Nonprofit Kit for Dummies

Need practical advice on running a nonprofit? No problem! Packed with the latest tips and techniques on starting and managing a charitable organization, this easy-to-follow guide offers everything you need to help your nonprofit endure the ups and downs of the economy. From applying for your tax exemption to raising money to pay for your programs, it covers it all. So get ready to bring in the bucks — and enjoy watching your nonprofit prosper.

• Write a mission statement
• Craft a compelling pitch
• Raise money online
• Apply for grants
• Get the word out
• Adapt in hard times
• Prepare a solid budget
• Project cash flow

Stan Hutton is a senior program officer at the Clarence E. Heller Charitable Foundation. Frances N. Phillips is program director for the Arts and the Creative Work Fund at the Walter and Elise Haas Fund in San Francisco. She also taught grant writing at SFSU for more than 25 years.

Introduction 1

About This Book 1

Foolish Assumptions 2

Icons Used in This Book 3

Beyond the Book 3

Where to Go from Here 4

Part 1: Getting Started with Nonprofits 5

Chapter 1: Getting to Know the World of Nonprofit Organizations 7

What Is a Nonprofit? 8

Comparing for-profits to nonprofits 8

Introducing the one and only 501(c)(3) 9

Knowing Your Mission Before Entering the Nonprofit World 10

Setting up a nonprofit 11

Making plans and being flexible 11

Being Inspired and Inspiring Volunteers 12

Finding the Resources to Do the Job 13

Seeing where the contributions come from 13

Fundraising for fun and profit 14

Chapter 2: Deciding to Start a Nonprofit 15

Weighing the Pros and Cons of Starting a Nonprofit 16

Doing Your Homework First 17

Assessing the competition 17

Finding people to help you 18

Figuring out how you’ll pay the bills 19

Taking a long, hard look in the mirror 20

Planning — and then planning some more 20

Understanding Nonprofit Ownership 21

Benefiting the public 21

Being accountable 22

Looking at the Many Varieties of Nonprofits 23

Identifying nonprofits by their numbers 24

Rules and regulations to add to your file 25

Comparing Nonprofits and For-Profits 28

How they’re alike 28

How they differ 28

Using a Fiscal Sponsor: An Alternative Approach 30

Examining common details of a fiscal sponsorship relationship 31

Finding a fiscal sponsor 32

Chapter 3: Creating Your Mission Statement 35

Mission Statement Basics 36

Homing in on your purpose 36

Specifying your beneficiaries 38

Explaining how you’ll accomplish your goals 38

Imagining your future with a vision statement 38

Keeping your focus narrow at first and broadening over time 39

Keeping your statement short and sweet 39

Writing the Mission Statement 40

Gathering input from your group 40

Drafting the statement 41

Living by Your Mission 42

Chapter 4: Incorporating and Applying for Tax Exemption 43

Creating a New Entity: The Corporation 44

Following your state law 44

Understanding your corporation’s governing documents 45

Deciding whether to have members in your corporation 46

Finding the best name 46

Writing the Articles of Incorporation 47

Crafting a heading 48

Article I 48

Article II 48

Article III 48

Article IV 49

Article V 50

Article VI 50

Article VII 50

Article VIII 50

Signed, sealed, and delivered 51

Getting Your Employer Identification Number (EIN) 51

Writing Your Organization’s Bylaws 53

Holding Your First Board Meeting 53

Applying for Tax Exemption 54

Tackling Form 1023 55

Understanding the difference between public charities and private foundations 56

Establishing public charity status 56

Describing your activities 57

Reporting salaries and conflicts of interest 58

Dealing with financial information 59

Collecting the other materials 60

Paying the fee 61

Getting along until the exemption comes 61

Chapter 5: Protecting Your Nonprofit Status 63

Disclosing What You Need to Disclose 64

What you do need to show 64

What you don’t need to show 65

Avoiding Excessive Payments and Politicking 66

Determining reasonable pay and benefits 66

Using caution when getting involved in politics 68

Why all the fuss? Understanding the increased scrutiny 68

Reporting to the IRS 69

Filing the 990-N 70

Taking it easy with the 990-EZ return 71

Tackling the long Form 990 76

Getting your 990 to the IRS 78

Reporting to Your State and Local Governments 78

Part 2: Managing a Nonprofit Organization 79

Chapter 6: Building Your Board of Directors 81

Understanding the Duties of a Nonprofit Board of Directors 82

Primary role: Preserving public trust 82

Secondary role: Dealing with planning, hiring, and other board tasks 84

Sharing responsibilities among the board, staff, and volunteers 86

Recruiting the Right People for Your Board 86

Keeping it fresh 87

Big boards or little boards 89

Choosing officers and committees 90

Introducing new and prospective members to the board and the organization 91

Putting Staff Members on Your Board 93

Using Your Board to Full Capacity 93

Encouraging commitment from board members 94

Holding effective board meetings 95

Chapter 7: Planning: Why and How Nonprofits Make Plans 99

Understanding the Importance of Planning 100

Making Your Organizational Plan 100

Getting ready 101

Starting from your organization’s mission 102

Surveying the external situation 102

Looking at the internal situation 103

Hearing from all your stakeholders 105

Calling in the SWOT team 107

Putting the plan in writing 109

Adjusting your plan when necessary 111

Putting Plans into Action 111

Defining and setting goals, strategies, objectives, and outcomes 111

Creating a work plan 112

Planning for Programs 113

Assessing needs 114

Going beyond the needs assessment 115

Working as a team 117

Facility Planning: Finding a Place to Do Your Work 118

How much space and of what kind? 118

Location, location, location 118

Owning, leasing, or taking a free ride 119

Making a move 120

Taking on a capital project 121

Chapter 8: Evaluating Your Work: Are You Meeting Your Goals? 123

Knowing the Importance of Evaluation 124

Working through the Evaluation Process 125

Selecting the right kind of evaluation 125

Planning for evaluation 126

Crafting valuable questions 128

Choosing evaluators: Inside or outside? 130

Conducting Your Evaluation 131

Analyzing Results and Putting Them to Work 131

Interpreting results 132

Using your evaluation to strengthen your work 132

Telling the truth 134

Chapter 9: Working with Volunteers 135

Knowing Why People Volunteer 136

Designing a Volunteer Program 137

Considering a volunteer coordinator 137

Determining your need for volunteers 138

Writing volunteer job descriptions 139

Organizing volunteers 139

Hunting for Volunteers 141

Using the tried-and-true methods 141

Going online 142

Looking for volunteers at other organizations 144

Finding volunteers with special skills 144

Hiring interns 145

Interviewing and Screening Volunteers 145

Managing Your Volunteers 147

Providing adequate training 147

Keeping good records 148

Insuring your volunteers 148

Saying farewell to bad volunteers 149

Saying Thank You to Volunteers 149

Chapter 10: Working with Paid Staff 151

Deciding That You Need Help 152

Getting Your Nonprofit Ready for Paid Employees 153

Developing your personnel policies 153

Setting up a payroll system 155

Providing benefits and perquisites 155

Preparing to Hire 156

First things first: Writing a job description 156

Considering necessary qualifications 157

Establishing salary levels 158

Announcing the position 159

Making the Hire 160

Looking at résumés 160

Interviewing candidates 161

Digging deeper with references 162

Making your decision 163

Bringing a New Hire Onboard 164

Confirming employment terms in writing 164

Getting your new hire started on the job 164

Evaluating your new hire’s progress 165

Managing Employees 166

Understanding what a manager does 167

Communicating with your staff 167

Letting a staff member go 169

Using Independent Contractors 170

Differentiating an independent contractor from an employee 171

Seeing what an independent contractor can do for you 172

Finding a consultant: Ask around 173

Interviewing consultants 173

Signing the contract 174

Chapter 11: Showing the Money: Budgets and Financial Reports 177

Making a Budget = Having a Plan 178

Beginning with zero 178

Defining a good budget 182

Budgeting based on your history 182

Understanding and isolating general administrative and fundraising costs 183

Accounting for in-kind contributions 183

Creating Budgets for Programs or Departments 184

Working with Your Budget 187

Projecting Cash Flow 189

Constructing your cash-flow projection 189

Deciding what to do if you don’t have enough 190

Borrowing to make ends meet 192

Putting money away to make a nonprofit strong 193

Keeping Your Books Organized and Up to Date 193

Understanding the different accounting systems 194

Considering accounting software 195

Reviewing the Numbers: Financial Statements and Audits 195

Preparing financial statements 196

Seeing the value of an audit 196

Knowing whether you need an audit 197

Reading Your Financial Statements 199

Getting to know the parts of a standard financial statement 199

Asking the right financial questions 200

Managing Financial Systems 202

Chapter 12: Marketing: Spreading the Word about Your Good Work 205

Taking Care of the Basics 206

Designing a logo and letterhead 206

Preparing an organization overview or brochure 207

Creating a website 207

Producing annual reports and newsletters 209

Taking care of customers — your most important marketing tool 209

Discovering Who You Are: First Steps to Marketing 211

Recognizing your current market 212

Defining whom you want to reach and how 216

Using Mass Media to Reach Your Audience 219

Planning for effective publicity 219

Developing a media list 220

Understanding how the media works 221

Submitting materials to your media contacts 222

Getting your event into “What’s Happening?” calendars 223

Putting together public service announcements 224

Using Social Media for Fun and Profit 225

Developing a social media policy 225

Planning your social media posts 226

Choosing your social media platforms 227

Protecting your online reputation 229

Part 3: Fundraising Successfully 231

Chapter 13: Building a Fundraising Plan 233

Recognizing Who Can Raise Funds 234

Naming Possible Funding Sources 235

Examining Your Potential 236

Drafting a Fundraising Plan 238

Setting a preliminary goal 239

Asking whom you know 239

Researching and refining your prospect list 240

Estimating fundraising costs 242

Getting Down to Business: Moving to an Action Plan 246

Planting the Seeds for a New Organization 247

Hitting up people you know 247

Branching out with special events 248

Approaching foundations 248

Considering government grants 248

Chapter 14: Raising Funds from Individual Donors 249

Knowing Why People Give Helps in the Asking 250

Stating Your Case 251

Identifying Possible Donors 254

Drawing circles of connections 254

Getting a list of contacts from your board of directors 256

Growing a Major Gift 257

Deciding who should do the asking 257

Preparing to make your request 257

Breaking the ice 258

Adopting the right attitude 258

Timing the request: An inexact science 258

Determining what to ask for 259

Minding your manners 260

Raising Money by Mail 260

Taking the direct-mail route 260

Trying your hand at a letter-writing campaign 262

Raising Money the “E” Way (Easily and Electronically) 263

Using email and related tools to build and maintain relationships 264

Building your email address lists 265

Using your website as a cultivation tool 266

Gathering money online 267

Soliciting text-message donations 269

Telemarketing: Dialing for Dollars 270

Writing a script 271

Coaching your callers 272

Collecting the pledges 273

Chapter 15: Making the Most of Special Events 275

Thinking through the Whole Event 276

Using your budget to guide decisions 276

Sticking to your budget 279

Soliciting in-kind gifts for your event 281

Building your event committee 282

Setting a date and location 283

Setting Up Your Timeline 284

The first three months 284

Months four and five 284

Four weeks before the event 285

The week before the event 285

Spreading the Word 287

Finding a news angle 287

Getting a mention on radio or TV 288

Chapter 16: Finding the Grant Givers 291

Planning a Foundation Grant Proposal 291

Figuring out who’s looking for whom 292

Knowing whom you’re dealing with: Different kinds of foundations 293

Using the Foundation Center to assemble a broad list of prospects 296

Digging deeper to narrow your prospects 300

Going for a Government Grant 301

Federal grants 302

Nonfederal government grants 304

Chapter 17: Writing a Grant Proposal 305

The Windup: Completing Pre-Proposal Tasks 306

Asking for permission to ask 306

Passing the screening questionnaire 307

The Pitch: Writing Your Proposal 307

Starting out with the cover letter and executive summary 308

Introducing your agency 309

Shaping the problem 310

Setting goals, objectives, and outcomes 310

Presenting (ta-da!) your project idea 311

Explaining how results will be measured 312

Talking about the budget 313

Showing where the rest of the money comes from: The sustainability section 315

Writing the P.S.: The appendix 316

Throwing Special Pitches for Special Situations 317

Trolling for corporate grants or sponsors 319

Seeking general operating support 320

Seed money: Proposing to form a new nonprofit 321

The Homerun: Following Through after You Receive Funding 322

Chapter 18: Capital Campaigns: Finding Lasting Resources 323

Beginning the Funding Plan 324

Preplanning your campaign 325

Developing a rough budget 326

Testing feasibility 327

Analyzing the results of your study 329

Developing a Case Statement 329

Building the Pyramid of Gifts 330

Starting at the top 331

Applying for grants as part of your capital campaign 332

Ending the quiet phase and moving into the public phase 333

Realizing the Benefits and Risks of Capital Campaigns 334

Part 4: The Part of Tens 337

Chapter 19: Ten Tips for Adapting in Hard Times 339

Recognize the Need for Change Before It’s Too Late 340

Communicate When Making Hard Decisions 340

Step Back and Regroup 340

Set a Manageable Fundraising Goal 341

Collaborate with Others in Your Field 341

Share a Back Office 342

Place a Program within Another Agency 342

Merge with Another Nonprofit 343

Close with Dignity If Necessary 343

Complete the Closing Paperwork 344

Chapter 20: Ten Tips for Raising Money 347

Ask 347

Hit Up People You Know 348

Tell Your Story 348

Show How You’re Improving Lives 348

Make the Numbers Sparklingly Clear 349

Research, Research, Research 349

Know Your Donors’ Point of View 350

Build a Donor Pyramid 351

Make It Easy to Respond 351

Keep Good Records 352

Chapter 21: Ten Tips for Protecting Your Nonprofit 353

Assessing Your Risks 354

Planning for Emergencies 354

Filing Annual Federal Forms 355

Filing Annual State Forms 356

Paying Employment Taxes 356

Reporting Payments to Consultants 357

Maintaining Transparency 357

Responding to Negative Press 358

Protecting Your Online Reputation 358

Determining Insurance Needs 359

Part 5: Appendixes 361

Appendix A: Glossary 363

Appendix B: About the Online Content 367

Index 373

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