Description
This book focuses on a specific subset of nonprofits, chartered to decrease the burden of government. Engaging NPOs to relieve the burden of government requires both an understanding of specific governmental burdens and corporate tax exempt law. This book covers those topics while teaching readers how to gauge an NPO’s ability to finance its goals without resource dependence on the government, and how to protect NPO assets against corruption. Herrington J. Bryce was a senior economist at the Urban Institute, a Brookings Economic Policy Fellow, a Fellow at the Institute of Politics at Harvard and a visiting professor in regional economics and planning at the Massachusetts Institute of Technology. He taught micro economic theory and public finance at Clark University in Worcester, Massachusetts, and was director of the program in legal and budget studies at the University College at the University of Maryland. He currently teaches courses at the College of William & Mary in nonprofits but mostly in corporate financial strategy and cost management-heavily reflected in this text. He has published extensively and has served on many state, local and federal government advisory committees. He has a PhD in economics from the Maxwell School at Syracuse University, and a Clu and ChFc from the American College. Preface | xv Chapter 1 – Purpose, Policy, Theory, Definitions and Context | 1 Purpose | 1 The Burden of Government | 2 Perspective, Collaboration, Competence | 5 Traditional, Nontraditional, Burden | 9 Organizational Design | 11 Prices, Profits and Nonprofit Motives | 12 The Context | 13 Dimension of the Problem in the United States | 13 Why the Nonprofit Option | 16 Toward a Supporting Theory | 17 Bibliography | 18 Chapter 2 – Designing, Empowering and Engaging the Nonprofit to Lessen the Burden of Government | 19 The National Trust for Historic Preservation | 19 Crafting the Intent to Lessen the Burden of Government | 19 Federal and State Designation of an Eligible Burden | 21 Classification of Nonprofits as Doers and Facilitators | 22 The Planks on Which to Design a Nonprofit to Reduce the Burden of Government | 26 Plank 1: Money | 28 Plank 2: Marketing and Persuading | 32 Plank 3: Membership and Public | 32 Plank 4: Management | 33 Plank 5: The Mission | 35 Plank 6: Collaboration and Cooperation | 37 Plank 7: Tax Exemption | 37 Plank 8: Powers to Act | 38 Plank 9: Accountability | 39 Plank 10: Legitimacy | 39 Summary and Preview | 40 Bibliography | 40 Chapter 3 – Empowering the Nonprofit to Lessen the Burden of Government | 43 The Creation of the Corporation | 44 Incorporation: Process, Purpose, Powers | 45 The Powers of the Nonprofit Corporation | 48 Prohibitions | 50 Financial Advantages and Disadvantages of Exemption | 53 Some Factors that Threaten the Loss of Tax-Exampt Status Under 501(c)(3) | 66 Summary and Preview | 68 Bibliography | 68 Chapter 4 – Nonprofits as Doers in Reducing the Burden of Government | 69 The Doers: Distinguishing Examples | 71 Categorizing 501(c)(3) Doers | 73 Doers Depending Mostly on Business Income | 78 Subsidiaries, Affiliates, and Holding Companies as Internal Facilitators | 80 Other Categories of Doers | 83 A General Comparison of Doers | 85 Lessening the Burden of Government: The Benefits and Justification of Tax Exemption | 86 Summary and Preview | 87 Chapter 5 – Nonprofit as Financiers and Facilitators in Reducing the Burden of Government | 89 Two Government-Created Examples: To Be Close But Not Controlled | 89 The Nonprofit Financers | 91 The Rules of Foundation Operation | 93 The Key Characteristics of the Facilitator | 100 Hybrids: Private Operating Foundations | 102 Summary and Preview | 104 Chapter 6 – Government Created Nonprofits to Lessen the Burden of Government | 105 Nonprofits Created by Governments to Lessen Their Own Burdens | 106 Qualifications of a Government-Created 501(c)(3) | 108 Public Authorities as Government-Created Nonprofits to Relieve Government Burden | 110 Ports and Powers | 113 Are Authorities Doers or Financers? | 123 Summary and Preview | 123 Bibliography | 124 Chapter 7 – Decision-Making and Governance Structure in Lessening the Burden of Government | 125 The Board | 125 Interlocking Directorates | 129 Conflict of Interest, Independence, and Board Members | 130 Dealing With Possible Conflicts of Interest | 132 Dealing With Non-Independence | 133 Standards at the Root of All Trustee Actions | 133 Excessive Economic Transactions and Due Diligence | 137 Duty of Organizations to Trustees and Their Rights | 138 Liability of Trustees | 139 Annual Disclosures of Involvement of Current and Past Trustees and Senior Management | 141 Summary and Preview | 142 Bibliography | 143 Chapter 8 – Financing the Burden through Contributions | 145 A General Picture of Contributions and the Sector | 145 Requirements of a Tax-Deductible Gift | 152 Problems of Accepting Gifts Subject to Debt | 158 Summary, Responsibility, and Preview | 161 Bibliography | 161 Chapter 9 – Financing the Burden through Business Earnings | 163 Business Activity as a Source of Money | 163 Definition of Related and Unrelated Nonprofit Businesses | 165 Excess Profits: A Distinction Between Related and Unrelated Income | 168 Integration of Business Operations Into a Conglomerate Structure | 169 The Organization of an Unrelated Business | 169 Tax Treatment of Different Types of Business Income | 172 Key Points on Entrepreneurial Income in Nonprofits | 188 Summary and Preview | 189 Chapter 10 – Financing the Burden through Debt | 191 The Need for a Charter and Other Documentary Powers | 191 Terms of Debt | 192 Non-Deductibility and Taxability of Interest | 194 Debt as Credit Facility | 194 Covenants, Default, Bankruptcy | 195 Strategies for Treating a Loan Due | 195 Borrowing from the Securities Market | 196 Borrowing from Nonfinancial Sources | 197 Preparing to Borrow | 197 Debt Limits and the Nonprofit | 198 Subsidized Infrastructure Debt Available to Nonprofits | 198 Long-Term Debt tor Infrastructure Used by the Nonprofit | 199 Long-Term Debt Issued by Nonprofits on Behalf of the Government for Public Purpose Infrastructure Called 63-20 Debt | 200 Issuing of Debt (Bonds) by an Authority | 202 Debt Through Tax Increment Financing | 205 Long-Term Lease Arrangements of Property | 206 Summary and Preview | 206 Bibliography | 206 Chapter 11 – Establishing Cash Flows for Sustainability | 207 The Trust | 208 Endowments: Perpetuating a Gift | 209 Specific Long-Term Assets In an Endowment: Trusts | 213 Specific Long-Term Assets for Endowments: Life Insurance Policies | 216 Gifts of Iras, Gift Annuities, and Other Such Contracts | 222 The Power of a Will | 223 Summary and Preview | 224 Bibliography | 224 Chapter 12 – Corruption and Control: Protecting the Assets for Lessening the Burden of Government | 225 Corruption | 225 Types and Effects of Corruption in Nonprofit Organizations | 226 Sources and Opportunities for Corruption | 228 Managing the Risks of Corruption and Fraud | 230 Controls: An Accounting Approach | 230 Controls: A Transaction Approach | 231 Controls: A Flow Approach | 232 Controls: Organizational Lines of Defense | 233 A Comprehensive Approach to Corruption | 234 The Discovery of Corruption | 237 The Protection of Sources and Records | 237 Insurance Against Corruption | 240 Classification and Treatment of Certain Costs | 242 A Tool of Cost Control, Avoidance of Cost Overruns, and Detection of the Risk of Inefficiency or Fraud | 246 Summary and Preview | 248 Bibliography | 248 Chapter 13 – Discussion and Dialogue | 251 Levels of Lessening the Burden of Government | 252 Types of Nonprofits Lessening the Burden of Government | 253 The Authority to Perform | 254 The Nature of the Promise to Lessen the Burden of Government | 255 To Exercise Authority the Nonprofit Needs Powers | 255 The Power to Finance and the Motive for Action | 256 Governance Structure | 256 Accountability and Disclosures | 257 Types and Range of Collaboration | 258 The Conflict Between Collaboration and Control | 258 Sources of Legitimacy | 259 Growth and Competition | 261 Debt and Off-Balance Sheet Financing | 262 Who Subsidizes Whom | 264 Tax Exemption as Price and Incentive | 264 The Rationale for This Direction | 265 Index | 269
