Nine Questions Every Non-Profit

Should Ask Themselves

Nine Questions Every Non-Profit Should Ask ThemselvesStarting a non-profit organization or reviewing a current organization can prove to be an exciting journey, but how did it begin? Did your nonprofit do the groundwork so it will last for years, decades? Ask yourself: Why does the non-profit exist? — What benefits will the non-profit provide? — Who will it serve? — What do we expect of the leadership? — How will it be funded? Many non-profit organizations look at their purpose and overlook some of the integral steps to make certain their organization has the right focus and strategy in place to succeed financially and legally. If your organization does not have a strong base, it’s not too late. Here are nine key questions that every non-profit should ask themselves annually to help focus and re-focus their organization.

Do you have a Current Mission?An effective mission statement answers the following questions:• What is the organization’s purpose or cause it is

looking to support?• What services/initiatives will it provide to support this

cause?The answers should express the authentic purpose of the organization and serve as a building block of the or-ganization’s brand and marketing efforts. The answers should also define whether the organization will operate under a non-profit status. A nonprofit is a tax-exempt organization that does not declare a profit. Instead it utilizes all revenue available after normal operating expenses in service to the pub-lic interest. The purpose of the organization must be charitable, educational, scientific, religious or literary and funds are normally raised in the form of tax deductible contributions. Operating under these guidelines allows organizations to apply for 501©(3) tax exempt status designation from the IRS. If you plan to apply for tax-exempt status, the IRS will look at your mission statement to see if your organization matches its requirements for that type of entity. Your mission statement should reflect these requirements.

Do you have a Strategic Business Plan & is it Up-to-Date?When starting a business, whether non-profit or for-profit, the first step is to develop a strategic busi-ness plan. The plan will lay out all the key components required to start a non-profit organization, including:• Mission Statement• Fundraising • Foundation• CommunicationThe business plan should be updated on a regular ba-sis so it grows and changes with the mission of the organization. This plan is the road map to lead to the organization’s success and will serve as a funding stimulus by showing prospective donors the transpar-ency of the operation and how it is in sync with the mission statement.

Do You Have an Effective Plan?An effective mission statement answers the following Where will the funding come from to start as well as sus-tain the organization’s functions? The organization must have a target audience for fundraising efforts as well as a fundraising plan and timeframe.

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How is Your Foundation Organized?How will it be organized? Provide a description of the board of directors and most importantly, their role in the management of the non-profit. An engaged board is in-tegral towards the success of an organization.

What are the Organization’s Communication Plans?How does it plan to “get their message out there” to potential volunteers, donors and other supporters? Hiring a communication expert to set the tone and reach a large audience can be beneficial to new or ex-isting nonprofit organizations.

Does Your Organizations Have a Solid Legal Infrastructure?Does your organization have sufficient resources to cre-ate a strong basis which the nonprofit can be organized and operated? If you are not proficient in the legalities surrounding the beginning of a nonprofit, consult with an experience professional to guide you through the process. If that is not an option, educate yourself on the laws applicable to organizing and operating a non-profit organization and begin to build around these laws. A nonprofit built on a weak base can jeopardize the good-will surrounding the organization. Three necessary tools to build a strong foundation for your nonprofit are:• Strong corporate governance: An engaged board of

directors has a tremendous impact on the success of nonprofit organizations. A great nonprofit board is essential to the formation of your enterprise, its fundraising success, maintaining legal compliance and the quality of the leadership it hires.

• Establish by-laws: The organization’s by-laws should define the size of the board and how it will function, the roles and responsibilities of directors and officers, conflict of interest policies, fundrais-ing strategy as well as other corporate governance matters.

• Articles of Incorporation, if applicable: Articles of in-corporation is a legal document that is filed with the state to create any type of corporation. Nonprofit articles contain the organization’s basic information including name, registered agent, office address, etc. and tax exemption information.

Is Your Organization Registered Properly? Non-profit organizations can be unincorporated or in-corporated. An “articles of incorporation” must be filed with the state in which it resides or must decide where will be its jurisdiction for legal purposes. Each state has its own rules and regulations, but most require a non-profit organization to have officers of the corporation, a board of directors, by-laws and annual meetings. Many states require nonprofit organizations to register with state charity bureaus or similar agencies if they in-tend to solicit donations in each of those states. In order to gain tax exempt status, non-profit corporations must apply for 501©(3) status with the IRS. The designation “501©(3)” refers to the section of US Tax Code that oversees tax exempt organizations. Because tax-exempt organizations do not pay feder-al corporate income taxes, non-profits must complete and file Form 1023, “Application for Recognition of Ex-emption” with the Internal Revenue Service. This is a public document and proper completion of this form is critical as it may face future scrutiny by government au-thorities, the public, and media, even if the organization is granted tax-exempt status. Organizations need to abide by state tax exemption requirements also.An unincorporated nonprofit group can apply for tax exempt status under the 501(c)(3) designation as de-fined by the Internal Revenue Service. The group should consider incorporating as an option - without 501©(3) approval from the IRS, receipts of donations as well as grants, although possible, are very difficult.

Are You Keeping Good Records? Diligent recordkeeping is a critical task for not-for-profits since they are required for audits, taxes, meeting regula-tions and being transparent to the Board and members. Evolving to electronic recordkeeping makes good sense and will save you time and money in the long run.

Have You Built an Effective BoardHow do you define effective? Are you focused on your mission and members? Is the Board organized properly? Are the right decisions being made in a timely manner?

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Smart Devine provides a full range of accounting, advisory, tax and investigative forensic and litigation services to organizations across a variety of industries. For more information about our services call 267-670-7300 or visit our website at smartdevine.com.

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A c c o u n t i n g T a x A d v i s o r y

CHRISTOPHER NIWINSKI & SMART DEVINE CAN HELP YOUChris Niwinski and the Non-Profit Practice at Smart Devine can guide you and inform you about being effective in planning and developing a strong organiza-tion. We offer a series of white papers to non-profit organizations’ board mem-bers and leadership to enhance the understanding of duties and requirements for non-profit organizations. Please contact Chris for more information at 267-670-7345 or email cniwinski@smartdevine.com

Topics:• Introduction to the Non-Profit Industry• The Do’s and the Don’ts of Starting a Non-profit organization• What is My Role as a Board Member? • Understanding Non-Profit Financial Statements• Accounting for Endowments and Restricted Gifts• Understanding IRS Tax Form 990• Differences Between Non-Profit and For Profit Accounting• Fundraising and Development’s Impact on the Finance Department• The Board’s role in Risk Management• Non-Profit Planning• Challenges Facing Non-Profits

Christopher J. Niwinski, CPA Senior Consulting ManagerChristopher is a Senior Manager for Smart Devine. He has over 17 years of non-profit management consulting experience. He has extensive experience providing interim financial and operational management within the non-profit industry, specifically to hospitals, health systems and higher education institutions as well as government, foundations and other non-profit entities. Chris has also provided assistance to these clients through internal audits and control assessments, best practices reviews, finan-cial system process improvements, as well as grant and endowment management and expenditure reviews of non-profit entities receiving financial assistance.Chris earned his Bachelor of Science in Accounting from LaSalle University. He is a Certified Public Accountant in Pennsylvania and is a Member of the American Institute of Certified Public Accountants and the Pennsylvania Association of Certified Public Accountants, as well as on the Board of Directors of the Healthcare Financial Management Association (HFMA) and the LaSalle University Alumni Association.

ACCOUNTING OPERATIONSGAAP Audits A-133 AuditsSponsored Program ComplianceBudgetingEndowment Spend ReviewFinancial Risk AssessmentAccounting Outsourcing

FINANCIAL ADVISORYReconciliation and RemediationFinance Process Assessment and Reporting OptimizationInternal Audit OutsourcingEnterprise Risk ManagementInternal Control AssessmentsIT Audit

TAXESForm 990, 990PF, 990T, 1023 & 5500 ComplianceSales and Use Tax Exemption IssueEmployment Tax AssistanceTax Free financing Analysis501(c)(3) Tax Exempt Status QualificationsTax Controversy Support

CONSTRUCTION AND FACILITIESMonitoring Project Progress / Analyzing Cost EstimatesAdministration of Escrow AccountsCash Flow AnalysisIdentification of Sources of RecoveryFinancial Analysis of Builder

REVENUE MANAGEMENT ANDCOMPLIANCECredit Balance AnalysisComplianceRevenue Integrity ServicesReimbursementExpense Management

LITIGATIONInternal InvestigationsForensic AccountingFraud / Billing IssuesLitigation Support

Smart Devine provides the superior service your organization deserves. Our enhanced list of services include:

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