Non Profit Organizations

[Sharpshooter]

I wasn't referring to anyone on this forum. Some people (probably not a majority) that brag that they work for a non-profit organization, like they're better than everyone else.

See, that's the problem - there's no reason for an NPO to be throwing away money like that to acquire help.

So, from how you describe it, an NPO is a business then, which agrees with at least one of my points.

I think I'll start a business and if I fail, I'll call it an NPO.

[LostViking]

I agree a lot of NPOs are not run well, they overpay executives and waste money all over the place. In my experience these are the ones that typically run almost exclusively off volunteer labour, with the execs siphoning much of the cash for themselves. Lots of mistakes are made, people aren't as dedicated or skilled, its more of a hobbyshop than a workplace. However there are a lot of them that are run well, and I would argue that in most cases paying reasonable wages is an indicator that the NPO is dedicated to doing quality work. (If anyone has different experiences please share)

Oddly enough, a lot of NPOs are the exact definition of what a lot of people would like corporations to be, pay the workers good wages but no profits whatsoever go to the owners/capital investors. If we were talking about Wal-Mart then people would jump for joy with that type of business model. However, since the NPO may be trying to do something more important than what Wal-Mart is doing, they suddenly become the bad guy.

This is a bookkeeping position being discussed, likely around $20/hour. There are a ton of young men and women who graduate with a degree and go into an accounting program (in this case, CGA) and work in industry. This means they make the same $20/hr but they are putting all of their hard work towards the goal of making some owner copious amounts of cash. This person is considering putting his efforts towards making some sort of difference, and likely just wants to receive the same wage as he would elsewhere.

I would rather have someone who is working towards a good cause get paid good money and have someone who is working towards making some guy rich make less, rather than the other way around. It should be those who make the bigger difference who get paid more, but people cannot separate themselves from the idea that anyone who works for a good cause should do so for free, essentially saying that all the money in the world should go to those who are greedy and lets ignore the nice people because they shouldn't want money anyways. This is flawed reasoning in my opinion.

Now when it comes to bookkeeping, there are organizations (both non profit and for profit) who decide to try to pinch pennies at every turn. This always has the same result, things gets behind, work piles up, people have to rush, mistakes are made, and most importantly if someone higher up in the organization is doing something illegal with the money the accounting staff doesn't have the time to notice and investigate the financial anomalies that type of situation creates. If you aren't willing to pay a good wage, it likely means you aren't willing to increase the size of your staff, this often results in one person doing the work of two or three. In accounting, that means trouble, time to stop and think is everything. The more time you have to breath, the more consistent you become, the more accurate the records, the better picture you have of the cash flowing through the org, the easier it is to spot illegal activity, and the more likely you are to discover ways to save the org money.

There are a lot of people who would think shrinking the accounting staff down by a couple workers and offering lower wages provides more money to the NPO, this simply wouldn't be the case. I'm not saying we should pay someone worth $20/hr double or anything like that, but if the NPO doesn't have a dedication to doing their finances correctly, that is an extremely bad sign!

[Mastaj]

NPO's are structured in many ways like a business, except their 'shareholders' or memberships or volunteers and Board of Directors don't typically get renumerated for their time and work. They also have to file paperwork every year with the gov't, much like any private business, except they have to show that they're not making or keeping a profit of the monies that are coming in. NPO's can't hoard cash, many of the grants they receive have to be used up fully....and many of the grants don't cover wages of employees....

[Sharpshooter]

Actually, this is not exactly correct. A NPO can in fact make a profit, and maintain a positive cash balance. The issue is that the funds can only be used towards the society itself, and not distributed to shareholders (link). So anyone can start a business as a NPO, and make a great living off of it (i.e., pay yourself a very high salary). The organization must have a board of directors (minimum of 3 people), and is "owned" by the public, but in reality if you start the NPO, you would choose the board members so you can maintain control and pay yourself handsomely. There are a number of organizations like this, that are really for-profit businesses, but are legally NPO's. Not that I agree with people that do this (i.e, IKEA), but it is technically legal and some organizations do it this way for optics and tax reduction purposes.

A charitable organization is a different designation, and must be applied for separately from being a NPO. As a charitable organization, you must show that your business is operating for the benefit or welfare of a disadvantaged group; you can at this point accept donations, and issue tax receipts for them.

[Mastaj]

I agree with your post. I was thinking about getting into the issues and loopholes of balance sheets and 'income' and what NPO's can and can't do, but didn't really want to get into the sinews of it. Glad you did for the sake of clarity.

And yeah, there are differences in registered charities, which is what I was unspecifically referring to, as opposed to other types of NPO's. My experience being moreso with charities type NPO's, than the IKEA types.

Most charities who are NPO's who work at the 'front lines' of society through their programs in the real world pay relatively well, but no one should make the mistake that employees of most of those NPO's are terribly overpaid, because the reality is, many are not...and many of them do more than one job at the NPO, and do plenty of unpaid work at times as well.

Also, having a positive cash balance is much different than 'earning profits'. Many times an NPO registered charity's balance sheet will be flush with cash as grant monies come in....but by the next fiscal year, those funds are gone through the various programs they were intended to be allocated to. A legit and honest charity will show very little cash on hand held over from year to year, unless it's in the form of assets, like land, building, vehicles, or donations that have come in prior to gov't required filings.

[Drybone]

Like many have indicated, just do the homework on the cause, books, and structure of the non profit before donating /volunteering.

Some are good but scams do take place.