Nine Questions
Every Non-Profit
Should Ask Themselves
Nine Questions Every Non-Profit
Should Ask Themselves
Starting a non-profit organization or reviewing a current organization
can prove to be an exciting journey, but how did it begin? Did your nonprofit do the groundwork so it will last for years, decades? Ask yourself:
• Why does the non-profit exist?
• What benefits will the non-profit provide?
• Who will it serve?
• What do we expect of the leadership?
• How will it be funded?
Many non-profit organizations look at their purpose and overlook some
of the integral steps to make certain their organization has the right
focus and strategy in place to succeed financially and legally. If your
organization does not have a strong base, it’s not too late. Here are nine
key questions that every non-profit should ask themselves annually to
help focus and re-focus their organization.
Do you have a Current Mission? v Do you have a Strategic
u
An effective mission statement answers the following
questions:
• What is the organization’s purpose or cause it is
looking to support?
• What services/initiatives will it provide to support this
cause?
The answers should express the authentic purpose of
the organization and serve as a building block of the organization’s brand and marketing efforts. The answers
should also define whether the organization will operate
under a non-profit status.
A non-profit is a tax-exempt organization that does not
declare a profit. Instead it utilizes all revenue available
after normal operating expenses in service to the public interest. The purpose of the organization must be
charitable, educational, scientific, religious or literary and
funds are normally raised in the form of tax deductible
contributions.
Operating under these guidelines allows organizations
to apply for 501©(3) tax exempt status designation from
the IRS. If you plan to apply for tax-exempt status, the
IRS will look at your mission statement to see if your
organization matches its requirements for that type
of entity. Your mission statement should reflect these
requirements.
Business Plan & is it Up-to-Date?
When starting a business, whether non-profit or
for-profit, the first step is to develop a strategic business plan. The plan will lay out all the key components
required to start a non-profit organization, including:
• Mission Statement
• Fundraising
• Foundation
• Communication
The business plan should be updated on a regular basis so it grows and changes with the mission of the
organization. This plan is the road map to lead to the
organization’s success and will serve as a funding
stimulus by showing prospective donors the transparency of the operation and how it is in sync with the
mission statement.
Where are Your Funding
w
Sources?
An effective mission statement defines the organization
and the source of the funding to start operations, as well
as, sustain the organization’s functions. Your organization must have a target audience for fundraising efforts
as well as a fundraising plan and timeframe.
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267-670 -7300
x Does Your Organization have a
Solid Foundation?
How will it be organized? An organization without a solid foundation is headed for failure. The support for the
foundation starts with the formation of a solid board of
directors. A description of the board of directors, and
most importantly, their role in the management of the
non-profit, should be documented and included within
your entity’s business plan. An engaged board is integral
towards the success of an organization.
y What are the Organization’s
Communication Plans?
How does your organization plan to “get their message
out there” to potential volunteers, donors and other
supporters? Hiring a communication expert to set the
tone and reach a large audience can be beneficial to
new non-profits or existing organizations looking to
bolster their communication efforts.
Does Your Organizations Have a
z
Solid Legal Infrastructure?
Does your organization have sufficient resources to create a strong basis for which the non-profit can be organized and operated? If you are not proficient in the legalities surrounding the formation of a non-profit, consult
with an experienced professional to guide you through
the process. If that is not an option, educate yourself
on the laws applicable to organizing and operating a
non-profit organization and begin to build around these
laws. A non-profit built on a weak base can jeopardize the goodwill surrounding the organization. Some
necessary tools to build a strong foundation for your
non-profit include:
• Strong corporate governance: The level of
involvement of the board of directors has a
tremendous impact on the success of non-profit
organizations. An engaged non-profit board is
essential to the formation of your enterprise, its
fundraising success, maintaining legal compliance
and the quality of the leadership it hires.
• Establish by-laws: Your organization’s by-laws
should define the size of the board and how
it will function, the roles and responsibilities of
directors and officers, conflict of interest policies,
the fundraising strategy, as well as, other corporate
governance matters.
• Articles of Incorporation, if applicable: Articles
of incorporation is a legal document that is filed
with the state to create any type of corporation.
Non-profit articles contain the organization’s basic
information including name, registered agent, office
address, etc. and tax exemption information.
Is Your Organization Registered
{
Properly?
Non-profit organizations can be unincorporated or incorporated. An “articles of incorporation” document
must be filed with the state in which it resides or must
decide where will be the jurisdiction for legal purposes.
Each state has its own rules and regulations, but most
require a non-profit organization to have officers of the
corporation, a board of directors, by-laws and annual
meetings.
Many states require non-profit organizations to register
with state charity bureaus or similar agencies if they intend to solicit donations in each of those states. In order
to gain tax exempt status, non-profit corporations must
apply for 501©(3) status with the IRS. The designation
“501©(3)” refers to the section of US Tax Code that
oversees tax exempt organizations.
Because tax-exempt organizations do not pay federal corporate income taxes, non-profits must complete
and file Form 1023, “Application for Recognition of Exemption” with the Internal Revenue Service. This is a
public document and proper completion of this form
is critical as it may face future scrutiny by government
authorities, the public, and media, even if the organization is granted tax-exempt status. Organizations need
to abide by state tax exemption requirements also.
An unincorporated non-profit group can apply for tax
exempt status under the 501(c)(3) designation as defined by the Internal Revenue Service. The group should
consider incorporating as an option because without
501©(3) approval from the IRS, receipts of donations as
well as grants, although possible, are very difficult.
Are You Keeping Good Records?
|
Diligent recordkeeping is a critical task for non-profits since they are required for audits, taxes, meeting
regulations and providing transparency to the Board
and its members. Evolving to electronic recordkeeping
makes good sense and will save you time and money
in the long run.
} Have You Built an Effective
Board
How do you define effective? Are you focused on
your mission and members? Is the Board organized
properly? Are the right decisions being made in a timely
manner? Constant interaction between the non-profit’s
management team and board of directors will drive the
organization’s mission, activities and ultimately, success.
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267-670 -7300
Potential Pitfalls
No matter how well intended a non-profit may be, even the best plans can
have potential pitfalls. In any business venture, the following tasks should
be maintained at all times:
Failure to keep good records
An organized accounting
department allows non-profits to
accurately report business activity,
inclusive of the annual Federal
Form 990 tax return, and provide
transparency to the Board, as well
as, the public.
No investment in professionals
Retaining a lawyer as well as an
accountant is recommended when
starting a non-profit organization.
Their expertise provides benefits
when registering the organization
as well as filing the required reports.
No Funding Plan
The administration involved with
running any type of organization
costs money, and specifically for
non-profits, providing services to
support the non-profit’s cause
costs money. A strategic plan
defining the funding necessary to
fulfill the non-profits cause is mandatory for a non-profit to survive.
Non-compliance with IRS
Non-profits must remain informed
of what is required to stay in compliance with the IRS, including the
filing of Federal tax form 990. In
order to receive the tax benefits of
a 501©(3) entity, non-profit organizations must remain compliant with
the IRS.
Starting a non-profit is exciting. Having the vision to grow the organization
through diligence and hard work will create a sustainable non-profit for
years to come. The formation, if done properly, can serve as a must needed
resource for like-minded individuals to support a worthy cause.
smartdevine.com
267-670 -7300
CHRISTOPHER NIWINSKI & SMART DEVINE CAN HELP YOU
Chris Niwinski and the Non-Profit Practice at Smart Devine can guide you and
inform you about being effective in planning and developing a strong organization. We offer a series of white papers to non-profit organizations’ board members and leadership to enhance the understanding of duties and requirements
for non-profit organizations. Please contact Chris for more information at
267-670-7345 or email [email protected]
Topics:
Christopher J. Niwinski, CPA
Senior Consulting Manager
Christopher is a Senior Manager for Smart
Devine. He has over 17 years of non-profit
management consulting experience. He
has extensive experience providing interim
financial and operational management
within the non-profit industry, specifically
to hospitals, health systems and higher
education institutions as well as government,
foundations and other non-profit entities.
Chris has also provided assistance to these
clients through internal audits and control
assessments, best practices reviews, financial system process improvements, as well
as grant and endowment management and
expenditure reviews of non-profit entities
receiving financial assistance.
Chris earned his Bachelor of Science in
Accounting from LaSalle University. He is a
Certified Public Accountant in Pennsylvania
and is a Member of the American Institute
of Certified Public Accountants and the
Pennsylvania Association of Certified Public
Accountants, as well as on the Board of
Directors of the Healthcare Financial
Management Association (HFMA) and the
LaSalle University Alumni Association.
•Introduction to the Non-Profit Industry
•The Do’s and the Don’ts of Starting a Non-profit organization
•What is My Role as a Board Member?
•Understanding Non-Profit Financial Statements
•Accounting for Endowments and Restricted Gifts
•Understanding IRS Tax Form 990
•Differences Between Non-Profit and For Profit Accounting
•Fundraising and Development’s Impact on the Finance Department
•The Board’s role in Risk Management
•Non-Profit Planning
•Challenges Facing Non-Profits
Smart Devine provides the superior service your organization deserves. Our enhanced list of services include:
ACCOUNTING OPERATIONS
GAAP Audits
A-133 Audits
Sponsored Program Compliance
Budgeting
Endowment Spend Review
Financial Risk Assessment
Accounting Outsourcing
TAXES
Form 990, 990PF, 990T, 1023 & 5500
Compliance
Sales and Use Tax Exemption Issue
Employment Tax Assistance
Tax Free financing Analysis
501(c)(3) Tax Exempt Status Qualifications
Tax Controversy Support
REVENUE MANAGEMENT AND
COMPLIANCE
Credit Balance Analysis
Compliance
Revenue Integrity Services
Reimbursement
Expense Management
FINANCIAL ADVISORY
Reconciliation and Remediation
Finance Process Assessment and
Reporting Optimization
Internal Audit Outsourcing
Enterprise Risk Management
Internal Control Assessments
IT Audit
CONSTRUCTION AND FACILITIES
Monitoring Project Progress / Analyzing
Cost Estimates
Administration of Escrow Accounts
Cash Flow Analysis
Identification of Sources of Recovery
Financial Analysis of Builder
LITIGATION
Internal Investigations
Forensic Accounting
Fraud / Billing Issues
Litigation Support
Smart Devine provides a full range of accounting, advisory, tax and investigative forensic and litigation services to organizations
across a variety of industries. For more information about our services call 267-670-7300 or visit our website at smartdevine.com.
Accounting
Ta x
Advisory
Smart Devine | 1600 Market Street | 32nd Floor | Philadelphia, PA 19103 | T 267-670-7300 | [email protected]