Table of Contents The Purpose A Note About ‘Free Money’
Introduction
Thank you and congratulations on your decision to download this book, “How to Start a Nonprofit: A Comprehensive Guide on How to Start a Nonprofit Organization”. This book contains proven steps and strategies on how to start a nonprofit -- in simple, easy to understand language. Many books about starting a nonprofit organization are written by experts who typically know what they’re talking about; they just forget that they’re writing it for people who typically don’t—so it’s so complicated and difficult to understand that you get discouraged. The point of a resource is to help make life easier. In this eBook, I keep it simple so that you can get a good understanding of what it takes to start a nonprofit organization. I have over 25 years of nonprofit management experience, 20 years of that is as a grant writer. I get so frustrated by the lies people are told about starting a nonprofit. Things like, “Just start a nonprofit and get grants to cover it!” It’s so unfair that people aren’t told the truth. I tell you the truth in this book so you can make an informed decision. I tell you Why nonprofits were created and what the IRS expects you to do as a nonprofit; What it takes to start a nonprofit; how to decide if you should start a nonprofit or for profit; who should file your forms; and the real deal about your Board of Directors. But the most important gem in this book is the Dashboard. It is the roadmap for your success. If you take away nothing from this book (which of course you’ll take away a lot!) this is the one thing that will save you hours of work and thousands of dollars! The Dashboard provides you with a step-by-step plan on how to create a successful nonprofit. It’s called nonprofit sequencing. If you follow this roadmap in developing your organization, I guarantee you’ll have success! Starting a Nonprofit Organization is the first book in this series. It sets the foundation for creating a powerful and successful nonprofit organization. My goal is to provide information in small chunks so that it’s both manageable and affordable. This series format provides community leaders with support at every stage of the nonprofit development process. Thanks again for downloading this book, I hope you enjoy it!
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Chapter 1: The Purpose of Nonprofit Organizations Nonprofit organizations have a pre-defined role in society. The government has established these criteria, and as a result, society has an expectation of what that role is to be. Laws have been established that clearly outlines what a nonprofit organization is, what types of activities it is allowed and disallowed to do, and because of the nature of the services it provides, what type of benefits it is awarded for performing those services. A Nonprofit Organization (NPO), also referred to as a not-for-profit organization, a noncommercial organization, often called an NCO, or a non-governmental organization (NGO) -is an organization that uses surplus revenues to achieve its goals rather than distributing them as profit or dividends. Designation as a nonprofit does not mean that the organization does not intend to make a profit, but rather that the organization has no owners, and that the funds gained in the operation of the organization will not be used to benefit any owners. The extent to which an NPO can generate surplus revenues may be constrained or use of surplus revenues may be restricted. While nonprofit organizations are permitted to generate surplus revenues, they must be kept by the organization for its self-preservation, expansion, or plans. An NGO is any non-profit, voluntary citizens' group that is organized on a local, national or international level. Task-oriented and driven by people with a common interest, NGOs perform a variety of service and humanitarian functions, bring citizen concerns to Governments, advocate and monitor policies and encourage political participation through provision of information. Some are organized around specific issues, such as human rights, environment or health. They provide analysis and expertise; serve as early warning mechanisms and help monitor and implement international agreements. Their relationship with offices and agencies of the United Nations system differs depending on their goals, their venue and the mandate of a particular institution. Whatever name you choose to use, the nonprofit organization is tasked with providing a specific function in our society: as a provider of services, a watchdog, or a subject matter expert. The Purpose Envision a Puzzle, with all of the missing pieces coming together to create a picture. That’s pretty much how society functions. Each sector has its role, function, and responsibilities. Together, if each sector does as it’s supposed to, society as a whole functions smoothly.
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Below is an explanation of what each sector is responsible for: The Government is responsible for creating infrastructure, guiding, managing, and funding government-sponsored programs. But it lacks the manpower to administer the day-to-day programs. Government agencies typically grant awards to nonprofits, thereby holding them accountable to fulfill the goals of the grant. In this capacity, government agencies oversee the activities of the nonprofit. Think of government funded programs like Food Stamps, Section 8, and Social Security. The government does not administer these programs, but they fund them. The public agencies that administer those programs report their monthly/quarterly/ annual results to the local, state and federal government who then reports the cumulative results (e.g., 80% of all Seniors on social security . . . or, Employment Development Department statistics reported a 9% increase in unemployment). Community Based Organizations (CBOs) also receive funding from government agencies. As an expert in a particular area, CBOs are often ideal for filling a gap the government agencies do not have the manpower or expertise to fill. These CBOs provide monthly reports to the government about their programs and services as a requirement of the award (e.g., Twenty homeless veterans were placed in construction training; Ten homeless veterans were placed in entry-level jobs; Twenty-Five homeless veterans were placed in transitional homes). These statistics are then counted by the agency that administered the grant. A Note About ‘Free Money’ Many people refer to grant money as ‘free money’. While grant money is not a loan, and therefore does not have to be repaid, it is not free money, as often incorrectly referred to. Someone attempting to encourage a potential consumer to purchase a product or service usually uses this language. It is a ploy to lure unsuspecting nonprofit leaders into believing that grant monies is an entitlement. It is not. Nonprofits do not automatically qualify for grants simply because they have 501(c)(3) tax exemption status. (We will discuss this more in depth later.) And then, they want nonprofit leaders to believe that the money is given freely with no strings attached. Again, this is not true. Funders are providing grant monies to nonprofit organizations in exchange for services provided, for a specified amount of time, to be administered to a specific target audience. Nonprofits may not have to pay the money back, but grant money comes with a lot of rules, restrictions, and expectations. Failure to spend the money according to the terms and agreement may result in the organization being cited for mismanagement of funds, fines, penalties, and possibly revocation of their tax-exempt status, or worse, imprisonment. Nonprofits certainly have to work for the grant money.
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For profit companies focus on making money, keeping investors happy, and creating innovation in specialized niche markets. For profit companies design their daily operations around making products or delivering services that yield a profit. They have shareholders and investors that they focus on keeping happy. Leaders strategize to accumulate as much wealth and prestige as possible in their leadership roles. From this sector, however, comes commerce, jobs—and because they have the money, and need to remain competitive—the latest technological advances. In today’s corporate environment, companies who demonstrate their commitment to humanitarian causes via Corporate Social Responsibility (CSR) programs often gain social favor, and points toward company ratings (i.e., Fortune 500, etc.). This status encourages companies to make financial contributions to causes that benefit them, their reputation, and the community. So if the government is regulating, and the corporations are creating new technology, which sector is actually administering these social programs? The Nonprofits. Nonprofit organizations are viewed as altruistic, specialized, socially driven, and experts at what they do. The purpose of the nonprofit organization is to fill the gap left by the Government and the For Profit. It does what the other two are ill equipped to do. Because they aren’t directly governed by legislation or government regulation, nor driven by financial gain or stockholders, nonprofits as entities are viewed as pure in their efforts. Altruistic causes spurn volunteers to donate their time and resources to help accomplish organizational goals and objectives because the goal is to improve society, not make money. Here’s an example that might help you understand better. Think of Hurricane Katrina. The government brought in the National Guard to help restore order, FEMA to help fund the rebuilding of the homes, and enacted laws to help the people (extend unemployment). The for-profit companies went in and charged individuals, insurance companies, and the government to demolish and rebuild the homes, excavate the rivers and lakes of debris so they could rebuild the cities. Who is going to serve the community? Who was actually going in and helping to rebuild the lives of the people in New Orleans? It was the nonprofits. The Red Cross provided shelter, food, and clothing, collected financial donations from caring people around the world, and distributed it to those in need. Other community based organizations helped with finding the Gulf residents temporary homes, providing counseling, relocation assistance, and job training for those disenfranchised as a result of this devastating natural disaster. So these nonprofits served as the bridge between the two sectors, doing the ‘work’ in communities the other two sectors were ill equipped or not inclined to do.
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Because of the nature of the services provided, and the fact that monies received go back into the community, nonprofit organizations approved by the IRS receive a tax-exempt status that allows them to provide donors with tax benefits. The government, in its wisdom, knew it could not provide funding for all nonprofits; but understanding their value, established tax incentives for companies and individuals as a way encourage them to support nonprofits. The IRS approves tax write offs to donors for their donations. Understanding the purpose of nonprofit organizations is crucial to its success. The IRS holds nonprofit organization leaders accountable to the laws and regulations established to govern it, and the rest of society has expectations of what type of services and programs should be delivered. Nonprofits that fail to adhere to these laws are subject to fines and suspension of their tax exemption status. Depending on the violation, nonprofit leaders also risk the threat of jail time. Tax exemption is a status that comes with clear expectations. Mismanagement of funds or misuse of the tax exemption comes with very strict penalties.
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For a full version of this eBook, and the following nonprofit topics in the series, visit Amazon.com •
Why Nonprofits Fail: The Truth Every Executive Director Should Know
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How to Start a Nonprofit: A Comprehensive Guide on How to Start a Nonprofit Organization, Made Easy!
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Developing the Nonprofit Infrastructure: A Step-by-Step Guide on How to Write and Effective Mission Statement, Vision Statement, Organization History, and Program Description
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The Annual Budget: How to Develop an Annual Budget for Nonprofit Organizations
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Nonprofit Sequencing: A Step-by-Step Process for Building a Sustainable Nonprofit Organization
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The Nonprofit Board of Directors: How to Attract Powerhouse Board Members
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Nonprofit Program & Service Delivery: A Comprehensive Guide on Developing Dynamic and Innovative Programs and Services
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Funding a Nonprofit: How to Create a Diversified Funding Strategy
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The Art of Networking: What to Say and Do to Get Donors, Volunteers, and Partners to Support Your Nonprofit Organization
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Nonprofit Donor Cultivation: How to Turn Annual Asking into Annual Giving
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The Greek Exchange: Leveraging BGLO Sponsored Nonprofits for Community Impact
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The Greek Exchange II: From Tradition to Innovation . . . A Dynamic Partnership for the Future
Simply search for these titles on the Amazon website to find them.
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