PPTS ON Fundamentals of Non –profit organization.pptx

Notes

1. Unit 1.Fundamentals of Non-profit organization 1.Introduction of Non- Profit Sector & Non- Profit Organizations NPO (non profit organization) are organizations that focus on a specific social cause, such as in science, education, health, arts and recreation, and religion. 1. Define the Non- Profit Organization and describe its dimensions. 2.Key concepts in Non-Profit management including board of governance Staffing, regulation, and volunteer management. 4.Concept of Non-Profit leadership and governance and the functions of boards in organizational governance 5.Board's Role and Responsibilities. 6 Roles of board members in Non- Profit organizations 7.Responsibilities of Non-Profit Organizations. 8.Elements of board behaviour for effectiveness of organization. 9.Developing Leadership and Improving Governance in Non-Profit Organizations 10.Improving the Effectiveness of Boards of Directors and the tools used to facilitate assessments of board performance

2. Fundamentals of Non –profit organization Non Profit making organizations social welfare charity. They usually promote science, art, charity, commerce or religion for social development and not for personal profit. Such establishments can be registered under Section 8 of the Indian Companies Act, 2003. Non profit organization

3. It is a type of organization which does not gain profits for its owners, instead all the amount of money they earn as donation is utilized in pursuing objectives of it and in keeping it running. Non-profit seeking organizations are under the non-profit sector and are tax-exempt charities or other types of public service organizations.

4. Meaning of Not for Profit Organization A not-for-profit organization (NPO) is an entity formed for purposes other than making a profit. It aims to generate revenue and distribute profits to shareholders or owners, not-for-profit organizations exist to fulfill a mission or serve a social cause. These organizations are driven by their commitment to advancing the common good, promoting social welfare, advancing education, providing healthcare, supporting cultural and environmental causes, or addressing other societal needs.

5. The sole objective of such companies is to extend necessary aid to a specific group of people or public at large. Usually, they do not perform credit transactions which are generally done in a profit making organization. Hence, they need not to keep a list of credit records, accounts for loss or profits as such. 

6. They do keep a book of records which is then used to keep track of consumption of their funds and to assess the financial standing of the company during a fiscal year. This record is kept to maintain the transparency between the expenditure and income of that particular company and then submitted to statutory authority, also known as Registrar of Society. 

7. Characteristics of Not for Profit Organizations The Motive for Service – Non-profit organization meaning they are set up mainly to provide service to a specific group of people or public, without discriminating for their caste, creed and gender. They extend help free of cost or at a nominal price as profit making is not their motive. For example, they provide services like health care, education, food, recreation, shelter, clothing, sports facilities, etc.

8. Management – Usually, a managing committee or executive committee looks after these organizations, and its members elect them.  Members – Since these organizations are formed as charitable societies or trusts, the people who give subscriptions to these are its members.  Income Sources – The primary source of these trusts are donations, subscriptions, government grants, incomes from investments, legacies and several others. 

9. Surplus – If a financial year surplus is generated, that will be credited to the capital fund.  Reputation – These organizations generally earn a reputation for the contribution it makes through the services and not for any of its member’s personal goodwill.  Accounting Information – Generally, any present or potential contributors and its members can have access to its accounting information.

10. Accounting Process of Non - Profit Organizations Non-profit seeking organizations do not trade with the motive to earn a profit, like any other organization, they need to keep records of expenses, assets, income, liabilities, etc. Most of their sources of income are donations, subscriptions, etc. which are mainly made through cash or bank transactions.

11. Keeping proper credit documentation is required as these trusts are accountable to its members and contributors and most importantly, to the Government as well. For a matter of fact, the government monitors these trusts whether they are using their funds for right causes or not.

12. Along with ledgers and cash books, they also hold a Stock Register. This stock registers records of all consumables and fixed assets, and are maintained carefully. Moreover, the not for profit organizations maintain a general fund account or capital funds instead of a capital account and this is one of the primary differences between a profit o rganization and non-profit organization.

13. Receipts and Payment Account – Here, all the cash and bank transactions are recorded. It is used to prepare income, expenditure accounts and balance sheets, and finally, three of these have to be submitted to the Registrar of Societies.  Expenditure and Payment Account – It is somewhat similar to profit and loss accounts and keeps track of deficit or surplus, if any.  Balance Sheet – A balance sheet has to be made following the guidelines like any other organization’s balance sheet is prepared. 

14. Types of Non - Profit in India The term non-profit meaning is an entity which serves society without any motive to earn a profit. There are majorly two types of such organizations in India . Companies Under Section 8 – It is one of the most popular forms of non-profit organization in India and comes under Companies Act, 2003. These types of companies are set up to promote social wellbeing and developments. Any profit generated from them can only be used for promotion of the objectives of that particular body and cannot be divided among its members. The registration process of them is quite similar to that of other companies, but a special certificate is given in this case.

15. NGOs – These are non-government organizations which come under the Section 8 of Companies Act. These companies are established in India but are allowed to accept foreign funds. However, the funds are monitored by the National Intelligence Agency. A few eminent examples of non-profit organizations of India are CRY (Child Rights and You), GOONJ, Help Age India, Give Foundation and various others.

16. T he distinguishing characteristic of not-for-profit organizations is their mission-driven focus. Rather than maximizing financial returns for shareholders, NPOs prioritize achieving their stated mission or objectives. This mission guides their activities, decision-making processes, and allocation of resources. It is founded by individuals or groups who are passionate about addressing a particular social issue or making a positive impact in their community.

17. Not-for-profit organizations rely on various sources of funding to support their operations and activities. These sources may include donations from individuals, corporations , and foundations, grants from government agencies and charitable organizations, fundraising events, membership fees, and revenue from fee-based services or programs. Unlike for-profit businesses, not-for-profit organizations do not distribute profits to shareholders but instead reinvest any surplus revenue into furthering their mission and objectives.

18. Governance and management structures within not-for-profit organizations typically include :

19. The board sets: organization's mission, establishes policies, hires and evaluates executive leadership, and ensures compliance with legal and regulatory requirements. Not-for-profits may also have: paid staff members responsible for day-to-day operations, program delivery, fundraising, and administrative functions.

20. Not-for-profit organizations are also characterized by their commitment to transparency and accountability. Essential for maintaining public trust and confidence in the organization's mission and operations Accountable -stakeholders , including donors , beneficiaries, volunteers , and the public, and are often required to disclose financial information and program outcomes.

21. Not-for-profit organizations play a vital role in addressing societal needs, promoting social justice, and advancing the common good. Through their mission-driven approach, diverse funding sources, dedicated governance and management structures, and commitment to transparency and accountability, NPOs contribute to building a more equitable, inclusive, and compassionate society.

22. Characteristics of Not For Profit Organization Mission-Driven Focus : NPOs are driven by a mission or purpose aimed at addressing a specific societal need or advancing a social cause. This mission guides all aspects of the organization's activities, decision-making processes, and resource allocation. Social Benefit Objective Non-Distribution Constraint Diverse Funding Sources Volunteer Involvement Governance Structure Transparency and Accountability Community Benefit Orientation Tax-Exempt Status

23. Objectives of Non Profit Organization The objectives of non profit organizations have been stated below. Provide essential services that would not otherwise be available, such as education, healthcare, and social welfare programs. Advocate for important causes and promote social change. Conduct research and gather data to inform policy and practice. Provide a voice for the voiceless and marginalized. Build community and promote social cohesion. Empower individuals and communities to take action on issues that matter to them. Promote international cooperation and understanding. Protect the environment and promote sustainable development. Celebrate and preserve cultural heritage.

24. Key concepts in Non-Profit management including board of governance Staffing, regulation, and volunteer management . A board of directors, also known as a nonprofit board, is the governing body of a nonprofit. The members of a nonprofit board focus on the high-level strategy, oversight, and accountability of the organization. This contrasts with employees or managers who oversee the day-to-day operations of the nonprofit. 

25. The  individuals who make up your board of directors  are responsible for making key decisions that address the organization’s mission, strategy, and goals. They aim to address the public’s interest through the organization’s work and act as the legal voice for the organization. 

26. Importance of Boards Nonprofit board of directors is in charge of the governance of your organization while your executive director and team members handle the day-to-day operations .

27. Nonprofits need a board of directors for a variety of reasons. Not only is the members’ wealth of knowledge and experience invaluable to the organization, but they are also necessary for essential tasks like applying for bank accounts, filing annual reports, and making important purchases.  Additionally, they act as the guiding voice for large decisions like approving annual budgets, borrowing money, and setting plans for major growth or reorganization. 

28. Structure of a Nonprofit Board of Directors Nonprofit boards of directors are  structured with a number of committees . These committees allow boards to tackle nominations and governance, finances and risk, and executive decisions. A current trend in the sector is to have three committees on the board.  

29. The following committees generally make up this three-part structure:  Governance Committee:  The Governance Committee recruits new board members and  determines the performance  of the board as a unit. Essentially, this is the committee that governs and oversees various board activities.  Internal Affairs Committee:  The Internal Affairs Committee is responsible for the finances of the organization, including budget review, capital acquisitions, personnel, and other such activities.  External Affairs Committee:  The External Affairs Committee is in charge of communications, marketing, and PR with the community. This committee is also in charge of fundraising, an essential part of board engagement. 

30. Responsibilities of a Nonprofit board of Directors When people become board members for nonprofits, they are expected to take on a number of responsibilities for the organization. Different responsibilities  of nonprofit Boards of Directors: Legal and fiduciary responsibilities, Board meeting attendance, Executive compensation decisions, and Committee service.

31. The most important quality to look for in a good board member is a passion and dedication to your mission. When your board members are driven by your mission, they’ll be more likely to make the decisions and have the motivation to continue pushing that mission forward.

32. Culture : The culture of your organization all comes back to a few essential core values that your organization represents. These values are what is considered right and good for your organization.

33. Character : Every day, we make judgments about people based on their actions. The character of the people you choose to serve will come back as a reflection of your organization as a whole. Choosing caring, respectful, and kind people to be on your board of directors will show the community that your organization also holds those characteristics.  

34. Competence : When you choose members for your board of directors, you’ll need to be sure that they’re competent in the areas in which they need to have competence. Of course, they need to be able to learn and retain information from meetings and about your organization.

35. Connections : In the past, nonprofits recruited board members simply because they had highly affluent friends. However, now that’s not the only type of connection you should be interested in. While affluent connections are always helpful, you should also consider board members with connections who have a passion for the mission, have a connection to those you serve, and who can help you better serve the community. 

36. 8.Elements of board behaviour for effectiveness of organization Nonprofits need skilled, experienced board members to fulfill the mission and ensure strong leadership, yet the boardroom isn’t always a calm place.   Active boards deal with regular challenges and the occasional urgent matter. Tensions can surface when strong personalities clash in the boardroom. Board effectiveness reflects how well boards handle tension and conflict and how they work together to accomplish a nonprofit’s goals

37. While they face many challenges to achieving their mission and meeting their stakeholder’s expectations, NPOs with a robust system of governance and a strong, effective board of directors have a greater likelihood of success than a poorly governed organization.” A board effectiveness evaluation is something your board should address annually, and board management systems such as  BoardEffect  come with built-in survey tools and templates that makes the process easy and convenient.

38. A board effectiveness evaluation is something your board should address annually, and board management systems such as  BoardEffect  come with built-in survey tools and templates that makes the process easy and convenient.

39. 5 pillars of an effective board The right board members and the right structure along with a firm commitment to good governance is a good start to board effectiveness. To take things a step further, boards can look to the following 5 pillars of effective board governance to evaluate themselves individually and collectively in various areas of nonprofit leadership. Board Mission and Purpose Board Membership Board Governance Board Efficiency Evaluating and Measuring Progress

40. The technology, processes, and skills that today’s nonprofit board members need are evolving as quickly as the external landscape. Organizations must be all at once informed, more secure, more collaborative, and more purpose driven. To fully meet changes and  modern governance standards , board members must have a grasp of all the workflows, insights, policies, stakeholders, and moving parts that make up the nonprofit organization and its activities. Without it, leaders may fail to make the right decisions at critical times and can expose their organizations to extremely costly governance deficits and operational risks.

41. Board mission and purpose 1. Mission and purpose Does the board have clarity on its mission and purpose? 2. Goal setting Are you setting timely goals? Is there a clear understanding of what the organization and board want to achieve and a clear direction of how they want to get there and by when? 3. Professionalism How are the expectations for attendance, culture, and boundaries being set? 4. Board relationships What actions are you taking to encourage collaboration and trust across your board and management team? How are you fostering transparency?

42. Board membership 5. Board composition Do you have the right mix of board members with the right skill sets? Do you need to develop board member skills or fill gaps? 6. Clear roles and responsibilities Do you have well-defined roles and charters for committees outlining responsibilities? 7 .Board member on boarding How are you making the necessary documents available to bring new board members on board, and get them up and running quickly? 8. Board development and training How are you ensuring all board members have the necessary information and resources to be able to carry out their fiduciary duties? Do you have a board development plan in place?

43. Board governance 9. Board governance systems Are you using modern governance board software? Does it support real-time online agenda management? Does it come with top-of-the-line security that meets security standards for boards? 10. Board structure and processes Is your governance structure streamlined so that you have the right board structure and processes to be effective? 11. Supporting the board Do you have the necessary staff, structures, and systems in place to support your board for meetings, logistics, and communications? Can trustees easily access information, give feedback, and ask any questions?

44. Board efficiency 12. Meeting optimization Do your agendas allow time for strategic discussion? Are you properly allocating time for the most important issues and subjects? 13. Accessing the right data Are you using a board portal that can deliver the right data to help aid decision-making? Evaluating and measuring progress 14. Objective board self-evaluations. Are you carrying out annual self-assessments to identify strengths and weaknesses among the board?

45. 9.Developing Leadership and Improving Governance in Non-Profit Organizations Enhancing Governance Practices:  Following our discussion on governance as the steering mechanism of our non-profit 'ships', we now focus on specific governance aspects like strategic planning, performance assessment, and resource development. Understanding these elements is critical to ensure our organizations do more than survive—they thrive in their missions. Strategic Planning:  A pivotal aspect of governance is strategic planning, where the board’s role is to set long-term goals and align them with the organization’s mission. This process is crucial for charting the future course of our organizations and requires a comprehensive understanding of both the internal and external environments they operate in.

46. Performance Assessment:  Another key governance role is performance assessment. It’s not just about evaluating outcomes but enhancing the board's effectiveness in steering the organization. Adopting tools and frameworks for assessment can greatly aid in this process, ensuring that boards are not just overseeing but actively contributing to organizational success. Resource Development:  Fundraising and resource development are vital for sustaining and advancing our missions. This involves strategic alignment of resources, ensuring they are utilized effectively and that fundraising efforts are closely tied to the organization's strategic goals.

47. 10.Improving the Effectiveness of Boards of Directors and the tools used to facilitate assessments of board performance