Not-For-Profits Careers

1. Not-For-Profits Careers It’s Not About the Money X420 Discussion Session #54

2. 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: Definitions

3. 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. Special Provisions

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

5. 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.

6. Where does the money go? • In USA about 45% to religious groups • About 8% to human services • About 13% to education • About 9% to health care • About 8% to arts and culture

7. Where does the money come from? • About 81% from living individuals • About 7% from bequests • About 12-14 % from foundations • Generated from sales and fees • Government funds may also be available.

8. 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.

9. 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

10. 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

11. 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

12. 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

13. Nps are intensely political.

14. What about salaries ? • Consistently about 19% below comparable work in the for-profit world.

15. 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

16. And yet other concerns? • Donor influence • Board micromanagement • Clients with intractable problems • Outsize executive salaries in large multi-state organizations • Difficulties with corporate/not-for-profit partnerships.

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

18. Why form a not-for-profit? • Exemption from corporate taxes • Nonprofits 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.

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

20. 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

21. 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

22. 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

23. Nonprofits in Indiana • Recent 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 payroll • Go to <www.indiana.edu/~nonprof>

24. Accounting 410 Not-for-Profit Accounting • Offered through Indiana State University • ISU is seeking approval to make this an online course Not-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

25. PhD in Philanthropic Studies • Announced June 12, 2003 • Through Center on Philanthropy at Indiana University • Started Fall 2003 at IUPUI in Indianapolis

26. Evaluation Questions • Use: • Strongly agree • Agree • Disagree • Strongly disagree • Don’t know • I found the presentation of material easy to understand. • This discussion session increased my knowledge on the subject presented. • I will be able to use some of the information from this discussion session in the future. • The presenter was well prepared for this discussion session. • This presentation should be repeated in future semesters.