Not-For-Profits Careers

It’s Not About the Money

X420 Discussion Session #54

Definitions Non-Profit Nonprofit Not-for-Profit Not-For-Profit NGO (non-

government organization)

Critical characteristic: barred from distributing any profits it earns to persons who exercise control over the firm.

Generally established for charitable or educational purposes under IRS Code 501(c) in USA.

Exempt from federal income taxes

Family:Family:

Special Provisions Should a not-for-profit

(np) have revenues in excess of expenditures for a period, the difference or excess (e.g. profit in a private business, but accumulated reserve or net assets for an np) is allowed to be carried forward for future operations (up to a point).

FUTA (federal unemployment tax) is optional for nps. Laid-off employees may not be eligible for unemployment payments from federal or state sources unless their np opted for these.

Not-for Profits are specifically exempted from federal and from many state do-not-call lists.

How Big?USA: charitable contributions in 2002

estimated at 240.92 billion or 2.3% of gross domestic product. Worldwide NGOs represent one trillion per year budgets.

•Where does the money go? In USA about 45% to religious groupsAbout 8% to human servicesAbout 13% to educationAbout 9% to health careAbout 8% to arts and culture

Where does the money come from?About 81% from living individuals About 7% from bequests

About 12-14 % from foundationsGenerated from sales and feesGovernment funds may also be

available.

1954 IRS Code

501(C) (1) Organized under Acts of Congress like Federal Deposit Insurance

501 (C) (2) Title holding corporations for exempt organizations like Naugatuck Masonic Building Corporation

501 (C) (3) Religious, educational, charitable, scientific, literary, public safety, certain national or international amateur sports competition, child or animal organizations; private foundations.

501 (C) (4) Civic leagues, social welfare, local

associations of employees 501 (C)(5) Labor, agricultural, and

horticultural like AFL/CIO 501 (C)(6) Business leagues, chambers of

commerce, real estate boards 501 (C)(7) Social and recreational clubs like

Bloomington Yacht Club 501 (C) (8) Fraternal beneficiary societies

501(C) (9) Voluntary employees’ beneficiary

associations

501(C) (10) Domestic fraternal societies

501(C) (11) Teachers’ retirement fund associations

501 (C)(12) Benevolent life insurance associations, mutual ditch or irrigation companies, mutual or cooperative telephone companies

501 (C) (13) Cemetery companies

501 (C) (14) State chartered credit unions, mutual reserve funds

Each group operates under different IRS rulings as well as different state rulings

Which business specialties do not-for-profits hire? Accountants above all; Finance people Managers (although often managers are

promoted from social service program managers)

Marketers—to clients, to donors, to community at large

CIS, IT, Informatics people ODTs for those nps where products are

produced, warehoused, or distributed Entrepreneurs

Nps are intensely political.

What about salaries ?Consistently about 19% below

comparable work in the for-profit world.

Other Concerns? Salaries are lower for business specialties than in

for-profits, but still often higher than typical social service salaries so there may be unspoken resentments

Elite employees (like doctors and professors) may capture effective control of organization which hired them

Nps typically have underfunded programs and a dearth of program maintenance funds

Social service cultures can differ radically from business cultures—values and methods conflict

And yet other concerns?

Donor influence Board micromanagementClients with intractable problemsOutsize executive salaries in large

multi-state organizationsDifficulties with corporate/not-for-profit

partnerships.

Why are you interested in the not-for-profit world?

Why form a not-for-profit?Exemption from corporate taxesNonprofits receive the same liability

protection as for-profits. Directors or trustees, officers and members are not responsible for the debts and liabilities of the corporation in most cases.

Why do entrepreneurs choose the not-for-profit world?Allows non-salary rewards

And these rewards are? Sometimes more free time Sometimes more flexibility in work Sometimes allows more concentration on

quality of the product than the for-profit world allows

Altruistic satisfaction Special causes like ecological or

humanitarian or civic concerns are furthered

And still one more reason?A not-for-profit entity connected to a for-

profit entity can take advantage of governmental and foundation grants not otherwise available.

See Antoine Danchin’s The Delphic Boat

Why does Paul Theroux despise NGOs? After 40 years of

NGOs the people of Africa are worse off

NGOs serve the economies of the home countries of aid agencies more than they serve Africa

Nonprofits in IndianaRecent report “Indiana NonProfit

Employment 2001 (July 2003) cites 222,000 Hoosiers work in nonprofits

They earned about $6 billion in wages They accounted for 6.6% of state’s total

payrollGo to <www.indiana.edu/~nonprof>

Accounting 410 Not-for-Profit AccountingOffered through Indiana State University ISU is seeking approval to make this an

online courseNot-for-Profit accounting comprises 30%

of the Accounting and Reporting Section of the CPA examination

http://www.ihets.org/learntech/grants/99-00/proposals/08moncada.html

PhD in Philanthropic Studies Announced June 12,

2003 Through Center on

Philanthropy at Indiana University

Started Fall 2003 at IUPUI in Indianapolis

Evaluation Questions Use: Strongly agree Agree Disagree Strongly disagree Don’t know

1. I found the presentation of material easy to understand.2. This discussion session increased my knowledge on the subject

presented.3. I will be able to use some of the information from this discussion

session in the future.4. The presenter was well prepared for this discussion session.5. This presentation should be repeated in future semesters.