How Mission Drives Nonprofits
Mission answers the question - "What do you do?" It expresses the core values of a nonprofit, and ultimately forms the basis for extending/maintaining its tax-exempt status. In the absence of a mission, nonprofit organizations would have a different economic model. They are tax-exempt because they are taking on a responsibility that would otherwise fall to government; therefore the government relieves them of the burden of taxes. In so doing, the government requires nonprofits be held to certain standards.
“Mission statements" articulate what a nonprofit does and who it benefits. It shows dedication to a particular set of values and ideal goals to adhere to, from the smallest nonprofit to vast nonprofit enterprises. Although most frequently comprised of a few sentences, it is much more than a simple description of purpose; a mission statement is part of the legal status of the organization. All activities must flow from the mission. For that reason, the mission be a feasible undertaking, not a herculean goal.
Nonprofits Similarities to For-Profit Corporations
Nonprofits are similar to for-profit corporations, regardless of size:
- What distinguishes nonprofits is mission; for-profit corporations seek profits to benefit the owners (private corporation) or shareholders (publically traded corporation). Nonprofits seek funds to execute the mission.
- The organizational chart of a nonprofit is often functionally no different from a for-profit corporation. Lines of authority from the CEO to staff and so forth are comparable.
- Carrying out the non-profit mission requires paid staff that is often willing to accept lower salaries than a for-profit position commands because money raised must first be used to carry out the mission, not pay staff market rate. For that reason, the most vibrant nonprofits are led by people committed to the mission who can vigorously advocate for the cause within the organization and in the community-at-large.
- For-profit and nonprofit entities have expenses to carry out what they do. The decision to become or remain nonprofit is significant, as a remarkable nonprofit, Kiva, demonstrates. Kiva raises money to loan capital for small businesses in developing countries. Stanford Social Innovation Review has lauded its success, noting that Kiva has had to turn down commercial capital and continues cobbling grants together to stay a mission-based nonprofit. See www.Kiva.org
- Nonprofits are accountable, internally through their boards and externally through public records. Donors can check up on nonprofits through Guidestar, a repository of information from mission statements to IRS filings and other online resources. Annually, nonprofits must file a 990 with the IRS; it is a detailed report that includes how much it has raised, how it was raised, how it was spent and who manages the funds. The 990 also lists the names and salaries of the highest paid staff as well as the names and business affiliations of the trustees. As it reveals the organization's culture through its fiscal decisions, the 990 is also a public relations document that affects fundraising.
Mission and Fundraising
To carry out their missions, nonprofits need to fundraise. In fact, they must fundraise to maintain their tax-exempt status. A worthy cause funded solely by a generous founder is not considered to be serving the public good. The IRS publishes "Stay-Exempt" summaries for more information. The funds raised must reflect broad support from the community. During the first five years of a nonprofit’s life, it is treated as if it is already a public charity supported by the community. This is to allow time to actually build public support. In a nonprofits' sixth year, however, it is imperative that a nonprofit show contributions in the form of gifts, donations and grants from the community-at-large. If a nonprofit cannot show public support, its tax-exempt status may be challenged and the organization could be re-classified as a private foundation.
Doing good and not paying taxes to achieve that end is a public trust. Nonprofits, whether start-up or established units, must adhere to their missions and show substantial community support or lose the privilege of serving the “greater good” as a tax-exempt entity.
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