Optimize Your Organizational Development

If your organization has recently established a non-profit status, you may want to review your mission statement, maximize your use of the board of directors and understand the Internal Revenue Services (IRS) timelines you must follow to maintain a good standing.

1. Review Your Mission Statement

A mission statement should be a clear, concise statement about your organization. It should say who your agency is; including the name and that it is a non-profit organization. The mission statement should also define the type of agency it is, including what you do and who you serve. It does not need to say anything else.

• A good mission statement provides strategic vision and direction for the organization. It should not have to be revised every few years.
• Revise the mission statement only when it is no longer appropriate or relevant to your organization. Your mission should not be revised to fit your programmatic efforts. Inversely, your programmatic efforts should be chosen based on your mission statement.
• Your mission statement should be short, visible and easily remembered. Using mission statements on business cards, letterheads and ongoing reporting is the key to reminding stakeholders why your organization exists.

2. Create Your Strategic Plan

Your organizational strategic plan should include short and long-term goals as well as strategies or activities to reach these goals, including indicators of success and target dates. The plan should also specify the partners and resources. Engage your board, staff and/or constituents in the development of your long-term strategy for the success of your organization. Establish why your organization is best qualified to meet those long-term goals.

Review the following questions to establish your own strategic plan:

• How easy will it be to recognize and document program success when it emerges?
• Has the program ever been evaluated? If so, what were the findings and how were they used?
• Is it feasible to assume that the program will survive beyond funding cycles you receive?
• What are long-term plans for program continuance?
• What are program threats?

3. Follow Internal Revenue Services (IRS) Timelines

There are many details related to the IRS and the timelines and filing deadlines for different events within your 501(c)3. Always check with the IRS for specific information and deadlines. Some of these may include issues related to:

• Starting out with organizing documents, bylaws and Employer Identification Numbers (EIN)
• Application to the IRS
• Ongoing compliance with employment taxes, disclosure statements and charitable contributions
• Significant events such as audits
• Information about the Advance Ruling Period as listed by your Determination Letter

Always maintain information related to your tax status. Keep updated letters and copies as you will often be asked for this letter when soliciting donations and/or applying for grants. Understand the standards that the Better Business Bureau Wise Giving Alliance uses to rate charity and non-profit organizations. These include standards related to your financial status as well as to the involvement and meetings of your board members.

4. Plan Your Organizational Budget

Money obviously plays an important role in your success as a non-profit organization. This includes raising money and using it properly. This section gives you an overview on how to define your sources of income and how to create an organizational budget. There are also resources to provide you with further assistance and information.

• Define your sources of income and expenses: You will want to ask yourself key questions about your organizational practices:
  • Are you going to charge anything for your services? If so, what are the pros and cons of charging? Will it limit people accessing your services?
  • What are the historical "best practices" for similar programs?
  • Using your community needs assessment, what is a realistic amount for the population you are serving to pay?
• Determine what revenue sources you can expect. This may include:
  • Grants
  • Events
  • Sponsors
  • Individual donations
  • General fundraising
  • Other development efforts (cause marketing, endowments)
  • Fees/Memberships
  • Pro bono/donated services, equipment or materials

In order to determine how much revenue you will need, make a list of all your anticipated expenses. Expenses might include:

• Staff salaries and benefits
• Building fees, including rent, maintenance and utilities
• General overhead, including maintenance of computer equipment
• Printing and shipping costs for collateral pieces
• Event costs such as rental of facility and food
• Travel costs, if necessary
• Consultants, if necessary
• Website domain usage and maintenance
• Fixed vs. Variable Costs

Be sure to figure out what percentage and amounts of each of the above you anticipate annually to cover your expenses. A common suggestion is to underestimate your expected revenues and to overestimate your expenses. Tailor your padding based on your organization and its needs.

Be sure to distinguish between accrued and cash basis revenue and which accounting forms you plan to use. For example, a $50,000 pledge in Year 1, payable in equal installments over 5 years, is typically reported as $50,000 of revenue in Year 1. In this scenario however, only $10,000 is expected to be received in cash in Year 1. Once you have established more sustainability you will have a better idea of how to anticipate these income flows in the future

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Track your budget: In order to be knowledgeable about your revenues and expenses, you will need to track your budget. To do this you should:

• Get a good software program and learn how to use it.
• Identify one key staff member (or accounting team) to track your revenues and expenses. If possible, seek out a board member with auditing or accounting experience.
• Keep accurate account by saving receipts for purchases and copies of invoices for payments.
• Establish policies and procedures that all staff can follow to make the process smooth and user-friendly.
• Use your time wisely to find out the best use of your money. It can be time-consuming to get a number of different bids and quotes for services but it might save you money in the long run. Just make sure that the time spent is realistic and necessary.
• Create banking relationships with bankers who have a familiarity with non-profits needs. Ask for reduced bank fees and interest rates on lines of credit.
• Become familiar with the Federal Government's regulations regarding audits, expenditures and charitable contributions. The following are publications created by the Federal Government to address the above:
  • Office of Management and Budget (OMB) Circular A-110: Uniform Administrative Requirements for Grants and Agreements
  • OMB Circular A-122: Cost Principles for Non-Profit Organizations
  • OMB Circular A-133: Audits of States, Local Governments and Non-Profit Organizations
  • IRS Publication 526: Charitable Contributions

5. Worksheets

1. Mission Statement Worksheet
2. Budget Template
3. Accrued and Cash Basis Revenue Explanations

6. Resources

The IRS' "Life Cycle of a Public Charity" is an excellent checklist of things to keep in mind during every stage of your organization's life. www.irs.gov/charities/charitable/article/0,,id=122670,00.html

Idealist is an interactive site where people and organizations can exchange resources and ideas, locate opportunities and supporters, and take steps toward building a world where all people can lead free and dignified lives:www.idealist.org

Free Management Library is an online resource for non-profits with information on how to start a non-profit as well as a basic overview of what is involved in managing a non-profit: www.managementhelp.org/org_thry/np_thry/np_intro.htm

Non-Profit Good Practice Guide provides information on virtually all aspects of managing a non-profit organization. It can be used as a quick reference in preparation for meetings, as a training tool, or for in-depth research: http://www.npgoodpractice.org

Better Business Bureau – Wise Giving Alliance: http://us.bbb.org/WWWRoot/SitePage.aspx?site=113&id=4ef08b14-37cb-4974-a385-7f41f63b16b0

The Foundation Center provides educational classes and it has an online grant research directory: www.foundationcenter.org.