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What exactly is a nonprofit org?

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Given this is our first edition for NFPNews, here at Church Resources we have been giving a little thought here to our potential audience, and what an NFP actually is.

In the case of Church Resources, we are an NFP which helps our Members – other non-profit organisations – concentrate on their missions by helping to reduce costs, so those savings can be passed on to the people they serve.

We also help by providing information which helps our Members be better informed. But just what is an NFP?

Imagine you’re at a cocktail party and someone mentions the term “nonprofit” or “not-for-profit.” Do you really know what it means? Or do you just smile along, nodding appropriately and hoping the hors d’œuvres tray comes by soon?

Writer Christine Corbett Conklin is here to help. She writes:

See how savvy you are by picking the best definition of nonprofit from the following three choices:

1) A business that tries really hard, but just can’t seem to come out ahead — or make a profit at the end of the year.

2) Any group that provides services to the public, which, in itself, qualifies it as a nonprofit and means it pays no taxes.

3) A corporation or association that conducts business for the benefit of the general public without shareholders and without a profit motive.

If you selected 3, you’re correct! Although a variety of organisations may fail to make profits and/or provide services to the public, that does not qualify them as “nonprofit” or “not-for-profit” — which, by the way, are virtually interchangeable terms.

The website InvestorWords, explains that, “Any money earned by a nonprofit organisation must be retained by the organisation, and used for its own expenses, operations, and programs. Many nonprofit organisations also seek tax exempt status …”

Thus, nonprofits can’t make money, right? Not so, says Linda Moore, president and CEO of the Yakima Valley Community Foundation, in Washington State in the USA.  The was entity formed in 2003 when the Sisters of Providence sold St Elizabeth Hospital to a for-profit owner. That’s perhaps the most common misconception about these organisations, she contends.

“Each must make enough money to be effective and stay in business,” Moore said. “Not-for-profit means that no private individual or for-profit corporation benefits.” Although nonprofits are not in business for the purpose of making money, “You still need to support yourself,” agreed Verlynn Best, president and CEO of the Greater Yakima Chamber of Commerce, which has some 800 members, 15 to 20 percent of which are nonprofit. “We also need to see nonprofits as operating businesses. They have payrolls to meet and they have expenses” to fulfill their mission.

“If a group is rescuing puppies, you still need to buy dog food,” she observed.

Income channelled back into the group’s mission

A nonprofit can also have some reserve funds for an emergency or for a “dry time” when contributions don’t come in as readily, including when there’s a “downturn in the economy,” Best said.

A nonprofit such as a museum is even allowed to have a gift shop that sells items, with income channeled back into the group’s mission, pointed out John Baule, executive director of the Yakima Valley Museum since 1992.

“It’s considered a service to clientele,” he said. “You just have to have products in some way related to your mission.” Thus, the Yakima Valley Museum sells history books, Native American goods, and even food products related to the local agricultural industry.

FULL STORY: Nonprofits: Do You Know What They Are — And Aren’t? (YakimaHerald.com)

NB: This story was written for a US readership, but basic principles apply in Australia. For details, check the Australian Charities and Not for Profits Commission’s post, What is a not-for-profit?

IMAGE:  YakimaHerald.com