Nonprofit Toolbox and Glossary



In the nonprofit sector it can seem as though there is a different language being spoken. Learn what the key words are in the world of Nonprofits. Understanding the framework of communication is critical to achieving your mission, vision and values. And–if you have a word that needs to go onto our Glossary–drop us a note at [email protected]. At the American Nonprofit Academy we are always learning!

501(c)3: Section Language in the IRS code which establishes a private foundation or public charity to be exempt from federal income taxes. It also establishes donations to such qualified organizations are tax deductible for donors.

78 Database: A list maintained by the IRS of those organizations qualified to receive tax deductible contributions. See: Publication 78

990 Form: Required by the IRS to be filed annually by federally tax exempt organizations and includes info on the organizations programs, financial position and mission. A publicly available document.

990 EZ: A version of the 990 form which can be filed by organizations with limited receipts and assets.

990 N: A version of the 990 form filed electronically with limited receipts.

ACCRUAL METHOD OF ACCOUNTING: Recognizes earned revenue when earned, contributed revenue when promised or received (whichever happens earlier) and recognizes expenses when incurred. By contrast, the cash method of accounting only records transactions when cash changes hands.

A.F.P.: Association of Fundraising Professionals. International professional association for fundraising which has strong education, training and ethics standards.

ALUMNI BOARD MEMBER: Designation given to past board members that allows organization to keep in touch with previous leadership. The nonprofit may also use this for perspective, historical reference and cache to attract funding. In some cases, an organization will have an annual Alumni Board Member event that connects the “Old Guard” to the “New Guard” for a social opportunity in order to exchange ideas and build connections.

ANNUAL GIVING: Fundamental approach to multi-year pledges of donations. Often called a Giving Society, donors commit to a multi-year pledge which allows the nonprofit to have a more sustainable cash flow.

ANNUAL REPORT: Not to be confused with the IRS required annual 990 form, this is a voluntary report presented by and organization to show their accomplishments and financial results in light of their mission and purpose.

APPEAL: The planned process or campaign for fundraising. Can be presented via a print campaign, digital marketing, direct mail or combined.

ASK: The process of meeting with a potential donor and making a request for funding or resources. The phrase “Making The Ask” is most commonly used in fundraising.

AUDITED FINANCIAL STATEMENT: Financial statements where an independent accountant has tested the accuracy of the financial statements and issues an opinion that the statements are free from material misstatements in accordance with the method of accounting described in the report. (Note: the accountant does not test everything. Relatively small errors may still exist.)

AUDITORS OPINION: A document statement provided by the auditor from their report which represents the nonprofits financial position.

BALANCE SHEET: A statement of the nonprofits financial condition at a specific point in time.

BENEFICIARY: The grantee (aka donee) receiving the funds or assets.

BEQUEST: Funds made available after the Donor passes.

BOARD DIVERSITY: The wide variety of elected Board Members who serve a nonprofit. This considers the following talents and traits: Gender, Age, Field of Expertise / Profession, Corporate Representation, Sexual Orientation, Capacity, as well as, Race and Ethnicity. A strong board has board diversity.

BOARD GOVERNANCE: The process of providing strategic leadership to a nonprofit organization.

B.O.D. DUES / FEES: Board Member fees or dues that are required and paid most often on an annual basis. This is generally used to cover costs associated with meetings. These fees are not contributions, but a cost of participating in board service.

BRICK AND MORTAR: Refers to physical structure associated with the nonprofit and not programing. Funders often have specific funding requirements that either include or exclude Brick and Mortar projects.

C.F.R.E.: Certified Fund Raising Executive. International professional designation with credentials. The organization maintains ethics, best practices and continuing education for its members.

CAPACITY: Used to describe the amount of funds and resources that a potential donor has.

CAPITAL CAMPAIGN: Associated with a fundraising project, which generally lasts several years, to fund a major structure or organizational asset. The intensive project is often the main focus of the nonprofit with a specific start and end point.

CASH FLOW STATEMENT: A financial statement covering a specific period of time which details the cash receipts and disbursements of the organization.

CHARITABLE FOUNDATION: Legal categorization of a nonprofit that donates funds and support to other organizations, or provides sources of funding for its own charitable purposes. This structure often needs to raise funds for redistribution. Different from a Private Foundation which generally manages its own funds without outside fundraising.

CHALLENGE GRANT: An agreement that specifies that the grantee is required to raise money or gifts from other contributors in order to receive the challenge grant monies.

CLIENT: Person who receives Programing from the nonprofit.

COLLATERAL: An asset of the organization pledged by the organization against the repayment of a loan.

C.O.I. / CONFLICT OF INTEREST: Policy that defines the structures of board member behavior in areas of financial operations. This policy is generally set forth in the nonprofit’s By Laws. The COI is essential in reporting and is expected to be annually reviewed by the full board. Most often, Board Members are required to sign a Conflict of Interest Policy document.

COMMUNITY FOUNDATION: Typically covering a defined geographic area, this is a grant making nonprofit designed to pool together donations from multiple donors toward specific charitable purposes.

COMMUNITY TOOL BANK: Organization that lends or rents tools and equipment to other nonprofits. The service allows nonprofits to spend minimal amounts of money on tools required to achieve a particular project without investing valuable resources on tools that may not be used on a regular basis.

COMPILED FINANCIAL STATEMENTS: A report from someone (it may or may not be an independent accountant) where the independent accountant has put the information provided by the organization in the form of a financial statement without testing and provides no form of assurance as to the accuracy of the statements.

CONSENT AGENDA: A process that bundles several topics, reports and routine items into one agenda item which is voted upon. This saves a lot of meeting time and is reserved for non-controversial topics. However, this requires Board Members to have reviewed the Consent Agenda materials in advance of the Board Meeting.

CONTRACTING: Sometimes government agencies or other nonprofits will contract with a nonprofit to provide services that they are unable to perform. For example, a domestic violence shelter is needed but a municipality is unable to manage such a facility or program. The municipality will contract with a nonprofit who will then manage the process.

CONTRIBUTION: A voluntarily and unrestricted payment of cash, assets or gifts from one entity to another.

CORPORATE GIVING PROGRAMS: Established inside a for profit business for the benefit of a named organization or nonprofit programs.

COST REIMBURSEMENT GRANTS: An agreement to fund that reimburses specific costs incurred by the nonprofit in their performance of programs and activities.

CROWDFUNDING: Raising money by asking many people for smaller amounts of donations, typically conducted via social media, emails and digital service apps.

CURRENT ASSET: Property, which may be tangible or intangible, that is likely to be converted to cash within 12 months.

CURRENT LIABILITIES: Obligations (and debt) that is due within the next 12 months.

D&O COVERAGE: Directors and Officers liability insurance which is positioned to cover Board Members during their tenure on the board.

DECLINING GRANT: A funding agreement structured over multiple years that gets smaller each year.

DEMONSTRATION GRANT: Made to establish a new program or project intended to serve as a model, which if successful, may be expanded.

DEVELOPMENT: Associated with the process of fundraising, but with a long-term view. Fundraising is more immediate, cash flow related. While development sets to build relationships with sustainable funding opportunities. This process is not always ASK related, but instead seeks to build meaningful dialogue with potential funders and donors.

DIRECT PUBLIC SUPPORT: These are contributions, gifts, grants, and bequests received directly from the public. It would include amounts received from individuals, trusts, corporations, estates, foundations, public charities, or raised by a third party fundraiser.

DISCRETIONARY FUNDS: With respect to Foundations, monies distributed at the discretion of one or more trustees, which may not require approval by the full foundation board.

DONEE: An organization (or persons) that receive cash/gifts.

DONOR: A person or organization that contributes a thing of value.

DONOR-ADVISED FUND: Charitable giving structure which is managed by a third party. Instead of setting up and managing a fund, an organization administrates the process. Costs associated with this are lower than a if an individual were to set up their own private foundation. Arizona Community Foundation is an example of this process.

EMPLOYER MATCHING GRANTS: Whereby an employer matches the tax deductible contribution made by the employee.

EMPLOYER IDENTIFICATION NUMBER (EIN): The 9 digit tracking number assigned by the Internal Revenue Service. Every IRS-designated tax-exempt nonprofit organization has a unique EIN. This number is generally used in grant applications and contracting.

ENDOWMENT: A fund structure where the principle amount is never used. The proceeds earned from the management of the endowment are used. Endowments may be use specific which means their proceeds may only be used for a particular project and have been legally defined.

EXECUTIVE COMMITTEE: A special committee which is generally structured to include the main leadership, Board Chair and key leaders of the nonprofit. This committee may meet more often than the full board. The Executive Committee in some cases has the authority to make more substantial decisions such as contracts. The rules and structure of the Executive Committee should be described in the organization’s By Laws.

EXECUTIVE SESSION: Often a board meeting is open to executive level staff and others. When Executive Session is called, only voting board members may be present. The nonprofit CEO may or not be included in this meeting. Used for private discussions, confidential topics such as compensation. This is also called a Closed Meeting.

EXPENDITURE RESPONSIBILITY: IRS procedures established for foundations when awarding grants to organizations other than 501(c)3 classified.

FAMILY FOUNDATION: A grant making nonprofit that gets it money primarily from one family.

FIDUCIARY DUTY: The legal duty to act solely in another party’s interests. Board members have a fiduciary duty when they represent their nonprofit organization.

FISCAL SPONSOR aka Fiscal Agent: Structure that allows an organization or individuals to be a part of a larger nonprofit’s legal structure. The larger tax exempt organization accepts and is responsible for grant and donation monies on your behalf. Often used for time limited missions or for new groups while they are in process of getting their Letter of Determination from IRS. Some groups and individuals choose to be under a fiscal sponsor to save administrative and reporting burdens, plus many receive additional benefits from the Sponsors grouped benefits.

FISCAL YEAR: A 12 month period selected by the organization tracking the use of its funds. It does not need to be the calendar year.

FORM 990: The IRS Form 990 is filed annually. This document discloses financial and operational information to the government. It is also used in Grants and Contract processes. The organization Guidestar also uses this information for their rating system.

FUNDING CYCLE: The pattern whereby a foundation reviews, decides upon, and notifies grant applicants. Depending on the foundation, some cycle quarterly or annual.

FUNDRAISING EXPENSE: Used to describe expenses incurred in soliciting contributions, grants or gifts to the organization.

G.A.A.P. : Generally Accepted Accounting Principles. The commonly accepted way of recording and reporting accounting information. Set by the Financial Standards Accounting Board (FASB). Sections 116 and 117 cover the nonprofit sector.

GIVING CIRCLE: An independent group of individuals who donate their money to a pooled fund and decide as a group where to focus their donations.

GRANT: A financial award to an organization for a specific purpose. Funding process is often competitive. A Grant seeks to obtain funding or services for a specific use and is documented within a specific structure set forth by the Grantor. Grants are becoming more web-based and are often being submitted via web portals.

GRANT PAYABLE: Money or awards that a nonprofit plans to pay other organizations or individuals who typically nonprofit themselves.

GRANT WRITER: Professional who writes, prepares, submits and processes grants. This is often an outside consultant who contracts with nonprofits. The professional organization for this profession is the American Grant Writers Association which offers training and best practices. Rates are usually $50 – $100 per hour for researching grant opportunities and $50-125 per hour for writing proposals and applications.

GRANTEE: Person or organization receiving funds or a grant.

GRANTOR: Person or organization distributing funds to a nonprofit.

GUIDESTAR: The nonprofit organization that tracks and lists participating organizations. Their rating service is often used by funders to determine reputation, impact and service.

GOVERNANCE: The process and structure of governing, managing and stewardship. Strong board governance is based on the notion that the organization has a set standard of policies and procedures. In essence, this is the process to determine how the board functions in pursuit of achieving the organization’s mission.

HONORARY CHAIR: A chairperson in name only who does not have any assigned tasks. Generally used for event fundraisers to attract sponsors and donors. The title is often prestigious and helps nonprofits to align with high capacity donors.

INCOME: Money received by the organization from grants, services provided and contributions.

INDEPENDENT FOUNDATION / PRIVATE FOUNDATION: Often funded as a bequest, this is a type of private foundation. Typically make grants to other tax exempt organization’s to carry out their charitable purpose.

INDIRECT PUBLIC SUPPORT: Funds that come through another organization such as United Way. These contributions are collected and then distributed to the nonprofit. Current models include “Rounding Up Campaigns” or “Add an Extra Dollar” as seen at retailers.

INDIVIDUAL GIFT: This comes from a personal donor and not a corporation. Often individual gifts can come from members of a larger corporation or foundation.

IN-KIND DONATION: Equipment or supplies contributed to the organization. Not cash. May also include shared staff time or facility space/services.

JOINT FUNDING: A program or project supported by more than a single donor/grantor.

KPAWN SESSION / Keeps The President Awake At Night: A structure that supports a nonprofit’s Chief Executive Officer. This session is a planned meeting time which addresses long-term issues that are critical for moving the nonprofit forward. It is not held during Board Meetings but can dovetail into mission strategy.

LETTER OF DETERMINATION: The official document from the IRS that signifies the organization has achieved tax-exempt status. This document is used in the Grant or Contract process and other manners.

LETTERS OF SUPPORT: Generated from an organization supporter–this is often a personal appeal communication showing support for the Grantee.

LEVERAGE GRANTS: Awards given to Grantees by Foundations with the thought to encourage additional funding from other sources.

LIMITED PURPOSE FOUNDATIONS: An organization with restricted funding to one area of need.

MAJOR GIFT: An amount level set by the nonprofit. Depending on the size of the organization a major gift might start at $10,000 or perhaps even $100,000. Each nonprofit needs to set their own level standards.

MANAGEMENT AND GENERAL EXPENSES / OVERHEAD: Money spent by the organization not related to programs or fundraising. Typically includes salaries of management and directors, legal services, office management, accounting costs and other expenses not related to programs or fundraising of the organization.

MISSION: The main purpose for which a nonprofit organization exists. Answers the question: What is the focus of service and commitment to service?

MOBILE GIVING: Online giving platforms that work from hand-held devices such as mobile phones. This is generally used for one-time, disaster relief projects with donations that are under $10. The profile of the Mobile Donor is younger and one who is actively connected to social media.

NAMING RIGHT: Often associated with a major gift where the donor’s name appears. This could be on a building or physical structure. Universities and cultural institutions may name “Chairs” which indicates a funding of the Chairperson’s salary or department costs.

NTEE CODE: National Taxonomy of Exempt Entities Code. A classification system created by the National Center for Charitable Statistics for nonprofits that divides the nonprofit world into categories.

OFFICERS CERTIFICATE: A statement executed by an officer of the organization stating that at a formally called board meeting the resolution was adopted and remains in effect.

OPERATING PROGRAMS: Activities conducted by the nonprofit which seek to accomplish its mission.

OPERATING FOUNDATIONS: Nonprofits that use a major part of their money and resources to provide charitable services and programs of its own.

OPERATIONAL SUPPORT GRANTS: Money provided to support the general management and operating expenses of a nonprofit.

P.O.E. / Point Of Entry: The process of how a donor comes into to connection with the nonprofit. This term is used in fundraising and can help an organization determine how to cultivate prospective donors.

PADDLE RAISE: Seen at fundraisers that include an auction, this is sometimes called Fund A Need. The auctioneer calls for guests to raise their paddles for a specific amount and then their bidder number is charged accordingly. There are often a range of donation amounts starting with the highest number and then moving down in steps to the lowest amount of $50 to $100. These donations are fully tax deductible as opposed to winning bid items from a live auction.

PAYOUT REQUIREMENT: Generally, private foundations must distribute at least 5 percent of their average market value of assets each year.

PEER TO PEER FUNDRAISING: Supporters use their individual social networks on the organizations behalf for the purpose of raising money.

PERMANENT RESTRICTED ASSETS: Property (tangible or intangible) that is subject to donor imposed restrictions that cannot be removed.

PERFORMANCE GRANT: A grantor agrees to fund grantee based on some metric such as number of persons served, volunteer hours completed.

PLANNED GIVING: The process of establishing a gift which is paid by the estate of the donor. Some planned giving is funded by insurance, asset transfer or real estate. High net worth donors may involve estate planning professionals in this process. The gift is fully documented in a legal document such as a Last Will and Testament.

PLEDGE: Funds promised to an organization that have not been received and may be planned over a period of several years. Most organizations plan for a certain percentage of failure or inability to collect these pledges in their cash flow budgets.

PRIVATE FOUNDATION: A legal entity set up by an individual, a family or a group of individuals, for a purpose such as philanthropy. Unlike a charitable foundation, a private foundation does not solicit funds from the public.

PROGRAM: Associated with the resources and activities organized to provide services that follow the nonprofit’s mission. Program funding is generally the opposite of Bricks and Mortar funding.

PROGRAM RELATED INVESTMENT / PRI : A loan (at low or zero interest) from a foundation to an organization for a program or project that supports the organizations activities.

PUBLIC CHARITY: An organization which receives its income mainly from the general public or from government/municipal sources. Public charities support broad issues and should not be limited to a few individuals or connected families.

POPULARITY BASED GRANT: This is a funding process whereby nonprofits compete to get the most “likes” (votes) using social media and digital platforms in order to win funding from the sponsoring partners/grantors.

RAISER’S EDGE: Database system that tracks donor activity, fundraising goals, projects and nonprofit development measurements.

RULING YEAR: The identified year confirmed by the IRS which the organization received 501(c)3 status.

REVIEWED FINANCIAL STATEMENT: Financial statements where an independent accountant does some analytical analysis and limited testing as needed to provide limited assurance, but not an opinion, that the independent accountant is not aware of any changes that need to be made to the financial statements in order for them to be in accordance with the method of accounting described in the report.

ROBERT’S RULES OF ORDER: Standard meeting process which allows for discussion and effective governance. The structure is democratic and allows for robust discussion.

RULING YEAR: The year that the IRS granted an organization 501(c)(3) status. This is important when a nonprofit has been operating for a period of time before a Letter of Determination was achieved since it effects the process of tax deductible giving.

SARBANES-OXLEY ACT (S.O.X.): Federal legislation that determines legal structures for the way a board and board leadership functions. The main intent of this legislation revolves around transparent financial reporting and stewardship of whistle-blowing. This relatively newer legislation has created standards that are not always familiar to Board Members.

SET ASIDES: Money set aside for up to five years by a foundation for specific project or purposes which are accounted for as a qualifying distribution of the foundations annual payout requirements.

SHOW BOARD MEMBER: Board Members who are high profile and who lend their name, credibility and support to the organization. A Show Board Member will probably not attend meetings, serve on committees or participate. However, this Board Member may be a large donor or serve as a community connector. Elected officials such as Governors, Senators or members of Congress, celebrities or large donors often perform this function.

SOCIAL BUSINESS VENTURE: A social business venture generates profits, but rather than return those profits to shareholders, like commercial ventures, it reinvests those profits to further the social venture and the resulting social benefits. This structure is now being favored by funders as it has a sustainable approach to raising money.

STATEMENT OF ACTIVITIES: Equivalent to the for-profit “Income Statement” which shows the Revenue and Expenses for a period of time; generally a month or a year.

STATEMENT OF FINANCIAL POSITION: Equivalent to the for-profit “Balance Sheet” which shows the Assets (what you own) and Liabilities (what you owe) and the Net Assets (the Equity, or the Assets in excess of the Liabilities) at a point in time. Generally, at the end of the period covered by the Statement of Activities.

STATEMENT OF FUNCTIONAL EXPENSES: Unique to non-profit organizations, this statement details expenses by natural classification (salaries, rent, travel, etc.) and by function (program, management and general fundraising) in a grid.

TABLE HOST: Responsibility to invite and coordinate the attendance of guests at a seated event. Board Members are generally called to serve as Table Hosts for community events. This may include selling tickets or full table sponsorships.

TRUSTEE: With respect to Foundations, a board member or officer who makes decisions on how funding is distributed.

VOLUNTEER: Person who gives services without pay to an organization. Volunteers are the backbone of most nonprofits. Many donors make financial commitments after serving as a volunteer first. They become engaged via an experience and then become a financial supporter.

VENTURE PHILANTHROPY : Using venture capital and business planning concepts of metrics goal setting/innovation/mass market engagement.

WORKING BOARD MEMBER: The opposite of a Show Board Member. This is a fully functioning Board Member who serves the organization fully and according to the requirements of the nonprofit.

WORKPLACE GIVING: Often administered by a larger corporation and through the Human Relations Department, this is a program which allows employees to have a percentage of their paychecks applied to a nonprofit. These funds are often matched 100% or partially. The United Way program is an example of this.

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