Nonprofit Glossary of Terms
*Adapted from BoardSource, National Council on Foundations, Financial Literacy, The Alliance's Principles and Standards for Nonprofit and Philanthropy Excellence©, and contributions from expert nonprofit professionals.
Organizations that are nonprofit entities to which contributions are tax-deductible to the extent permitted by the law.
Social welfare and advocacy organizations as defined by the IRS.
Trade associations and business leagues as defined by the IRS.
An option for public charities (except churches) to measure their permissible lobbying activity using an expenditure test.
see “Form 990/Form 990-PF”
A system of financial recordkeeping in which transactions are recorded as expenses when they are incurred (i.e. when a bill is received for merchandise or services provided to the organization) and as income when it is earned (i.e. when services or merchandise is provided by the organization, or the organization receives a commitment of a contribution) rather than when cash is paid or received. The alternative is cash-basis accounting.
Ad hoc Committee
A temporary committee established to address a specific issue, not necessarily within a specific time frame.
Any behavior or action that speaks in support of, recommends, argues for, or otherwise defends or pleads for a cause, mission, or organization that benefits others.
A separate and independent coalition of nonprofits, grantmaking institutions or individuals associated with such institutions that shares information or provides professional development and networking opportunities to individual nonprofits and grantmakers with a shared interest in a particular subject or funding area.
Organized attempts by nonprofits to solicit contributions made on an annual basis.
Annual Operating Budget
An itemized listing for a specific year that includes:
- the amount of all estimated support and revenue which an organization anticipates receiving
- all estimated expenses that will be incurred.
An annual document provided to stakeholders and donors that lays out organizational income, expenditures, programs, and progress.
Articles of Incorporation
An official statement of creation of an organization; it is filed with the appropriate state agency.
The nonprofit equivalent of a sales pitch.
What is owned by an organization: cash, stocks, bonds, real estate, or other holdings of a nonprofit or foundation.
Statute and Description: Miss. Code Ann. § 79-11-507 | A charitable organization with annual contributions between $250,000-$500,000 when all of the solicitations and fund-raising functions are conducted solely by volunteers, must file a financial statement reviewed or audited by an independent CPA along with the charitable registration statement required by Section 79-11-503. The Secretary of State may require an audited financial statement prepared by an independent CPA if the organization’s annual revenue is at least $25,000. NOTE: Every charitable organization that uses a professional solicitor (defined as a staff employee or person who performs fundraising functions and services for pay) for its fundraising functions must file an audited financial statement prepared by an independent CPA.
An examination and verification of records by a certified individual for compliance reasons.
A report showing the financial condition – Assets, Liabilities, and Net Assets – of the organization at a particular moment in time. Also referred to as a Statement of Financial Position.
An individual who serves on the governing board of an organization.
Board of Directors (BOD)
A group of independent volunteers that represent the community served that is ultimately responsible for the actions of a nonprofit. The board’s specific responsibilities should be outlined in the organization’s bylaws.
A common term used for “for profit” corporations.
The rule book for an organization. The bylaws should be a detailed document addressing issues such as membership and the board of directors.
Any major campaign intended to raise significant amounts of funds. Typically these funds support the development of building construction, renovations, and/or endowments.
The movement of cash into and out of an organization; or the difference between cash receipts and cash disbursements during a period of time. See Statement of Cash Flow.
The Chief Executive Officer is the administrative head of the organization, hired by the board to manage the resources and programs of a nonprofit. This position is most frequently called executive director, but sometimes called president (when there is a designated “board chair” position).
A kind of nonprofit corporation focused on charitable causes and whose income is generally exempt from taxation by Federal and State law. Charitable organizations work for the common good and cannot allow profits to benefit anyone member or group. The IRS defines 501(c)3 nonprofits as either charities or foundations.
Chart of Accounts
A list of all accounts used in accounting system, including assets, liabilities, income and expenses.
Code of Ethics
A general outline of broad ethical principles, unique to an individual or organization that usually includes values, behavior and overall standards of conduct.
A tax-exempt foundation that serves a specific geographic area and enables residents of that area to establish specified funds for charity without the expense of establishing individual private foundations.
Conflict of Interest
A situation in which the personal or professional concerns of a member of the board or staff may affect his or her ability to put the welfare of the organization before benefit to self or another party.
Unconditional transfers of cash, other assets, forgiveness of debt, or in-kind goods to an organization.
A corporate (company-sponsored) foundation is a private foundation that derives its grantmaking funds primarily from the contributions of a profit-making business. The company-sponsored foundation often maintains close ties with the donor company, but it is a separate, legal organization, sometimes with its own endowment, and is subject to the same rules and regulations as other private foundations.
D&O (Directors and Officers) Insurance
Insurance that protects board members and top staff personnel from personal liability created by board decisions or actions.
A type of restricted fund in which the fund beneficiaries are specified by the grantors.
An official notification by the IRS stating that a nonprofit is recognized as a tax-exempt organization.
The act of sending out information for solicitation, donations, volunteers etc. through mass mailing. These can be through postcards, flyers, or anything that passes USPS requirements.
A person selected by the membership of a nonprofit corporation or the board of directors to serve as a person in charge of the overall policy of an NPO, including the selection of officers.
Grant funds distributed at the discretion of one or more trustees, which usually do not require prior approval by the full board of directors. The governing board can delegate discretionary authority to staff.
The formal procedure by which a nonprofit ceases to operate or exist; involves filing with the state and distribution of assets.
All the ways in which people differ, and it encompasses all the different characteristics that make one individual or group different from another. It is all-inclusive and recognizes everyone and every group as part of the diversity that should be valued. A broad definition includes not only race, ethnicity, and gender — the groups that most often come to mind when the term “diversity” is used — but also age, national origin, religion, disability, sexual orientation, socioeconomic status, education, marital status, language, and physical appearance. It also involves different ideas, perspectives, and values.
A person, group of persons, or institution making donations or pledges.
A fund for the sole purpose of supporting charitable organizations in which the donor wants to invest including cash, securities or other assets at a public charity generally eligible to take an immediate tax deduction. A contribution to a donor-advised fund is an irrevocable commitment to charity; the funds cannot be returned to the donor or any other individual or used for any purpose other than grantmaking to charities.
A condition specified by a donor that will release them from an obligation.
A donor-imposed condition, temporary or permanent, that specifies a use or uses for a contribution.
The purpose, sometimes publicly expressed, for which a philanthropist intends a charitable gift or bequest.
The efforts of a charity or other non-profit organization to foster long-term relationships with donors who provide support. These efforts are also intended to ensure that gifts and financial support are put to the donor's intended use.
An expectation that a board member exercises reasonable care and follows the business judgment rule when making decisions.
Duty of Care
A requirement that board members be reasonably informed about the organization’s activities, participate in decisions, and do so in good faith and with the care of an ordinarily prudent person in similar circumstances.
Duty of Loyalty
A requirement that a board member remain faithful and loyal to the organization and avoid conflicts of interest.
Duty of Obedience
A requirement that a board member remain obedient to the central purposes of the organization and respect all laws and legal regulations.
To actively work for or publicly endorse a specific candidate or a political party. (501(c)(3) nonprofits are prohibited from endorsing political candidates or parties.)
Employer Identification Number (EIN)
This number acts similarly to the social security number for individuals. It is sometimes referred to as a federal ID number. A nonprofit should apply for an EIN even if it has no employees.
A permanently-maintained fund established to provide income for a nonprofit organization.
A review process of a nonprofit by the Secretary of State's office, commonly known as an "audit." In Mississippi, this can be initiated for myriad reasons but can come from a random annual draw, complaints, whistleblower, legal action, or if there is an expressed need.
Excellence In Action (EIA)
Mississippi’s only core competencies certification program for all nonprofits and philanthropies. EIA is a practical learning experience based on the MS Alliance of Nonprofits and Philanthropy’s Principles & Standards for Nonprofit and Philanthropy Excellence© that delivers information and practical applications in twelve categories. The certification is designed to address changing needs as organizations develop. The Alliance continues to work closely with the MS Secretary of State’s Charities Division to help remediate compliance issues and assist in the organizational learning development of all Mississippi charities through the EIA process.
The person in a nonprofit responsible for management of the day-to-day affairs. They are also in charge of implementing policies set by the board of directors.
Excess Benefit Transaction
A transaction in which an economic benefit is provided by a nonprofit, directly or indirectly, to a disqualified person, and the value of the economic benefit provided by the organization exceeds the value of the consideration (including the performance of services) received by the organization.
When a private foundation makes a grant to an organization that is not classified by the IRS as tax-exempt under Section 501(c)(3) and as a public charity according to Section 509(a), it is required by law to ensure that the funds are spent for charitable purposes and not for private gain or political activities. Such grants require a pre-grant inquiry and a detailed, written agreement. Special reports on the status of the grant must be filed with the IRS, and the grantees must be listed on the foundation's IRS Form 990-PF.
A person or organization that acts on behalf of another person or persons, putting their clients' interests ahead of their own, with a duty to preserve good faith and trust. Being a fiduciary thus requires being bound both legally and ethically to act in the other's best interests. They may be responsible for the general well-being of another (e.g. a child's legal guardian), but often the task involves finances; managing the assets of another person, or a group of people, for example. Money managers, financial advisors, bankers, insurance agents, accountants, executors, board members, and corporate officers all have fiduciary responsibility.
A responsibility of board members and the nonprofit board as a whole to serve as trustee of the organization’s assets on behalf of the greater community; responsibility for financial viability and proper handling of financial matters.
Financial Accounting Standards Board (FASB)
The national governing board which sets the accounting standards known as Generally Accepted Accounting Principles (GAAP).
An accounting statement detailing financial data of an organization. This includes expenses, income, assets, and liabilities.
A 501c3 organization that provides an umbrella for an unincorporated group that is not fully prepared to incorporate. Fiscal sponsors provide such services as payment of taxes, insurance, maintenance of financial records, payment of expenses, human resources administration, and other general duties for the unincorporated group until such time as it is able to file its own 501c3 application.
Any corporation, whether for profit or not, that is organized in one state and does business in another.
Form 990/Form 990-PF
The IRS forms filed annually by public charities and private foundations respectively required by the IRS. The letters PF stand for private foundation. The IRS uses this form to assess compliance with the Internal Revenue Code. Both forms list organization assets, receipts, expenditures and compensation of officers. Form 990-PF includes a list of grants made during the year by private foundations.
A tax-exempt nonprofit organization operating under more stringent IRS regulations than other 501(c) (3) organizations; may be designed to collect and distribute funds for nonprofit purposes or may operate its own programs. See “Community Foundations, Corporate Foundations, Private Foundations, Public Foundations.”
Any activity intended to raise income.
A group that meets regularly to donate or make related decisions.
The specific purpose of a project, nonprofit organization (NPO), or fundraiser.
Funds given to non-profit organizations by foundations and institutions to be used for a specific purpose, such as a study.
The most localized level.
A financial report that summarizes income and expenses and resulting surplus or deficit for a given period of time. Also known as the statement of activities. See Statement of Activities.
The submission of articles of incorporation and other required documents by a business, nonprofit, or foundation to be registered with the MS Secretary of State to be recognized as a legal entity.
The system of practices, procedures and policies intended to safeguard the assets of the organization from fraud or error and ensure accurate recordkeeping.
The giving of goods or services instead of cash, real property, or real estate.
IRS Letter of Determination
Official documentation given by the IRS verifying an organization’s tax-exempt status.
What the organization owes to others, including accounts payable, debts, mortgages and other obligations to pay.
Attempting to influence legislation through direct contact with lawmakers or with constituents.
Someone who attempts to influence the votes of public officials, for or against, specific causes.
The fundamental purpose and reason for which an organization exists.
A brief description of the organization’s approach to filling the need it was created to address.
Failure to perform in a reasonable manner in a given situation.
An incorporated nonprofit organization, usually but not always barred by law from making a profit.
Nonprofit Organization (NPO)
An entity, either incorporated or not incorporated, with the following characteristics that distinguish it from a business enterprise:
- contributions from donors who do not expect profit.
- operating purposes other than to provide goods or services at a profit.
- absence of ownership interests.
Organizations that are independent from government and not part of the for-profit business sector.
A person elected by the board of directors to serve as an appointed agent of a corporation. Common positions include: president, one or more vice-presidents, one or more secretaries, and treasurer. They is not necessarily a director or even an employee of a for-profit or nonprofit corporation.
Open Meeting Laws
State regulations that require government agencies and some nonprofit organizations receiving public funding to open at least some of their board meetings to the public, also called “Sunshine Laws”.
The short term (one to two years) goals, objectives and tasks that describe the strategies a nonprofit will use to fulfill its strategic plan.
A reasonable buffer against unforeseen, seasonal, irregular, or exceptional cash shortages.
Any name by which a group is known.
Organization Legal Name
An organization’s name listed on the IRS Letter of Determination.
A donor-imposed restriction that states all or part of a fund may be used under specified circumstances.
Announcements to mass media (newspapers, radio, TV etc.).
A relatively long piece of content sent to reporters and other possibly interested parties.
Funds from bequests, life insurance, and charitable annuities. These are often released upon a donor’s death.
A verbal or written promise to donate a specific amount.
A nongovernmental, nonprofit organization with funds (usually from a single source, such as an individual, family, or corporation) and program managed by its own trustees or directors, established to maintain or aid social, educational, religious, or other charitable activities serving the common welfare, primarily through grantmaking. U.S. private foundations are tax-exempt under Section 501(c)(3) of the Internal Revenue Code and are classified by the IRS as a private foundation as defined in the code.
Benefits received by an insider with sizable influence over a nonprofit organization’s decisions when benefit is of greater value than service provided.
An itemized list of all estimated support, revenue, and expenses that an organization anticipates receiving for a specified project.
Public foundations, along with community foundations, are recognized as public charities by the IRS. Although they may provide direct charitable services to the public as other nonprofits do, their primary focus is on grantmaking. To be eligible for membership in the Council, a public foundation must grant at least $60,000 yearly and must dedicate at least 50 percent of its organizational budget to a competitive grantmaking program.
Public Support Test
An IRS regulation used to determine whether a nonprofit organization is a private foundation or public charity; involves determining the source of the majority of funding for the organization.
The number of voting members or board members needed to carry out the business of the board. The number needed for a quorum should be specified in the organization’s bylaws.
Assets or income that is restricted in its use, in the types of organizations that may receive grants from it, or in the procedures used to make grants from such funds. Also referred to Restricted Support – donor-restricted revenue or gains from contributions.
Essentially, risk is the chance of something going wrong and the danger that injury, damage or loss will occur as a result of a decision or activity. (Example: The risk of fire or an auto accident.)
This is putting into place policies, practices and procedures to reduce the level of risk or the likelihood that injury, damage or loss will occur.
An exemption that nonprofit educational or some health providers may use in conducting the business of their nonprofits.
The section of Form 990 that provides detailed information to support the annual return required by the IRS of all tax-exempt organizations as specified in section 501c of the United States Internal Revenue Code of 1986.
Secretary of State (Charities Division)
This is the official State regulatory body for charities and nonprofit in the state of Mississippi. Charity registrations and compliance issues are supervised by this office.
Social Venture Funds
Funds whose donors also contribute labor. Similar to funds from a venture capitalist in for-business enterprises.
Statement of Activities
One of the primary financial reports for an organizations, reporting the income, expenses, and change in net assets for a period of time—a FASB title. See Income Statement.
Statement of Cash Flows
A financial report component summarizing the sources and uses of cash for a period of time-- a FASB title. The Statement of Cash Flows is a historical report and is different in form and use from a cash flow projections. See Cash Flow.
Statement of Financial Position
One of the primary financial reports for an organization, reporting the assets, liabilities, and net assets as of a specific date-- a FASB title. See Balance Sheet.
A long term (three to five years) plan that identifies and attempts to answer three questions using information gathered from stakeholders both internally and externally to the organization: Where are we now? Where do we want to be? How will we get there?
State regulations that require government agencies and some nonprofit organizations that receive public funding to open at least some of their board meetings to the public, also called open meeting laws.
How an organization can fund a project after a grant period has elapsed.
Target Population/Target Demographic
The set of people as defined by demographics served by a specific NPO or specific project.
Nonprofits are considered exempt from paying federal (and state) income taxes on year-end surpluses, except for unrelated business income. Nonprofits in Mississippi are not exempt from paying sales tax on certain purchases unless specifically given the exemption by the state tax commission.
Restrictions on funds specified by a donor dependent on the passage of time, or some other temporary condition.
A legal instrument for holding assets of an individual for the benefit of one or more persons or organizations.
The board of directors is also called “trustees” of the organization, meaning that both the public trust and financial trust are the responsibility of the board.
Unrelated Business Income Tax (UBIT)
A tax on income from a trade or business which is regularly carried on and which is “unrelated” to the exempt purpose of a nonprofit or foundation.
Unrestricted Funds or Support Revenues
Revenue from donations that may be used in any way. An unrestricted fund is one that is not specifically designated to particular uses by the donor, or for which restrictions have expired or been removed.