By Cliff Ennico
“I started a nonprofit organization about three years ago. In the beginning, we had three directors — we were told we needed at least three to get our federal tax exemption — but two of them quit shortly after we formed and I have struggled to fill those two positions since. People sign up, probably out of personal friendship for me, but then quit within a year.
“We’ve done pretty well despite all that — we had over $50,000 in donations last year — but no matter what I do to get more people interested, I always end up doing all of the work.
“Is there any way around this problem? I have a day job and can’t afford to spend 100 percent of my time on the nonprofit’s activities.”
No question about it: Nonprofit organizations (called 501(c)3 organizations after the section of the U.S. Internal Revenue Code that exempts them from federal income taxes) are time vampires that will suck all of the available time out of your life — if you let them.
I have had the privilege of working with dozens of nonprofit organizations in my 40-year career, and, in my opinion, there is one thing above all else that determines whether or not a nonprofit will grow and achieve its mission:
The presence of an “inner core” of one, two or three people (maximum) who are willing to shoulder most of the work and devote a substantial amount of their time to the nonprofit’s activities.
No matter how many people are technically (and legally) involved with the nonprofit, it inevitably falls to one or two people to do the bulk of the work: scheduling the events, working with volunteers and employees (if any), and most importantly — fundraising, fundraising and fundraising.
In the case of your nonprofit, dear reader, that somebody is you.
Ask any nonprofit president, director or executive director (a full-time employee who runs the nonprofit’s day-to-day operations and reports to the board of directors), and they will tell you that dealing with donors, applying for government grants and otherwise dialing for dollars take up 90 percent of their total time.
If you’re not good at fundraising or comfortable doing so, do not start a nonprofit. It takes up lots of time, is extremely frustrating and can lead to some unpleasant soul-searching if you are not passionately, fanatically driven to achieve the nonprofit’s mission without any assurance of a reward if it’s successful. It’s extremely difficult to ask other people to give up their hard-earned money for something you don’t believe in without feeling like a fraud.
Still, it sounds like your nonprofit has been somewhat successful and needs a strategy to grow to the next level. What you need to do is find one or two key people who are as passionately committed to the nonprofit’s mission as you are and who will help you share the workload and avoid burnout.
Here are some ideas:
Look for Retirees. Older people have two things your organization desperately needs: time on their hands (sometimes too much) and some money they can donate to help you keep the organization on life support.
Consider Paid Volunteers. Yes, that’s something of a contradiction in terms, but quite a few people are looking to make a few extra bucks for the chance to do some good for the world. Especially college students — they are socially motivated and need beer money. Post some notices on the campus bulletin boards of your local college or university (don’t forget the tear-off strips with your phone number or email address).
Pay Yourself. With more than $50,000 in annual donations, your organization can afford to pay you a little something to help keep you motivated and pay some bills. If you have donated a significant amount of money to the organization, then consider treating it as an interest-free loan to be paid back over time. A return of principal is not a taxable event as compensation would be.
If you haven’t, prepare a board resolution authorizing you to take $10,000 to $15,000 out of the checking account each year for personal expenses and your time. That will be subject to federal and state income taxes (at ordinary income rates because it’s compensation), but it will help you psychologically as you will no longer feel you are working for nothing.
Just don’t get too greedy. By taking out too much, you may put your organization’s tax-exempt status in jeopardy. For guidance on how much a nonprofit can pay in overhead expenses, see https://smallbusiness.chron.com/much-can-nonprofit-legally-spend-overhead-72388.html. Once your organization gets closer to $100,000 in donations, I would make sure your annual compensation is approved by the independent members of your board (those who do not work day to day in the organization).
One last thing: Since you have more than $50,000 in annual donations, you are no longer eligible to file the postcard annual report form (Form 990-N) with the IRS. You will now need to use Form 990-EZ (www.irs.gov, search for “Form 990-EZ”).
Important Note: If you have filed for tax-exempt status for your nonprofit using Form 1023-EZ online, be prepared to wait up to six months for approval as the IRS is currently preoccupied with administering the COVID-19 stimulus programs (see https://www.irs.gov/charities-non-profits/charitable-organizations/wheres-my-application-for-tax-exempt-status).
Cliff Ennico (crennico@gmail.com) is a syndicated columnist, author and former host of the PBS television series “Money Hunt.”
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