1. C H A P T E R 7
The Nonprofit Sector
Chapter 7

2. Types of Nonprofit Leisure Services Organizations
Educational organizations
Religious organizations
Mutual benefit organizations
Public benefit organizations

3. Noncharitable Organizations
Examples of 501(c)(7) tax-exempt organizations:
Social clubs
Country clubs
Youth sport organizations
Homeowners associations
Hobby clubs
Fraternities and sororities

4. Charitable Organizations
Examples of 501(c)(3) tax-exempt organizations:
YMCAs
Boys and Girls Clubs
Hospitals
Foundations
Museums
Cultural centers and historic sites

5. The Membership Model Sometimes there is an up-front initiation fee.
If low-income people are accepted, the initiation fee is waived.
There is an annual membership fee.
If low-income people are accepted, their membership fees can be partially or totally waived.
(continued)

6. The Membership Model (continued)
Programs have additional program fees.
Low-income people can have program fees partially or totally waived.

7. Revenue Engines as Primary Sources of Income
Leisure services programs or services that are or can be profitable:
Fitness center membership fees
Early childhood development and day care programs
Camp programs
Birthday parties
Classes

8. Secondary Sources of Revenue
Leisure services programs that are typically not very profitable:
Youth sport programs
Programs for people with special needs
Senior citizen programs
Open gym programs

9. Management of Membership
Prospecting for new members
Advertising programs
Incentives to existing members to bring in their friends
Discounts or initiation fee waivers
(continued)

10. Management of Membership (continued)
Management of existing members
Engagement programs
Personal services
Monitoring their usage
Membership renewal discounts

11. Fund-Raising and Donations
Primary fund-raising
Campaigns run by the organization itself to fund operating or capital costs
Secondary fund-raising
Typically for operating cost support
Campaigns are usually run by external organizations such as United Way or Community Chest
Generally precludes recipients from doing their own primary fund-raising for operating costs

12. Capital Campaigns Large donors Small donors
A primary large donor giving 25 to 50 percent is required.
Secondary large donors giving 10 to 25 percent are required.
Small donors
$25 to $1,000 donations make up the small-donor base.
Small donors need to see large donors before they will give.

13. Development Directors
Full-time staff who manage fund-raising
Usually bring large donors with them
Have very good prospecting skills
Are good at donor cultivation and relationship building

14. Donor Cultivation The goal is to make friends with the donor.
Donors give to their friends, not organizations.
The rule of ten
Be patient in relationship building.
Don’t ask for a donation until at least the 10th meeting with potential donors.

15. Fund-Raising Consultants
Brought in to reassure the board that a licensed pilot is flying the plane
Are important when the staff are new or not up to the task of fund-raising
Can be very effective even when the staff is good at fund-raising

16. Boards of Directors
Required to be chartered as a nonprofit organization
Must meet on a regular basis
Must maintain minutes of their meetings and be prepared to share them with the state
Must contain at least three members
Typically have more than 10 members for the purpose of fund-raising
Are appointed to the board by the board itself

17. Nonprofit CEOs
Similar to corporate CEOs in that they are running a business
Managing the revenue engines
Managing staff
Answering to the board
Similar to governmental CAOs in that they are running a charity
Managing the charitable programs
Have the primary fund-raising responsibility in the organization

18. The Donation Exchange Donating makes donors feel good.
Donors want to make the world a better place.
Donors feel guilty about their own wealth and need to share it.
Donors recognize that their donations are important to the continuation of the organization doing its work.

19. Nonprofit Versus Business Organizations
For-profit leisure services organizations
Need to repay investors and lenders
Have no other sources of revenues except fees for services
Nonprofit leisure services organizations
Do not need to repay donors
Have donations as an alternative source of revenue
(continued)

20. Nonprofit Versus Business Organizations (continued)
For-profit leisure services organizations
Pay taxes on their profits
Must provide a reasonable level of financial transparency to investors
Nonprofit leisure services organizations
Pay no taxes on their profits
Must provide a reasonable level of financial transparency to donors

21. When Nonprofit Organizations Make a Profit
They can spend the money on hiring additional staff.
They can make capital improvements.
They can vacate their nonprofit status and become a for-profit organization.
They can sit on the money until the Internal Revenue Service catches them.

22. Nonprofit Versus Government Organizations
Government leisure services organizations
Collect taxes
Serve everyone
Charge reasonable fees or no fees at all
Nonprofit leisure services organizations
Don’t collect or pay taxes
Serve members and some people in need who can’t afford their services
Charge competitive fees but waive them for the needy

23. Summary Nonprofit organizations don’t pay taxes.
When they are 501(c)(3) organizations, donations to them are tax deductible for donors.
Fund-raising is a constant task for nonprofits.
Revenue engines can sustain operating costs.
Boards of directors can be large in order to enhance fund-raising.
Nonprofits are different from businesses and governmental units in some ways and the same in other ways.