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Unformatted text preview: Nonprofit Organizations: Management for Change SM122 March 30, 2009 Prof. McCormack Today is About... Using your business skills to solve seemingly intractable problems in society Specifically we are focusing on the Nonprofit Sector and The possibilities that this unique corporate form of organization provides It's also about Managing in the Sector And it's about You What's the same? What's different? Nonprofit Sector: Overview Nonprofit, Tax Exempt Organizations Corporation"...organized and operated exclusively for religious, charitable, and scientific...or educational purposes." Special tax status in exchange for a public benefit (501(c) 3 of the IRS code) Mission must proclaim the public benefit of the organization Nonprofit Sector Also Knows As.... Third sector Independent sector Voluntary sector Philanthropic sector Citizen sector Nongovernmental organizations (NGOs) How the IRS sees the difference
For Profit Corporations Earn and distribute taxable business earnings to shareholders Exist to maximize shareholder value Individual Gain Nonprofit Corporations Provide programs and services that are of public benefit Surplus revenue must be used by the organization for future provision of programs and services Societal Gain Eight Major Categories Health Services Eight Categories (cont) Public and Societal Benefit Role in Society Social "safety net" Advocacy Problem solving Partnership with government and business Example: Teach for America
Since 1990: 20,000 young people 3 million students 29 urban and rural areas Wendy Kopp Founded Teach for America Fourth graders growing up in low-income communities are already three grade levels behind their peers in high-income communities1. About 50 percent of them won't graduate from high school by the time they're 18 years old1. Those who do graduate will perform on average at an eighth-grade level1. Only 1 in 10 will graduate from college2. Particular Relevance Today Intractable Problems New Market Opportunities Increased Public Focus Globalization and technology http://www.microsoft.com/Presspass/exec/billg/speeches/2008/01-24WEFDavos.mspx Trends in the Sector Focus on Outcomes and Impact Trend #1: Growth in Number of 501(c)(3) Organizations 909,574 964,418 1,064,191 1,045,979 1,010,395 654,186 692,524 733,790 773,934 819,008 865,096 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 Size and Scope of Sector Over 1.4 million 501(c) 3 organizations registered with the IRS Double the number from 10 years ago 73% are small, with budgets under $500,000 Size and Scope (cont.) Top 50 have annual budgets of over $200 million Top 10 have annual budgets of over $1 billion Health and education are leaders in expenditures and assets 10 Largest Charities (not including foundations, hospitals and universities) YMCA's of America (5.1 Billion) Salvation Army American Red Cross Catholic Charities Goodwill Industries United Jewish Communities Memorial Sloan Kettering Cancer Center Boys and Girls Clubs of America AmeriCares Habitat for Humanity International (1.0 Billion) National Economic Impact In 2005, nonprofits employed 9.7% of the U.S. workforce, more than the retail, manufacturing, govt and financial services sectors combined In 2006 nonprofits accounted for 8.1% of the wages and salaries paid in the United States; Expenditures equal 5.0% of the U.S. gross domestic product The Nonprofit sector was the only sector to gain jobs in the last quarter and has consistently been a leader in job growth (2.5% last year) Trend #2: Emergence of Social Entrepreneurs Richard Branson + Mother Theresa = Muhammad Yunus Entrepreneurship + Social Goals = Social Entrepreneurship Example: The Grameen Bank Muhammad Yunus is a social entrepreneur who applied the principles of business to a social problem When you view this video try to answer these questions: What is the problem Yunus is trying to solve? What product did he develop? For who? Is it successful? How do you know? Grameen Bank Video Trend #3:Focus on Outcomes and Impact Year Up's mission is to close the Opportunity Divide by providing urban young adults with skills, experience, and support that will empower them to reach their potential through professional careers and higher education. Outcome Measurement Year Up Management Dashboard 200 students receive intensive education, job training, corporate apprenticeship and guidance for one year During the Year Up Program Post Graduation from Year Up Job Placement: 87% College Acceptance: 65% Average Hourly Wage: $14.96 Apprenticeship Placement Rate: 100% Positive Apprenticeship Feedback: 90% 19 key metrics monitor internal sustainability Year Up Creates Real Impact and Return on Investment
In net present value terms, Year Up boosts a student's lifetime earnings by $423K, resulting in $134K in additional taxes.
$70,000 YU Composite Salary
$60,000 $50,000 $40,000 $30,000 $20,000 $10,000 $0 1 5 9 13 17 21 25 29 33 37 41 45 Years in Workforce
Sources: Massachusetts Project for Family Self Sufficiency, MIT Sloan Research Team, May 2003 Return on Investment: Return on Investment: Year Up's Total Classes Year Up's Total Classes Total amount invested Total amount invested $34.8 Million $34.8 Million Total NPV of increased Total NPV of increased lifetime earnings for Year lifetime earnings for Year Up graduates Up graduates $380 Million $380 Million Total NPV of additional tax Total NPV of additional tax revenue generated by Year revenue generated by Year Up graduates Up graduates $106 Million $106 Million Non-YU Composite Salary The Year Up Effect Trend #4: Use of technology and social networks http://www.kiva.org/ Managing in the Nonprofit Sector: Is it Different? Marketing Operations Accounting Finance Information Systems Human Resources Strategy It's Mostly the Same Nonprofits must do
everything that for profit companies do.... but like Ginger Rogers, they must be able to do it in high heels and backwards. But Some Things Are Different Mission Governance Marketing Finance and Accounting Fundraising Managing Volunteers Evaluation Mission How we measure success Did we achieve the mission? College Summit Governance: Board of Directors
10 Basic Responsibilities Determine mission and purpose Hire the CEO Financial oversight Ensure adequate resources Legal and ethical accountability Organizational planning Recruit board members; assess performance Enhance public standing Programs and services Support CEO and assess performance Marketing: Who is the Customer? Students Charter School State Authorizer Parents Evaluation: How do you know you are succeeding? 1-9 Source: Measuring Program Outcomes: a Practical Approach, United Way of America, 1996, p. 34 Example: Harlem Children's Zone What is the mission? Who are the customers? How do they measure success? http://www.cbsnews.com/video/watch/?id=1 http://www.cbsnews.com/video/watch/?id= Harlem Children's Zone Today http://www.hcz.org/ Finance and Accounting The Financial Statements For profits have owners and therefore the financials are setup to highlight profitability and owners equity Nonprofits are setup to manage public resources and therefore the financials are set up to reflect the nature of the assets and highlight fiduciary responsibility Asset Groups: Are "Strings Attached" No strings attached Unrestricted net assets Temporarily restricted net assets Conditional strings attached re: time and purpose Original gift permanently restricted; Income on gift may or may not be restricted as well. Permanently restricted net assets A Look at Contributions in the Financials
Statement of Activities For the Year Ended June 30, 2005 Temporarily Restricted Permanently Restricted Unrestricted Revenue, Gains and Other Support Program revenue Contributions, private grants, and special events In-kind contributions Rental Income Other revenue Net assets released from restrictions Satisfaction of program restrictions Total revenue, gains, and other support Total
Contributuions received that are restricted $ 8,190,088 1,021,127 114,762 102,336 100,757 394,808 $ 1,221,046 $ 2,068 $ 27,555 (394,808) $ 853,793 $ 2,068 8,190,088 2,244,241 114,762 102,336 128,312 $ 9,923,878 $ 10,779,739 Contributions that are unrestricted Grants that have met their restrictions Contributions that have Temp. Restrictions Sources of Revenue Fundraising Solicit tax deductible gifts and donations Staff dedicated to this function Charities raise funds from: Individuals Corporate Foundations Private Foundations Government Managing Volunteers
Six Stages of Volunteer Management Job Development Recruitment Interviewing Placement Orientation & Training Recognition Thoughts to leave you with.... The majority of adults in the U.S. today will switch careers 4 5 times in their lifetime (not jobs): this could mean you! Use Your Business Skills For More Than Just Business http://www.youtube.com/watch?v=qbcNuaatFR Be Bold What means the most to you? Have the gall to think big! Question the status quo See possibilities where others see problems If You Want to Learn More www.idealist.org MG455: Managing Nonprofit Organizations BU Community Service Center ( www.bu.edu/csc) Echoing Green http://originwww.fastcompany.com/social/200 http://www.echoinggreen.org/ How to Find a Good Charity? Charity Navigator ( www.charitynavigator.org) Guidestar (www.guidestar.org) ...
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- Spring '09