Hotline

By Rebecca Gardyn

Setting executive pay at a new charity

How an English major can pursue a nonprofit career

Obtaining a copy of a charity's bylaws

The Chronicle's Philanthropy Careers section asks its readers to submit questions about job hunting, recruiting, and management challenges in the nonprofit world. In our bimonthly advice column, we respond to some of those inquiries with tips about resources and recommendations from experts.

Previous editions of Hotline are available at http://philanthropy.com/jobs/archive/hotline.htm. Send your questions about job hunting, recruiting, or managing in the nonprofit world to hotline@philanthropy.com.

Q. I started a charity, which I registered with the Internal Revenue Service and which I run as a volunteer. I am being overwhelmed by the hours I'm putting in. I want to continue my organization, but I need an income. How do I go about getting compensated? What paperwork do I need to complete?

A. The founder of any charity, much like the founder of a business, is an entrepreneur, and entrepreneurs do often sacrifice compensation while getting their ventures off the ground.

"Many great entrepreneurs have to hold part-time jobs on the side so they can support themselves while still dedicating time to their nonprofits — kind of like starving artists," says Farhana Huq, founder of CEO (Creating Economic Opportunities for) Women, a nonprofit organization in Oakland, Calif., that helps female immigrants to the United States become economically self-sufficient. "Until your charity starts raising money, this is sometimes the only way."

So, if you haven't put a lot of effort into fund raising, now is the time to do so. Consider hiring a consultant to help. Both the Association of Fundraising Professionals, in Alexandria, Va., and the Alliance for Nonprofit Management, in Washington, allow you to search their Web sites so you can find a fund-raising specialist in your area.

Assuming, however, that you do have sufficient money coming in, there is no reason you shouldn't be compensated, says Shannon Nash, a tax lawyer and accountant in Sherman Oaks, Calif., who works with nonprofit organizations. Pay for your services should be part of your budget, she says.

The paperwork requirements you have to deal with will depend on whether you choose to set up your compensation as an employee or as an independent contractor.

As an employee, keep in mind that the charity will need to withhold money for Medicare and Social Security taxes from your paycheck and pay an equivalent amount from its own coffers to the Internal Revenue Service.

If you are an independent contractor, you will have to pay those employment taxes yourself and will be expected to make quarterly tax payments to the IRS.

As a self-employed worker, you will be able to deduct on your income-tax returns the costs of phone, travel, meals, supplies, and other items that are not reimbursed by the charity. If your compensation is more than your expenses, however, you will also need to pay self-employment taxes.

Basic information, as well as the forms you will need, to be paid as a charity employee or an independent contractor are available on the Web site of the Internal Revenue Service.

Because it sounds as though your charity is relatively new, Ms. Huq recommends setting up your payment structure as an independent contractor.

The flow of funds into a new charity can often be inconsistent, she says, and as an independent contractor you can keep track of the number of hours you spend working and then submit invoices to the charity for payment when it has money available.

"I worked for no or very little pay for almost three years before getting a salary because there was just no money to pay me," says Ms. Huq. "I convinced the board to pay me back wages, and they are now paid out periodically as the organization grows and becomes stronger."

As soon as the charity's cash flow becomes more consistent, Ms. Huq recommends, you should move to an online payroll system that can help you manage all the paperwork.

Once you decide how you are going to be compensated, you must next determine how much is "reasonable compensation," says Ms. Nash.

"Your payment should be in line with what similarly situated individuals would make for doing the same type of activities," she says.

Sources of salary information to conduct such comparisons are available on The Chronicle's Philanthropy Careers Web site.

Ms. Nash notes that the IRS will want you to prove that your board set your salary, and you were not in the room when your compensation was discussed. In addition, the board will have to show that it examined comparable organizations to make sure your pay was in line with the sums paid by other groups.

The organization should document all of this in the board meeting's minutes and have it signed by the board's secretary, says Ms. Nash. This should be done on the same day or soon after the actual meeting, and copies must be kept in the organization's official corporate minute and record book.

Q. I have a bachelor's in English and a varied résumé. I want to pursue a nonprofit career. Should I pursue a master's in nonprofit management, or just get some kind of certificate? What are the best programs for a master's in nonprofit management? Would I be better off specializing (in, say, fund raising) or attempt to train for a leadership role? And what's the difference between management and leadership?

A. Your questions are extremely broad, hinting that perhaps you aren't clear as to what your goals are. Before you do anything else, think about what you hope to achieve from this career switch, suggests Lyn Brennan, a partner at Battalia Winston, an executive-search firm in New York City that works with nonprofit organizations.

What motivates you to work for a nonprofit group? For which type of charity are you most interested in working — social service, international relief and development, health care, the arts? For what type of position do you think your skills are best suited — raising money or developing and carrying out a charity's programs?

Until have some of these questions answered, it is hard to recommend a specific educational path, says Ms. Brennan.

"If you've had little exposure to the nonprofit sector, I'd recommend that you get some experience before getting a master's in an area so focused as nonprofit management," she says. At the very least, spend some time volunteering and talking with people who work in various positions within the sector so you can better focus your interests.

That being said, regardless of your level of charity-related experience, you can't go wrong by obtaining a more traditional master's of business administration, says Ms. Brennan.

While her nonprofit clients have often specified that they only want applicants with master's degrees or, more specifically, M.B.A.'s, she says no client has explicitly required a master's in nonprofit management.

Beth Finnerty, executive director of Skyland Trail, a nonprofit psychiatric rehabilitation center in Atlanta, agrees that your career will benefit by attaining a master's degree.

"A master's program will give you a broad-based view of management as well as a range of experience that is applicable across a wide variety of areas," says Ms. Finnerty, who herself has two master's degrees, one in business administration and another in health-care management. "You will learn organizational systems, theory, and behavior, as well as finance, marketing, information technology, and business operations. Then you can better decide which areas interest you the most."

Ms. Finnerty recommends that you take internships at small, fast-growing nonprofit organizations while pursuing your degree so that you can obtain hands-on experience in as many management areas as possible before you graduate.

As to whether you should focus on fund raising or on grooming yourself for a leadership role, Ms. Brennan cautions you to recognize that the two are not mutually exclusive.

"Regardless of the route you take, you will have to work your way up the career chain, and virtually all nonprofit leaders, including executive directors and CEO's, are involved in raising money," she says.

Lastly, regarding your inquiry about the difference between management and leadership, Ms. Finnerty offers this analysis: "The difference between leadership and management lies in their relationship to each other: Management is a key aspect of leadership," she says. "Leadership embraces vision, innovation, strategy and planning — as well as the ability to motivate others, which is one sign of a strong manager."

Sources of information on continuing-education programs for nonprofit managers are available in an earlier Hotline column

Q. How can I gain access to a particular charity's bylaws and articles of incorporation?

A. One of the initial steps in establishing a nonprofit organization is creating its "articles of incorporation," detailing, among other things, the name, mission, location, and officers of the new charity.

The organization also creates a set of "bylaws" that outlines the role and size of the board of directors, how its members are chosen, and its governance rules and regulations.

Depending on the charity, gaining access to these documents may be easy or difficult. Some organizations keep copies of their articles of incorporation and bylaws on their Web sites, so that's a good place to start.

Another resource is GuideStar, which creates reports on individual charities and maintains copies of their informational tax returns. If an organization has amended or updated its bylaws or articles, they are required to attach copies to this form when they submit the annual form to the IRS, says Suzanne Coffman, director of communications at GuideStar.

You might also contact the state in which the nonprofit is incorporated. Most, but not all, charities are required to register with their state government agency (usually with the secretary of state or the attorney general's office), and, as part of this process, some jurisdictions require copies of a charity's articles of incorporation or their bylaws.

You can find a list of state agencies and their individual filing requirements at the Web site of the Multi-State Filer Project. Typically an organization is incorporated in the city in which it operates, but not always.

The date and state of incorporation are typically listed in GuideStar's reports and also in reports from the Better Business Bureau's Wise Giving Alliance, a charity watchdog group in Arlington, Va.

The most direct route to obtaining these documents, however, is to ask the charity for them directly.

"If a charity got a reasonable request, most wouldn't have any concerns about sharing them," says Bennett Weiner, chief operating officer of the BBB Wise Giving Alliance.

If the charity is uncooperative, ask its officials to provide a copy of the organization's Form 1023 Application for Recognition of Exemption, which they were required to file with the IRS when the charity was founded.

Organizations must attach copies of both their articles of incorporation and bylaws to this document, and they are required by law to provide copies of Form 1023 to anyone who asks them. In fact, IRS regulations require that certain documents, Form 1023 among them, "be provided immediately in the case of in-person requests and within 30 days in the case of written requests."

If the organization does not comply, it may be subject to a steep penalty. (For more information on these regulations, go to the charity section of the IRS Web site, click on "EO FAQs," then "FAQs About the Exempt Organization Public Disclosure Requirements.")

If you continue to have a problem, you can report the organization to the IRS's Tax-Exempt and Government Entities Customer Account Services at (877) 829-5500.