Download
1 / 72
720 likes | 801 Views
Nonprofit Essentials 2013-2014. Presented by Institute for Public Engagement & HandsOn Northwest North Carolina. Today’s Agenda. 1:00-1:15 Introduction: Nonprofits in Context 1:15-2:20 Governance: Developing a common understanding
E N D
Nonprofit Essentials2013-2014 Presented by Institute for Public Engagement & HandsOn Northwest North Carolina
Today’s Agenda • 1:00-1:15 Introduction: Nonprofits in Context • 1:15-2:20 Governance: Developing a common understanding • 2:40 – 3:45 Identifying Best Practices and applying practices in hypothetical situations
Introduction: Nonprofits in Context Nonprofit Essentials September 24, 2013
What is a nonprofit? • Legal definition: • State-level entity • File Nonprofit Articles of Incorporation • Federal-level recognition from the IRS • File 1023 to be recognized as tax-exempt • File Form 990
What is a nonprofit? • See USC Title 26 - Internal Revenue Code, Chapter 1, Subchapter F, Part I, Section 501, Paragraph C, Subparagraph 3: • An organization described in subsection (c)…shall be exempt from taxation under this subtitle… • “Corporations, and any community chest, fund, or foundation, organized and operated exclusively for religious, charitable, scientific, testing for public safety, literary, or educational purposes…no part of the net earnings of which inures to the benefit of any private shareholder or individual, no substantial part of the activities of which is…attempting, to influence legislation (except as otherwise provided in subsection (h)), and which does not participate in…any political campaign…”
Advantages • Organizations do not pay income taxes, sales taxes, etc. • Donors’ contributions are tax deductible • Example: WFU saves $3 million dollars annually because of this recognition • …on state sales tax alone.
What is a nonprofit? • A more holistic definition: • Organizations that do not exist primarily to generate profits, either directly or indirectly, and that are not primarily guided by commercial goals and considerations. They may accumulate surplus in a given year, but any such surplus must be plowed back into the basic mission of the agency and not distributed to the organizations' owners, founders, or governing board. • United Nations, 2003
NP Heritage • The fabric of the country has included nonprofits since the beginning: • “Americans of all ages, all conditions, and all dispositions constantly form associations…religious, moral, serious, futile, very general and very particular, immensely large and very minute. Wherever at the head of some new undertaking you see government in France, or a man of rank in England, in the United States you will be sure to find an association.” • - Alexis de Tocqueville, Democracy in America (1840)
NP by the Numbers • It is a large sector: • Est. 2.3 million exempt nonprofits in the US • 1.6 million are registered and recognized by the IRS • NC – 10,300+ NPs with over $50,000 in revenues
NP by the Numbers • Economically Important • 5.5% of US GDP • Approx. $820 billion annually • $300 billion in charitable contributions • Additional $300 billion estimated value of volunteer hours • NC – total impact of NPs estimated at $38 billion (up from $17 billion in 2002…more than double) • Public charities (501(c)(3) orgs.) reported $1.51 trillion in revenue and $2.71 trillion in assets in 2012
NP by the Numbers • Important for people: • Employment • Worldwide - 7.4% employed with NPs • US – 10.2% employed with NPs and 9.2% of all wages paid • NC – 11% employed with NPs • NP employment has increased during recession • Service/mission recipients
Why do NPs Exist? • Government failure model • NPs started by people dissatisfied with the amount of goods/services provided by the government • Market failure • NPs step in where consumers cannot compare products, negotiate with providers, or enforce contracts in a market economy • Philanthropic failure • NPs established voluntarily and government takes over once feasibility and necessity have been established
Two Big Questions • What is your role in managing this large and influential sector? • What can you do to improve your organization?
Curriculum Overview • Nonprofit Essentials 2013-14 Curriculum: • Governance • Strategic Planning • Budgeting and Finance • Human Resources • Fund Development • Collaboration • Evaluation • Advocacy and Communication • Grant Writing
Conclusion • “It is not enough to do good; it must be done well.” • -St. Vincent de Paul • (1581-1660)
Governance of Nonprofit Organizations Nonprofit Essentials September 24, 2013
Goals • Explore the meaning of “governance” in the nonprofit context. • Give nonprofit leaders tools to impact the governance of their organizations.
I. Governance • Governance has both technical and operational aspects. • Technically – a legal relationship between a group of people and a corporation or other entity • Operationally – a functional relationship between an organization and a group of people
Key to governance: The Board "Board" or "board of directors" means the group of natural persons vested by the corporation with the management of its affairs whether or not the group is designated as directors in the articles of incorporation or bylaws.
The Board’s Role • The role of the Board of Directors is to direct and manage the organization. • Board has ultimate obligation to manage the organization’s assets and activities.
Board’s Responsibilities – By Statute • Except as otherwise provided in the articles of incorporation, all corporate powers shall be exercised under the authority of, and the affairs of the corporation managed under the direction of, its Board of Directors. • See North Carolina Nonprofit Corporation Act, • N.C.G.S. § 55A-8-01.
Board Delegates As a general rule, unless prohibited by the articles or bylaws, the Board of Directors may delegate the management of activities of the corporation to committees, provided the committee is comprised of two or more members.
Limits on Power to Delegate While the Board may appoint committees, such committees may not exercise extraordinary powers. Specifically, a committee of the board shall not: Authorize distributions; Recommend to members or approve dissolution, merger or the sale, pledge, or transfer of all or substantially all of the corporation’s assets; Elect, appoint or remove directors, or fill vacancies on the board or on any of its committees; or Adopt, amend, or repeal the articles of incorporation or bylaws. See North Carolina Nonprofit Corporation Act, N.C.G.S. § 55A-8-25.
Governance: Operational • Governance is the process of setting goals, defining expectations, allocating resources, and verifying performance.
Board Member Duties in the nonprofit sector • Directors of nonprofit corporations have a unique duty to manage the affairs of the organization so that its property will be used for the “public purposes” for which it was entrusted.
II. Board Composition • Electing the Board: • Bylaws provide rules for board election • Membership Organizations – Board is elected by members at annual meeting • Non-membership Organizations – Board nominates and appoints board members directly.
Terms and Succession • Organizations benefit from stability. • Terms should be defined in the by-laws and include: • Staggered seats • Some provision for succession (e.g. limited number of terms or years and nominating committee for new members).
A note on required elements in Bylaws Conflicts of Interest Policy (IRS) Duty to disclose Duty not to vote on self-interested matters Annual statement from each board member Document retention policy (Sarbanes-Oxley§802) - Crime to knowingly destroy documents and records - Policy defines how long records will be retained Whistleblower (SOX)
III. What is Governed • The Nonprofit Corporation: A corporation formed under state statute which: • Does not distribute earnings in excess of expenses to any individual or group. • Maintains tax-exempt purpose through activities that are consistent with IRC 501
Once In… • Distribution Constraints – income in excess of expenses may not be distributed. • Dissolution Constraints – on dissolution, property may only be distributed to another nonprofit.
Purposes • Every corporation incorporated under this Chapter has the purpose of engaging in any lawful activity unless a more limited purpose is set forth in its articles of incorporation. • See North Carolina Nonprofit Corporation Act, • N.C.G.S. § 55A-8-01
IV. The Board’s Responsibilities • The role of the Board of Directors is to direct and manage the organization. • Board has ultimate obligation to manage organization’s assets and activities. • The board may use agents and employees to carry out day to day activities and to run the organization’s programs. See North Carolina Nonprofit Corporation Act, N.C.G.S. § 55A-8-01.
Fiduciary Duties of Directors Nonprofit directors and officers have two primary duties; The Duty of Care The Duty of Loyalty These are owed to the organization and in some circumstances to third parties such as members.
Duty of Care A director shall discharge his or her duties in good faith with the care an ordinarily prudent person in a like position would exercise under similar circumstances and in a manner the director reasonably believes to be in the best interests of the corporation. See North Carolina Nonprofit Corporation Act, N.C.G.S. § 55A-8-30.
Duty of Care: Informed & In Good Faith The Duty of Care requires that a Director be informed and act in good faith.
Duty of Care: Attend Meetings To meet the Duty of Care, Directors must- Attend Board meetings, Have access to all organizational information, and Make ‘informed’ decisions.
Duty of Care: Obtaining Needed Information The Duty of Care requires board members to seek out information they know they need in order to make an informed decision. This includes information that a board member should know he/she needs in order to make an informed decision based on a reasonable person standard.
