Not-For-Profits Careers

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Not-For-Profits Careers

• Its Not About the Money

X420 Discussion Session 54
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Definitions
Family

• 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

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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.

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

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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.

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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

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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.

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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.

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• 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

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• 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

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• 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

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Which business specialties do not-for-profits
hire?

• Accountants above all Finance people
• Managers (although often managers are promoted
  from social service program managers)
• Marketersto clients, to donors, to community at
  large
• CIS, IT, Informatics people
• ODTs for those nps where products are produced,
  warehoused, or distributed
• Entrepreneurs

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Nps are intensely political.
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What about salaries ?

• Consistently about 19 below comparable work in
  the for-profit world.

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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 culturesvalues and methods conflict

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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.

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

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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.

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Why do entrepreneurs choose the not-for-profit
world?

• Allows non-salary rewards

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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

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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 Danchins The Delphic Boat

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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

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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 states total payroll
• Go to ltwww.indiana.edu/nonprofgt

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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

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PhD in Philanthropic Studies

• Announced June 12, 2003
• Through Center on Philanthropy at Indiana
  University
• Started Fall 2003 at IUPUI in Indianapolis

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Evaluation Questions

• Use
• Strongly agree
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• Disagree
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• Dont 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.