn about salaries and other expenditures.
- I don’t intend to discourage you from starting an organization if that’s what you want to do. Because of the many administrative details involved in starting and running a nonprofit, it would be wise for you to think about whether there is an alternative option. Join an existing nonprofit Is there an organization that is already there, that is doing all of these things, such as filing these reports and doing withholding, that you can somehow join, or affiliate with, so as to use their administrative apparatus instead of creating your own? Why should you create a nonprofit organization? If you have charisma, and a wonderful idea for a wonderful program, there may well be an organization that would be happy and eager to make that program a program of theirs. Basically, you would be subsumed and adopted and become part of that organization. And if that is an option, really consider it very carefully and look around very hard for that possibility before you start. “ Fiscal Sponsorship ”. Fiscal sponsorship is the use, in one way or another, of an existing nonprofit, tax-exempt organization to somehow help you get started and operate. This is different than just becoming part of another nonprofit, when there is no separate organization that is “your” organization. In classic fiscal sponsorship, another organization agrees that what you are doing is something that they want to do as a “program”, and so they are happy to have you fundraise and have the check sent to them because they have decided that the program you want to do is something they want to support. This is a little ticklish because they cannot be an automatic conduit; they have to be making their own grant, reportable on their own tax return, to your organization or to your project. They can make grants to individuals, if they want to, for tax-exempt purposes. So they may agree at a Board meeting to support your program and agree that you can use their name for fundraising. In that case, you say to those you’re trying to raise money from that you have been adopted as a program of x nonprofit, and you ask them to support your program by making a check payable to x nonprofit. X nonprofit then uses the funds raised to make a grant to your program or organization. It is most common for this sort of thing to cover the kind of situation where you don’t yet have your tax exemption, so it is normally a short-term arrangement. Everyone says “find a fiscal sponsor,” but fiscal sponsors are hard to find. Very few organizations like to do it because it involves an inherent supervisory and oversight role. So while it can be a nifty solution in concept, it is very hard to find organizations willing to do it. For some reason, they seem to be more common in the arts. REFER TO COLVIN BOOK, web sites on resource list!
- Let’s turn at this point to one of the handouts in your packet titled “Before You Seek a Grant: A Checklist for New Nonprofits.” This checklist is adapted from The Checklist Project of The Nonprofit Coordinating Committee of New York, our collaborator to develop this particular course. This checklist is a good summary of what we talked about so far and more. It will help you to assess the viability of your nonprofit if you proceed with creating and running your own nonprofit. You would want to find a quiet moment to go over this checklist at some point. As a new organization your nonprofit may not be able to check “yes” with confidence on every item on this checklist. That’s okay as long as you thought about each of the steps and made an informed decision not to follow up on those items at this point.
- Thanks! Reminder for evaluation form. Q & A’s