theOREGON

NONPROFITCORPORATIONHANDBOOK

Fourth edition

Cynthia Cumfer and Kay Sohl

Published by:Technical Assistance for Community Services

www.tacs.orgEastbank Commerce Center

1001 SE Water Street, Suite 490Portland, OR 97214

503.239.4001 fax 503.236.8313

Copyright © 2005, 2001, 1996, 1993 by Cynthia Cumfer and Kay Sohl. All rightsreserved. No part of this publication may be reproduced, stored in a retrievalsystem, or transmitted, in any form or by any means, electronic, mechanical,photocopying, recording or otherwise, without the prior written permission ofCynthia Cumfer and Kay Sohl.

Cover design by Gini Chin

To order a copy of The Oregon Nonprofit Corporation Handbook, visit www.tacs.org or orders@tacs.org to place your order online, or call TACS at 503.239.4001 toplace your order over the telephone. Visit our website or call TACS for pricingand shipping information. If you are ordering bulk quantities, special discountsmay apply.

A Practical Guide for Boards of Directors & Officers of Oregon Nonprofit Corpora-tions (Chapter 13 of the Handbook) is also available. Please call TACS at thenumber above for more information and for prices.

We have done our best to produce accurate information, forms, and samples. Laws aresubject to differing interpretations and can change, and each group has its own uniquefacts. Neither the authors nor publisher assumes liability in connection with the use ofthe information, forms, and samples in this book. You should have an attorney oraccountant review your paperwork and the decisions you make based on this book.

TO MY FATHER, DONALD A. CUMFER, WITH LOVE

Thanks, Dad, for your sense of ethics, your faith in me, your kind heart, your goodbusiness and common sense, and your hard-headed stubbornness that sees a difficult

project through from beginning to end.

CINDY

TO MY MOTHER, CAROL GEORGE SOHL

Thank you for surrounding me with nonprofit organizations, and for sharing yourjoys and frustrations as a nonprofit executive, a tireless board member, and lifetime

civic activist.

KAY

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v

TABLE of CONTENTS

ACKNOWLEDGMENTS xxviHOW TO USE THIS BOOK xxviiWHAT'S NEW IN THIS BOOK xxixHOW TO FIND AN ATTORNEY OR AN ACCOUNTANT xxxi

PART 1 — GETTING STARTED 1

1 SHOULD YOUR ORGANIZATION BE A NONPROFITCORPORATION? 3

2 THE STRUCTURE AND TYPES OF OREGON NONPROFITCORPORATIONS 16

3 SETTING UP YOUR OREGON NONPROFIT CORPORATION 314 WRITING BYLAWS 47

PART II – THE TAX-EXEMPT ORGANIZATION 85

5 FEDERAL TAX-EXEMPT STATUS 876 FILLING OUT THE TAX-EXEMPT APPLICATIONS 1207 PUBLICLY SUPPORTED ORGANIZATIONS AND FEE/ACTIVITY

SUPPORTED ORGANIZATIONS (PSOS AND FASOS) 1458 POLITICAL ACTIVITY AND LOBBYING BY TAX-EXEMPT

ORGANIZATIONS 1749 BUSINESS ACTIVITIES BY TAX-EXEMPT ORGANIZATIONS 20210 FISCAL SPONSORSHIP 21511 STATE AND LOCAL TAX EXEMPTIONS 23212 TAX RETURNS FOR TAX-EXEMPT ORGANIZATIONS 240

PART III – SUCCESSFUL FUNCTIONING: PEOPLE 257

13 BOARD OF DIRECTORS AND OFFICERS 25914 MEMBERS AND MEMBERSHIP CORPORATIONS 31515 EMPLOYEES 33616 INDEPENDENT CONTRACTORS 37117 VOLUNTEERS 38918 HOW TO SUCCESSFULLY RESOLVE CONFLICT 415

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PART IV – SUCCESSFUL FUNCTIONING:MONEY, RECORDS AND RULES 427

19 UNDERSTANDING FINANCIAL MANAGEMENT 42920 MAKING A BUDGET 43521 FUNDING: OBTAINING RESOURCES FOR YOUR

ORGANIZATION 46422 PROTECTING YOUR NONPROFIT FROM FRAUD AND ERRORS 49823 KEEPING BOOKS AND PREPARING FINANCIAL REPORTS 51624 PAYROLL REQUIREMENTS AND PROCEDURES 55725 EVALUATING YOUR ORGANIZATION'S FINANCIAL HEALTH 57126 ELECTIONEERING AND LOBBYING BY ALL NONPROFIT

CORPORATIONS 59227 RECORDKEEPING, REGISTRATION, AND RULES 617

PART V – CHANGING YOUR CORPORATION 643

28 REVIEWING AND CHANGING YOUR ARTICLES AND BYLAWS 64529 MERGING WITH ANOTHER CORPORATION OR SELLING YOUR

ASSETS 66430 DISSOLVING YOUR OREGON NONPROFIT CORPORATION 677

APPENDICES 689

FORMS

INDEX

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EXPEXPEXPEXPEXPANDED TANDED TANDED TANDED TANDED TABLE ABLE ABLE ABLE ABLE ofofofofof CONTENTS CONTENTS CONTENTS CONTENTS CONTENTS

ACKNOWLEDGMENTS xxviHOW TO USE THIS BOOK xxviiWHAT’S NEW IN THIS BOOK XXIXHOW TO FIND AN ATTORNEY OR AN ACCOUNTANT xxxi

PARPARPARPARPART IT IT IT IT IGETTING STGETTING STGETTING STGETTING STGETTING STARARARARARTED 1TED 1TED 1TED 1TED 1

1 SHOULD YOURORGANIZATION BE ANONPROFIT CORPORATION?3

Types of NonprofitOrganizations 4

Nonprofit Corporation 4Formation 4Liability 5Control 5Continued Existence 5Registrations, Books andRecords 5Tax Consequences 5

Trusts 5Formation 6 Liability 6Control 6Continued Existence 6Registrations, Books andRecords 6Tax Consequences 7

Associations 7Formation 7Liability 7Control 7Continued Existence 8Registrations, Books andRecords 8Tax Consequences 8

Other Types ofBusiness Organizations 8

Cooperative 8Major Features 8

Profit (Business) Corporations 9Major Features 9

General Partnerships 10Major Features 10

Limited Partnerships 11Major Features 11

Limited Liability Companies 11Major Features 11

Sole Proprietorships 12Major Features 12

Advantages and Disadvantagesof Being a NonprofitOrganization 12

Advantages of the NonprofitOrganization 12

Tax Advantages 12Funding 13Public Profile 13Postal Benefits 13

Disadvantages of the NonprofitOrganization 13

Financial Drawbacks 13Paperwork 13

Which Nonprofit StructureIs Best for You? 14

2 THE STRUCTURE AND TYPESOF OREGON NONPROFITCORPORATIONS 16

The Board of Directors 17Powers and Duties 17Qualifications of Directors 18Number of Directors 18Election, Designation and

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Appointment of Directors 18Composition of Board 19Terms of Directors 20Multiple Roles by Directors 20Standard of Conduct for Directors21Committees of the Board 22

Committees ExercisingAuthority of the Board 22Committees that Do NotExercise Authority of the Board22

Officers 23Standard of Conduct for Officers23

Membership orNonmembership Corporations23

Types of Oregon NonprofitCorporations 25

Which Type Is Your Nonprofit? 26Major Features of Each Type 26

Public Benefit Corporations 26Religious Corporations 27Mutual Benefit Corporations 27

Nonprofit CorporationsConnected with GovernmentalAgencies 28

Issues 29

3 SETTING UP YOUR OREGONNONPROFIT CORPORATION31

Choosing and Reserving a Name32

Filling Out and Filingthe Articles of Incorporation 32

Filling Out the Articles ofIncorporation 33Other “Additional Provisions” toConsider for Your Articles 37

Item of Interest to Almost AllNonprofits 37Items of Greater Interest to

Many Nonprofits 38Filing Your Articles ofIncorporation 39

Writing Your Bylaws 40

Holding theOrganizational Meeting 42

Setting Your Fiscal Year 43Loans by Founders 43

Registering withthe Department of Justice 44

Applying for a Federal Tax IDNumber 44

Registering in Other States 45

Doing Business Under AnotherName 45

Obtaining Licenses and Permits45

Applying for Postal Benefits 45

4 WRITING BYLAWS 47

How Bylaws Fit with OtherRules 49

Articles of Incorporation 49Bylaws 49Board Resolutions 49

Tips for Drafting Bylaws 50Consistent with Laws 50Consistent with Your Articles 50Internally Consistent 50Understandability and Utility 51Completeness 51Using Bylaws to Handle Conflict51

Bylaws forNonmembership Corporations51

Article I: Purpose 52Article II: Nonmembership 52Article III: Board of Directors 53Article IV: Committees 60Article V: Officers 61Article VI: Corporate Indemnity 63

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Article VII: Amendments toBylaws 64

Bylaws forMembership Corporations 65

Article I: Purpose 65Article II: Members 66Article III: Board of Directors 69Article IV: Committees 77Article V: Officers 79Article VI: Corporate Indemnity 81Article VII: Amendments toBylaws 82

PARPARPARPARPART IIT IIT IIT IIT IITHE TTHE TTHE TTHE TTHE TAX-EXEMPTAX-EXEMPTAX-EXEMPTAX-EXEMPTAX-EXEMPT

ORGANIZAORGANIZAORGANIZAORGANIZAORGANIZATION 85TION 85TION 85TION 85TION 85

5 FEDERAL TAX-EXEMPTSTATUS 87

Tax Exemption: Do You Want It?89

§501(c)(3):Public Benefit andReligious Organizations 90

Who Qualifies for §501(c)(3)Exemption 90

Structure 91Exempt Purposes 91Organized and Operated 94No Inurement or InsubtantialPrivate Benefit 95Lobbying 96Political Activity 96

Classifications of §501(c)(3)Groups 96

Private Foundations 97Public Charities 100

Who Must File the Application 106Effective Date of the Exemption107

Soliciting Contributions BeforeYou Receive Your ExemptionLetter 108

What Type of Ruling to Seek 108New Groups 109Groups Less than Four YearsOld 110Groups More than Four YearsOld 111Final Reminder 111

Cost of Applying 111

§501(c)(4):Civic Leagues and SocialWelfare Organizations 111

Other Exempt Groups 112Labor, Agricultural andHorticultural Organizations– (c)(5)113Business Leagues– (c)(6) 113Social Clubs – (c)(7) 114Fraternal Societies – (c)(8) and(c)(10) 114Veterans Organizations – (c)(19)115Political Organizations – §527 115Miscellaneous Exempt Groups 115

General InformationFor Organizations Seeking AnyTypeof Tax Exemption 116

Cost of Applying 116Public Inspection of Application &Annual Returns 116

Applications 117Annual Returns 117

Unrelated Business Income 118Group Exemption 118

6 FILLING OUT THE TAX-EXEMPT APPLICATIONS 120

Filling Out Form 1023 121Part I – Identification of Applicant121Part II – Organizational Structure123Part III – Required Provisions 124Part IV – Narrative Description125

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Part V – Compensation 127Part VI – Your Members andOthers You Benefit 130Part VII – History 131Part VIII – Specific Activities 132Part IX – Financial Data 135Part X – Public Charity or PrivateFoundation Status 137Part XI – User Fee Information 139Signature Line 139Attachments to the 1023 139Schedules 140Schedule E – OrganizationsFormed More Than 27 MonthsBefore Filing 140Schedule G – Successors to OtherOrganizations 142

Filling Out Form 1024 143

Questions Back From the IRS144

7 PUBLICLY SUPPORTEDORGANIZATIONSAND FEE/ACTIVITYSUPPORTEDORGANIZATIONS (PSOS ANDFASOS) 145

Support Requirementsfor PSO’s and FASO’s 147

How to Calculate theTotal Support Base 148

1. Contributions, Grants andMembership Fees. 1492. Gross Receipts from RelatedBusiness Activities 1503. Net Income from UnrelatedBusiness Activities 1504. Gross Investment Income 1515. Certain Tax Revenues 1516. Certain Services and FacilitiesFurnished by the Government 152

Summary of the Formulas 152

How to Calculate Your Support

from Qualified Sources for thePSO Test 153

The Mechanical Test (or One -Third Support Test) 154

Governmental Unit Support 154Direct Public Support 154Indirect Public Support 159

Facts and Circumstances Test 161Financial Support Percentage161Support Sources 162Representative Governing Body162Public Facilities, Services,Programs, Policies andParticipation 162Membership Relations 163

How to Calculate Your Supportfrom Qualified Sources for theFASO Test 163

One-Third Support Test 164Qualified Support 164

One-Third Gross InvestmentIncome Test 166

The Normalcy Period 167General Rule 167Exception: Substantial Changes inSources of Support 167

Recordkeeping Issues 168

8 POLITICAL ACTIVITY ANDLOBBYING BY TAX-EXEMPTORGANIZATIONS 174

Who Needs This Chapter? 175

Political Activity 176Prohibited Activities for (c)(3)s 176Permissible Activities for (c)(3)s177

Voter Education and CandidateForums 177Voter Registration 178Issue Advocacy 178Candidate Education 179

The Internet and Political Activity

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179Penalties for Engaging inCampaigning 180

Lobbying and §501(c)(3) Groups:Two Tests 180

Lobbying Tests 181The “Substantial Part” Test 181The Mathematical Test: TheLobbying Election [the §501(h)Election] 181

Choosing Whether to ComeUnder the Lobbying ElectionRules 182How to Make the Election 183

Understanding the LobbyingElection 184

What Is Lobbying 184What Is Not Lobbying 186Special Rules AboutCommunications 187

Communications with Members187Mass Media Advertisements 189The Internet and Lobbying 189

The Lobbying ElectionComputations 190

Lobbying Expenditures 190Exempt Purpose Expenditures(EPE) 190Making the Calculations 191Additional Whammy for Failureto Comply 192Calculating the LobbyingExpenditures–An Example 192

Special Rules for AffiliatedOrganizations 193

Proving Compliance with theLobbying Rules 194

Keep Good Records 194Under the Substantial Part Test194Under the Lobbying Election194

Educate and Monitor 197

The §501(c)(4) Alternative 197

Restrictions on Federal Funds 198

Affiliated Organizations 199

Notice to Members AboutDeductibility of Dues Used forLobbying 200

Other Laws Concerning PoliticalActivity and Lobbying 201

9 BUSINESS ACTIVITIES BYTAX-EXEMPTORGANIZATIONS 202

Unrelated Business Income 203Who is Subject to the UnrelatedBusiness Income Tax (UBIT)? 203What is Unrelated BusinessIncome? 203

Trade or Business 204Regularly Carried On 204Substantially Related to ExemptPurpose 205

Examples of Unrelated BusinessIncome 208

Services 208Sales of Goods 209

Exceptions to the UnrelatedBusiness Income Rules 210How to Calculate and Pay theUnrelated Business Income Tax211When Does Unrelated BusinessIncome Threaten Your TaxExemption? 212

How to Protect Your Tax-ExemptStatus 213

10 FISCAL SPONSORSHIP 215

Proper Uses ofFiscal Sponsorships 217

New and Small Projects 217Ongoing Project with a MajorDonor/Funder 217Assistance to QualifiedIndividuals 218

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Private Foundation Project 218Support for Common IssueOrganizations 218Bookkeeper for Another §501(c)(3)Organization 219

Misuses of Fiscal Sponsorships219

Pass-Through Donations andGrants 219Conduit for Gifts or Grants toIndividuals 219Conduit to NonexemptOrganizations 220Avoidance of the Public SupportTest 220Avoidance of the Lobbying ExciseTax by Private Foundations 221

Consequences of theMisuse of Fiscal Sponsorships221

Issues in theFiscal Sponsor Relationship 221

Control 221Handling of Donations and Grants222

Donors 222Private Foundations 223Options for Handling Funds 223

Recordkeeping 224Ownership of Property 224Payments to the Sponsor 225Liabilities 226Public Relations 226Special Issues of the Sponsor 226

Mission and Purpose 226Activities Disclosed to IRS 226

How to Structure aFiscal Sponsorship 227

Nonexempt Projects 227Sponsor’s Project 227Independent Contractor 228Sponsor As Grantor 228

Exempt Projects 230Supporting Organization 230Group Exemption 230Technical Assistance 231

11 STATE AND LOCAL TAXEXEMPTIONS 232

State Income Tax Exemption 233Who is Covered by theExemption? 233How to Apply for the Exemption233Other Forms You Must File 233

Tri-Met andLane Transit District Taxes 234

County Business Tax Exemption234

County Property Tax Exemption234

Whether to Apply for theExemption 235What Groups Are Covered by theExemption 235

Literary, Charitable, ScientificGroups, Art Museums 235Religious Groups 236Some Schools and EducationalOrganizations 236Fraternal Organizations 236Other Groups 237

How to Apply for the Exemption237Leases and Lease Options 238

Building/Land 238Personal Property 238

Local Business License Fees 238

12 TAX RETURNS FOR TAX-EXEMPT ORGANIZATIONS240

Filing Federal Returns 242Who Must File Form 990 or 990 EZand Form 990 Schedule A 242What Is Schedule 990A and WhoMust File It? 243When and Where to File Form 990,990 EZ or Schedule 990A 243How to Deal with 990, 990 EZ andSchedule 990A Late Filing

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Penalties 243What Is the Accounting Period forForm 990, 990 EZ and Schedule990A? 244How to Change Your Fiscal Year245What Are the AcceptableAccounting Methods for the 990,990EZ and Schedule 990A? 245How Do You Change Your Methodof Accounting? 246Public Inspection of Your 990,990EZ and Schedule 990A 246How to Complete the 990, 990EZ,and Schedule 990A 247Most Common 990 Mistakes andProblems 248

Functional Accounting 249Reporting FundraisingExpenses 249Loans 250Unrelated Business Activities250Political Activity and Lobbying251Private and Non-privateFoundation Status 251Related Organizations 253Signatures 253

Filing State Returns 253Who Must File Form CT-12 andWhen Is It Due? 254Filling Out Form CT-12 254

Filling Out the Inventoryand Personal PropertyAssessment 255

PARPARPARPARPART IIIT IIIT IIIT IIIT IIISUCCESSFULSUCCESSFULSUCCESSFULSUCCESSFULSUCCESSFUL

FUNCTIONING: PEOPLEFUNCTIONING: PEOPLEFUNCTIONING: PEOPLEFUNCTIONING: PEOPLEFUNCTIONING: PEOPLE257257257257257

13 BOARD OF DIRECTORSAND OFFICERS 259

Recruiting and Retaining theDirectors Your OrganizationNeeds 261

The Duties and Responsibilitiesof Directors 264

Duty to Act with Due Care 264Observe Corporate Formalities265Act as a Nonprofit Corporation265Actively Manage 266Make Reasonable Decisions 267Provide Financial Management267Investigate SuspiciousCircumstances. 270Establish Proper EmployeePolicies 270Avoid Excess BenefitsTransactions 270Observe Laws on Tax-ExemptStatus 271Make Policies 271

Duty to Be Loyal to theCorporation 274

Conflicts of Interest 275Duty to Act in the Corporation’sBest Interest 276

Balancing Board Protection withSensible Management 277

Board Styles:How Different Boards FulfillTheir Duties 277

Community Based Start-up Board277Institutional Start-up Board 279Community Based Boards After

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Start-up 279Institutionally Based Boards AfterStart-up 280Clarifying Your Board’sExpectations 281Board/Staff Relationships 282

Board Meetings 283Meetings 283

Why Have Meetings? 283Holding Legal Meetings 284Action Without a Meeting 287

Notice 287Regular Meetings 287Special Meetings 287Emergency Meetings 288Calling a Meeting 288Waiver of Notice 288

Minutes 288Holding Effective Meetings 289

Late Starts and Late Endings290Lack of Clarity on Decisions 290Not Getting to the ImportantIssues Until There’s No TimeLeft 290Re-doing Committee Work withthe Full Board 292Failing to Provide for Directors’Needs 292

Board Committees 292Board Level Committees 293

Duties and Responsibilities 293Meetings, Notices, and Minutesof Board Level Committees 293

Advisory and Task-OrientedCommittees 294Responsibilities of Non-committeeMembers 294

Staff as Directors 294

The Duties andResponsibilities of Officers 296

Standard of Conduct for Officers296

Personal Liabilityof the Board and Officers 296

When You Are Personally Liable297

Failure to Act With Due Care orBreach of Duty of Loyalty 297Agreement to Be Liable for theCorporation’s Debt 298

Who Can Sue You 298Your Nonprofit Corporation298Employees, Members, andOthers Associated with theCorporation 299The Government 299Outsiders 299

Which Boards Are MostVulnerable to Being Sued 300

Protection of YourBoard and Officers 300

Create an Advisory Board 300Educate Your Board 301Maintain Proof of CorrectBehavior 301Reliance on Reports 302Proper Handling of Conflicts ofInterest 302

The Fairness Doctrine 303Approval by Disinterested Vote303Approval by Outside Sources305

Limited Liability of Directors andOfficers 305

Federal Law 305State Law 305All Directors andUncompensated Officers 306

Reimbursement by theCorporation When You Are Sued306

When the Corporation MustIndemnify Its Directors andOfficers 307When the Corporation CanIndemnify Its Directors andOfficers 307When the Corporation Cannot

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Indemnify Its Directors orOfficers 307

Insurance 308Directors and Officers Insurance308Errors and Omissions Insurance308Personal Insurance Coverage309Other Types of Insurance 309

Conclusion 309

Replacing Directors and Officers309

Expiration of Terms of Office ofDirectors 310Resignation of Directors 310Removal of Directors 310

Removal of Directors Elected byDirectors 311Removal of Directors Elected byMembers 311Removal of Designated orAppointed Directors 312

Vacancy on the Board 312Resignation and Removal ofOfficers 312

Evaluating the Effectivenessof Your Board 313

14 MEMBERS ANDMEMBERSHIPCORPORATIONS 315

Admission of Members 317Criteria for Admission 317Consent of Members 317

Rights, Obligations, andLiabilities of Members 319

Classes of Members 319Members’ Rights and Obligations319Liability of Members 319Membership Dues 320

Notice of Meetings 320Who Gets Notice? 320

Contents of Notice 320How Notice Is Given 321Notice of Adjournment ofMeetings 321Waiver of Notice 321Record Date 322

Meetings of Members 323Who Attends the MembershipMeetings 323Types of Members’ Meetings 324

Annual Meeting 324Regular Meetings 324Special Meetings 324

Conduct of Meeting 325Minutes 325Action Without Meeting 325Delegates 326

Voting by Members 326Quorum Requirements 326Voting Requirements at Meetings327Voting by Proxy 327Voting By Written Ballot 328Voting and Vote Splitting 328Corporation’s Acceptance of Votes329

Election of the Board 330Election of Directors 330Vacancy on the Board 330Removal of Directors 330

Inspection of Your Recordsby Members 331

Records Subject to InspectionWithout a Reason by the Members331Inspections That Require a ProperPurpose 332

What Is a Proper Purpose? 333Restrictions on Members’ Rights toInspect and Copy 333

Resignation and Terminationof Members 334

Resignation 334Expulsion, Suspension, orTermination 334

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15 EMPLOYEES 336

Wage and Hour Laws 337Who Is Subject to the Laws 337

Federal Law Coverage 337State Law Coverage 338

Exempt and NonexemptEmployees 338Overtime and Volunteer Time 339“Comp” Time 340Attendance at Training,Conference and Staff Meetings 341Enforcement of Wage and HourLaws – the Real Whammy 341

Excess Compensation 342

Discrimination Issues 342

Unionization 342

Personnel Policies andEmployee Handbooks 343

Developing an EmployeeHandbook 345Your Approach to an EmployeeHandbook 345What to Include in Your EmployeeHandbook or Personnel Policies348

The Philosophy and Purpose ofyour Program 348Noncontractual Nature of theEmployee Handbook orPersonnel Policies 348Organization Chart 349Nondiscrimination Policies 349Personnel and Medical Recordsfor Each Employee 350Hiring Policies 351Job Descriptions 353Conditions of Employment 353Employment Categories 355Compensation 357Benefits 358Other Benefits 363Reimbursements 364Job Reclassification 364Employee Evaluation 364

Disciplinary Action 365Termination of Employment 366Appeals Procedures forDiscipline and Termination 367Grievance Procedure 367Amendments to PersonnelPolicies or EmployeeHandbooks 368

Distribution of the EmployeeHandbook 368Administering Personnel Policiesor the Employee Handbook 369

Evaluating the ExecutiveDirector 370

16 INDEPENDENTCONTRACTORS 371

Who Is an IndependentContractor? 372

Federal Income Taxand Social Security Issues 373

State Income Tax issues 376The Independent Contractor TestBefore 2006 376The Independent Contractor TestBeginning in 2006 (We Think) 378

Workers’ Compensation Issues379

Your Service Providers 379The Test for “Worker” 379Exceptions to the “Worker” Test381

Workers for Those With WhomYou Subcontract 381

State Unemployment Issues 382

Federal and StateWage and Hour Laws 383

Federal Law 383State Law 384

The Importance of Complyingwith the Laws 384

Danger Signals 385

Protections for Your

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Nonprofit Organization 386Expert Opinion in Writing 386Ask the IRS – Form SS-8 387Assessing and Limiting YourExposure 387Independent ContractorAgreement 388

17 VOLUNTEERS 389

Recruiting, Screening, andPlacing Volunteers in YourOrganization 391

Recruiting Volunteers 391

394Screening Volunteers 394Placing Volunteers in the RightSpot in Your Organization 395

Orienting, Training, Supervisingand Evaluating Volunteers 396

Orienting Volunteers 396Training 396Supervising Volunteers 397Evaluating Volunteers 398

Recognizing and RewardingVolunteers 399

Volunteers Who AreReally Employees 400

Volunteers and Liability 402Assessing the Risk of Harm byVolunteers 403

When Your VolunteersFace Personal Liability 403

When Your Organization isLiable for the Actions of YourVolunteers 404

When You Are Negligent 405When You Are Not Negligent 406

When Your Volunteer Is Injured407

Assessing the Risk of Harm toVolunteers 407

Protection for Your Volunteersand Your Organization 408

Federal and State Law Protections408Preventive Actions 409Damage Control 409

Recordkeeping 409Releases 410Insurance 410

Protection for Your NonprofitOrganization and Your VolunteerWhen Your Volunteer Is Injured412

Releases 412Insurance 413

18 HOW TO SUCCESSFULLYRESOLVE CONFLICT 415

Preventing OrganizationalConflict 416

Identification of Conflicts 417

Steps to Conflict Resolution 4181. Clarification 4182. Negotiation – Mediation 4193. Follow-up 421

Gaining Insight Into SpecialProblems 421

Communication Styles 424

Summary 425

PARPARPARPARPART IVT IVT IVT IVT IVSUCCESSFULSUCCESSFULSUCCESSFULSUCCESSFULSUCCESSFUL

FUNCTIONING: MONEYFUNCTIONING: MONEYFUNCTIONING: MONEYFUNCTIONING: MONEYFUNCTIONING: MONEY,,,,,RECORDS AND RULESRECORDS AND RULESRECORDS AND RULESRECORDS AND RULESRECORDS AND RULES

427427427427427

19 UNDERSTANDINGFINANCIAL MANAGEMENT429

Signs ofGood Financial Management430

Achieving Your Mission 430

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Solvency – Staying in the Black 430Liquidity – Paying What You Oweon Time 430Documenting the Observance ofRestrictions 430

The Big Picture 431Planning: 431Execution: 432Recording: 432Reporting: 432Monitoring: 432

Timing for theFinancial Management Cycle 433

Financial Management Check-up 433

20 MAKING A BUDGET 435

Budget Terminology 436

Why Have a Budget? 437

Basic Budgeting Guidelinesfor Nonprofit Organizations 437

Budget Development Steps 439Projecting Income 439

1. Government Grants andContracts 439 2. Foundation Grants andCorporate Donations 4413. Contributions 4414. Special Events 4425. Program Service Fees 4426. Membership Fees 4437. Interest or Investment Income4438. Other Income 443

Projecting Expenses 4431. Salaries 4432. Employer Taxes 4443. Fringe Benefits 4454. Professional Service Contracts4455. Non-Personnel Costs 446

Fixed and Variable Costs 446The Effect of Volume of Services

and Activities on Costs 446

Functional Budgeting 447Management Costs 448Fundraising Costs 448Cost Allocation 449

Direct Costs 451Shared Costs 451Choosing a Cost AllocationMethod 452Allocating Management(Administration) Costs 452

Cost Allocation Plans 453

Budgets for Grants 454Start with Your Annual OperatingBudget: 454Budgets When Funders SupportOnly New Projects 455Grant Budget Notes 456

Budgeting for Restricted Funds457

Capital Budgets 457

Cash Flow Projections 459

Your Budget Process 460

Boards and Budgets 461

21 FUNDING: OBTAININGRESOURCES FOR YOURORGANIZATION 464

Foundation Grants 465Foundation Funding Preferences466

The Strength of theOrganization 466The Clarity, Logic, andImportance of the Project forWhich Funding Is Sought 467Foundation Funding Priorities467Personal Relationships 467Organization and Persistence inYour Efforts 468

Corporate and Other Business

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Giving 468

Individual Contributions 470

Fundraising Events 472Determining the Purpose of theEvent 472Projecting the Income andExpenses for the Event 473Considering the True Cost of theEvent 473

Bingo, Raffles, and OtherGaming 474

Exceptions to Licensing 474Getting A License 475Note for §501(c)(3) Tax-ExemptGroups 475

Membership Fees 476

Civic and ReligiousOrganizationsas Funders 477

Civic Organizations 478Religious Organizations 479

Government Grants andContracts for Services 480

Government Grants 480Government Contracts 481

Program Service Fees 483

Product Sales 485

Social Enterprise and BusinessVentures 487

Investment Income 488Components of an InvestmentPolicy 488

Risk 489Return 489Social Responsibility 489

Who Makes Investment Decisions?489

In-kind Contributions 490

Using the Internet to RaiseFunds 492

Ethical and Legal Issuesin Fundraising 493

Ethical Fundraising 493Consulting 493Staff Fundraiser 493Contract with a FundraisingOrganization 493Workshops and Trainings 494

Unethical Fundraising 494Grantwriting with the FeeDetermined as a Percentage ofGrant Funds Received 494Fundraising Companies whichKeep Most (above 60%) of theMoney for Their “Costs” butUse Your Nonprofit’s Name andTax-exempt Status 494Fundraising Events orIndividual Donor Solicitationsin Which the Fundraiser is Paida Percentage of What is Raised496Rules on Solicitation for Non-(c)(3) Exempt Groups 496

Final Tips 497

22 PROTECTING YOURNONPROFIT FROM FRAUDAND ERRORS 498

Who Should Do What:DevelopingFinancial Policies andProcedures 499

Key Banking Issues 500Opening Your Checking Account501Common Set-up Mistakes 501Check Printing Choices 502

Checks for Manual CheckWriting 503Checks for Computerized CheckWriting 503

Keep Unused Check Stock UnderControl 503Protect Your Account fromUnauthorized Checks 504Never Permit Blank Checks to Be

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Signed 504Should We Require TwoSignatures on Each Check? 504Should We Use On-line PaymentFeatures? 505Bank Deposit Slips and Records505 Do We Need to Get Our ProcessedChecks Returned with Our BankStatement? 505Bank Reconciliations Are Essential506Dealing with Multiple BankAccounts 507

Petty Cash Funds 508

Processing Payments 509

Handling Cash Receipts 510

Acknowledging Donations 511Substantiation Rules 511Disclosure Rules 512

In-Kind Contributions 513

Insurance Protection 514

23 KEEPING BOOKS ANDPREPARING FINANCIALREPORTS 516

What is Accounting? 518

Big Choices for Your AccountingSystem 519

Should You Use the Cash or theAccrual Method? 519Do You Need to Track MultiplePrograms or Multiple FundingSources? 521How Will You Meet IRS ReportingRequirements? 522Do You Want or Need to UseGenerally Accepted AccountingPrinciples (GAAP) for Nonprofits523

Accounting Requires More ThanTracking Revenues andExpenses 524

Double-Entry Accounting IsEssential 525

Very Small Nonprofits: BasicAccounting and Reporting 526

Monthly Financial Statements528

Statement of Financial Position 528Statement of Activities 530Statement of Functional Expenses531Statement of Cash Flows 531Key Connection Between FinancialStatements 532

What’s Special About NonprofitAccounting? 532

Three Classes of Net Assets 533Distinguish Contributions fromPurchases of Services or Goods 534Classification of Contributions534Fulfilling Restrictions 535

How Can All Expenses BeUnrestricted When Some ofThem Are Met with RestrictedGifts? 535Board Directions AreDesignations, Not Restrictions536Recording Promises to Give 536Multi-year Grant Commitments537

Program Fees Received inAdvance 537Using Deferred Revenue to TrackGrant Income 538Government Grants and Contracts538Cost Allocation Plans 539Accounting for Fundraising Costs539Accounting for In-KindContributions 541Accounting for Land, Building,and Equipment 542

Tips for Useful Financial

xxi

Reports 545

Government Funds AccountingRequirements 548

Whatever Happened to FundAccounting? 549

Accounting Software Choices550

Tips for QuickBooks Users 552

Who Should Do YourNonprofit’s Accounting? 554

Small Organizations 554Mid-sized or Small Nonprofitswith Multiple Programs orMultiple Restricted FundingSources 554Larger or Complex Nonprofits 556

24 PAYROLL REQUIREMENTSAND PROCEDURES 557

Establishing Payroll Procedures559

Explanation of Payroll Terms 560

Employer Taxes 562Unemployment 563

Federal Unemployment 563State Unemployment 563

SAIF or Workers’ Compensation564Local Governmental Unit Taxes565

Preparing Your Own Payroll 565Setting Up Your Payroll System565

Payroll Withholding Tax Tables566

Payroll Records 567Payroll Processing Procedures 567

Timesheets 568Prepare and Approve thePayroll Journal 568Signing Paychecks 568Payroll Tax Deposits and PayrollTax Report Submission 568

Payroll Tax ReportRequirements 568

Payroll Reports 569

25 EVALUATING YOURORGANIZATION’SFINANCIAL HEALTH 571

How to Ask the Right Questionsabout Your Financial Statements573

How Financially Strong is ThisOrganization? 573Can the Organization Meet ItsObligations on Time? 573Are There Limitations on What theOrganization Can Do With ItsResources? 574How Can I Tell If the OrganizationIs Complying with Restrictions onthe Use of Funds? 576Is the Organization “BreakingEven”? 577Is the Organization Using ItsResources Wisely? 578Are the Books In Balance? 579How Do We Know the FinancialStatements Are “Right”? 579

The Manager’s Rolein Monitoring FinancialPerformance 580

Steps to Be Sure the Reports AreAccurate: 580Steps to Determine WhetherAction Is Needed to Protect theOrganization’s Financial Health581

Should Your Nonprofit Have anIndependent Audit or Review?582

Audits 582Reviews 583Choosing Your Auditor 584

Understanding and Preparingfor Audits 585

Types of Audits 585

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Independent Audit by aCertified Public Accountant(CPA) 585Funding Source Audit 585Payroll Tax Audit 585990 or CT-12 Audit 586

Preparing for an Audit 586

Will Your Organization Needan A-133 Federal Funds Audit?587

The Nonprofit Organization’sResponsibilities 587The Auditor’s Responsibilities 588The Focus of the Audit 589Steps to Prepare for A-133 Audits590

26 ELECTIONEERING ANDLOBBYING RULES FOR ALLNONPROFIT CORPORATIONS592

Federal Election Rules 594Contributions to Candidates andPolitical Committees 595Express Advocacy 595Issue Advocacy 597

Broadcast Communications 598Coordination 599The (c)(4) Ideological NonprofitException 599

Federal Political Committees 600Political Action Committees(PACs) 601Disclosure Requirements 603

Voter Activities 603

Federal Lobbying Rules 604(c)(3) Organizations 605

Oregon Rules GoverningPolitical Campaigns 606

Independent Expenditures 607Political Committees 608

Involuntary Classification as aPolitical Committee 608Choosing to Form a Separate

Political Committee 609Contributions to PoliticalCommittees 611

Electioneering Conduct 611(c)(3) Organizations 611

Oregon Lobbying Rules 612

Use of Federal Funds forPolitical and LobbyingActivities 613

Political Expenditure Tax 614

27 RECORDKEEPING,REGISTRATION, AND RULES617

Books and Records 618What Books and Records ShouldYou Keep? 618

Books: Financial Records 618Records 618

How Long Should You KeepThem? 619

Permanently 619At Least Ten Years 619At Least Seven Years 620At Least Three Years 620Other Periods 620

Who Can See or Copy Your Booksand Records 620

Members 620Nonmembers’ Rights to Inspectand Copy Books and Records621

What Records Can and Must BeProtected 622

Reports and Registrations 622Secretary of State (CorporationCommissioner) 622Department of Justice (AttorneyGeneral) 623Other State and Local Licenses andFilings 624

Notices 624

Releases 626

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Terrorism Laws 626Actions that Aid SuspectedTerrorists 627Sanctions for Aiding SuspectedTerrorists 627

Freezing Your Assets 627Criminal Penalties 628Civil Lawsuits 628Revocation of Tax-ExemptStatus 628Treasury Department’sVoluntary Guidelines 629

What Should You Do? 629Government Lists of SuspectedTerrorists 630

Tax-Exempt Groups: OperationalRules 630

Public Inspection and Copying ofPapers 631

What Can be Inspected andCopied 631Inspection Rules 632Copying Rules 632

Rules on Solicitations and Dues632Donee Information Returns 633Changes in Activities 633Group Exemptions 633Special Requirements for Schools634Excess Benefits Transactions 634

PARPARPARPARPART VT VT VT VT VCHANGING YOURCHANGING YOURCHANGING YOURCHANGING YOURCHANGING YOUR

CORPORACORPORACORPORACORPORACORPORATION 643TION 643TION 643TION 643TION 643

28 REVIEWING ANDCHANGING YOUR ARTICLESAND BYLAWS 645

Reviewing YourArticles of Incorporation 646

Changing Your RegisteredAgent or Registered Office 646

Amending Your Articlesof Incorporation 647

Amendment by Corporations withNo Members or No Members withVoting Rights on Amendments 647Corporations With VotingMembers 648

By the Board Without MemberApproval 648By the Board, Members, andOthers 648

Class Voting by Members onAmendments 650

Religious Corporations 650Public Benefit Corporations 650Mutual Benefit Corporations650

Filing of Amendment 651Tax-Exempt Organizations 651

Restating Your Articlesof Incorporation 652

Reviewing Your Bylaws 652Understanding the Hierarchy 653

Articles of Incorporation 654Bylaws 654Board Resolutions 654

Tips for Reviewing Bylaws 654Consistent with Laws 654Consistent with Your Articles655Internally Consistent 655Readability and Utility 655Completeness 655

Common Pitfalls in Bylaws 656All Oregon NonprofitCorporations 656Membership Corporations 658Nonmembership Corporations661

Amending Your Bylaws 661Amendment by Corporations withNo Members or No Members withVoting Rights on Amendments 661Corporations With No MembersWho Vote on the Bylaws 662

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Corporations With VotingMembers on the Bylaws 662Tax-Exempt Organizations 662

29 MERGING WITH ANOTHERCORPORATION OR SELLINGYOUR ASSETS 664

Mergers 665Why Nonprofits Decide to Merge665Some Merger Terminology 665Limitations on Mergers by PublicBenefit or Religious Corporations666An Overview of the MergerProcess 666

The Steps of the Merger 667Formation of a PlanningCommittee 667Letter of Understanding 667The Due Diligence Investigation668

Issues to Deal With in a Merger668

Purpose and Structure of theSurviving Organization 669Assets and Liabilities 669Employee Issues 669Leases and Contracts 670Audits 670Funders 670Remedies If the SurvivingCorporation Violates the MergerAgreement 671

Creating the Plan of Merger 671Adopting the Plan of Merger 672

Adoption by the Board 672Adoption by the Members 672Abandonment 673

Filing the Articles of Merger 673The Effect of a Merger 674Special Note for Tax-ExemptCorporations 674

Sale of Your Corporation 674In the Usual Course of Your

Activities 674Not in the Usual Course of YourActivities 675

Adoption by the Board 675Adoption by the Members 675Finalizing the Sale 676

§501(c)(3) Groups 676Creditors 676

30 DISSOLVING YOUR OREGONNONPROFIT CORPORATION677

Voluntary Dissolution 678Issues to Consider 678Overview of the DissolutionProcedure 680

Dissolution by Incorporators680Dissolution by Directors,Members and Third Parties 680Notice to the Attorney General681Articles of Dissolution 682Revocation of Dissolution 682

Claims Against a DissolvedCorporation 682Effect of a Dissolution 685

Involuntary Dissolution 685Administrative Dissolution 685

Reinstatement 686Judicial Dissolution 687

Activities After Dissolution 687

Special Note for Tax-ExemptCorporations That AreVoluntarily or InvoluntarilyDissolved 687

APPENDICESAPPENDICESAPPENDICESAPPENDICESAPPENDICES

1 Source Material 691

2 List of Tax and RegulatoryAgencies 722

3 Types of Oregon NonprofitCorporations 726

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4 Open Records and OpenMeetings Laws 730

5 Additional Provisions for YourArticles of Incorporation 734

6 Homeowners Associations 737

7 Form 1024 743

8 Political Organizations under§527 751

9 Substantiation and DisclosureStatement 754

10 Letter to Donors 755

11 Disqualified Person InquiryLetter 757

12 Forms for Tax-ExemptOrganizations 759

13 Tax Forms Required of BothExempt and NonexemptOrganizations 760

14 Letter of Agreement for RegularEmployment 761

15 Letter of Agreement forTemporary Employment 762

16 Table of Contents for FiscalPolicies and ProceduresManual 763

17 Budgets for Administrative andIndirect Costs 765

18 Cash Flow Projection 777

19 Chart of Accounts 778

20 Statement of Functional Expenses780

21 Functional Revenue and ExpenseStatement 781

FORMSFORMSFORMSFORMSFORMS

Ballot for Election of Directors

Ballot for Proposed Action

Bylaws of a MembershipCorporation

Bylaws of a NonmembershipCorporation

Complete Release

Complete Release and HoldHarmless Agreement by Client

Complete Release and HoldHarmless Agreement by Volunteers

Conflicts of Interest Policy

Consent to Corporate Action Withouta Meeting by the Board of Directors

Consent to Corporate Action Withouta Meeting by the Members

Depreciable Property

Excess Benefits Transactions Policy

In-Kind Contribution Record

Minutes of First Meeting of Board ofDirectors

Minutes of Meeting of the Board ofDirectors

Minutes of Meeting of the Members

Promissory Note

Proxy Vote

Waiver of Notice of Meeting ofDirectors

Waiver of Notice of Meeting ofMembers

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Acknowledgments

We would like to thank our families, who put up with us while we have put outthis book four times. Thanks, Valerie and Kiera, for your excellent love andpatience and good nature. Thanks, Chris and Morgan, for accepting “the book”as a demanding member of our family.

We have so many other people to thank that we put Oscar winners to shame.We are very grateful to Kristen Gurdin, a nonprofit attorney at Davis WrightTremaine in Portland, for her review of much of this book and to AlyssaTormala, an employment attorney with the Miller Nash law firm in Portland,for her review of Chapter 15. We also benefited greatly from reviews and feed-back in the past from two of Oregon’s premier nonprofit experts, attorney DavidAtkin of Nonprofit Support Services in Eugene, and Gary McGee, CPA, ofMcGee and Company in Portland. In addition to much other assistance, Garyprovided the Indirect Cost materials in the Appendix. We are also grateful toJim Richman, CPA, for assistance with many of the sample financial reports.Oregon is very fortunate to have an excellent Assistant Attorney General, RossLaybourn, in charge of the Department of Justice’s Charitable Trust Divisionthat oversees public benefit nonprofits. We thank Ross for his help with severalimportant points in this book, for his unflagging assistance to nonprofits andfor his patience with our many questions over the years.

Many thanks to Joan Pinkert for her expert advice on desktop publishing; toRuth Gundle of Eighth Mountain Press for guidance in the intricacies of select-ing a printer; and to Gini Chen for the cover design. We appreciate Tere Mathernof TACS for her help with the graphics and Kris Bell and Abe Conway of TACSfor their computer wizardry. If you’re wondering how we knew exactly theinfo you wanted, you can thank Erica Rubin and Carol Cheney, coordinators ofthe TACS Nonprofit Organization Information and Referral Helpline, who arethe source of many of the questions this book tries to answer. We’d also like tothank Casey Caesar, Kinsey Loudon and the techies at Consolidated Press whomoved our work from computer disk to published book.

Most importantly, we want to thank the people who start and run nonprofitorganizations. Over the past 28 years we have been privileged to meet manyvery dedicated and able people who often make great sacrifices of time andmoney for a project that enhances the public good. We all owe them a debt ofgratitude.

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How to Use this Book

This is a large book. It is unlikely that any group will need ALL the informationin this book, so don’t be daunted by the size. We have written this book for bothbeginners and for technical people. If you are new to the nonprofit arena andare using this book to get started, you will find that in many places we tell yousections and chapters you can skip. The parts that you do read are not meant tobe read all at once – for instance, it’s unlikely that you will need to know how toincorporate and how to dissolve in the same month. (At least we hope not!)Keep this book as your reference book over time.

This book has an improved INDEX located at the very end of the book. Ifyou are looking for information on a specific topic, you may want to check theindex first. We have learned that preparing an index is one of the great chal-lenges of producing a book of this size. If you don't find the topic you are look-ing for in the index, you may want to check the EXPANDEDTABLE OF CONTENTS as well.

There are tear-out FORMS near the end of the book. In order to make themmore usable, the forms do not have page numbers on them. In the book, werefer to the forms by name and the forms are alphabetized by name so that youcan find the form you want more easily. The Forms section does not includeforms that you can get from the government on-line. Because these formschange from time to time and are now so accessible, we refer you to the websiteswhere you can obtain them. If you don't have access to the web, you can getcopies by contacting the appropriate agency. Appendix 2 provides a list of theagencies and their contact information and web addresses.

If you are a technical person – a lawyer, accountant, or similar professional–we have added a new feature to this book. Appendix 1 contains a list ofSOURCE MATERIALS that we rely on in each chapter. The Sources sectionincludes citations to statutes, administrative regulations and rulings, cases, gen-erally accepted accounting principles and general reference material to assistyou. You may also want to peruse the forms and the more detailed informationin the Appendices. We’ve also included some references in Appendix 1 to ma-terials accessible to and of interest to all readers. We alert you to these materialsat the end of each chapter as appropriate.

If you want to obtain additional copies of this book or if you want extrareprints of Chapter 13 to use as a Board of Directors manual, see the ORDERINFORMATION on the back of the title page.

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Technical Assistance for Community Services, the publisher of this book, isa §501(c)(3) nonprofit organization that is a training and consulting resourcefor nonprofits. TACS maintains a website at www.tacs.org. TACS may from timeto time include updated information about matters included in this book. Youshould check the website.

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What's New in this Book

The Fourth Edition adds 140 pages to the Third Edition and contains someexciting additions and updating. Among the most important are these:

� An extensive listing of SOURCES for professionals, includingstatutes, administrative regulations, cases and accounting stan-dards, and some excellent listings for the general reader in Ap-pendix 1

� More coverage of political activities permissible for §501(c)(3)groups in Chapters 8

� A new chapter, Chapter 26, that contains a greatly expandeddiscussion of federal and state campaign finance reform, electionand lobbying rules as these rules apply to all nonprofit corpora-tions

� A completely revised Chapter 6 with detailed instructions onhow to fill out the new application for tax exemption under§501(c)(3) revised in October 2004 (IRS Form 1023)

� More indepth discussion of fraud prevention in Chapter 22

� QuickBook tips for nonprofits in Chapter 23

� Accounting and reporting on administrative and fundraisingcosts in Chapter 23

� More extensive coverage of indirect cost rates in Chapter 20 andAppendix 17

� A discussion of capacity building and sustainability strategiesin Chapter 21

� Information on social enterprises and how nonprofits can earnincom while fulfilling their mission in Chapter 21

� Coverage of the new IRS regulations on excess benefit transac-tions for §501(c)(3) organizations in Chapter 27 with a new samplepolicy in the Forms section

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� A discussion of the new anti-terrorism laws in Chapter 27

� The implications of the Sarbanes-OxleyAct for nonprofits inChapter 13

� More specific discussion of board duties and policies in Chapter13 and a new sample Conflicts of Interest policy in the Forms sec-tion

� Coverage of new laws on homeowners associations in Appen-dix 6

� A more indepth discussion of membership nonprofits in Chap-ter 14

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How to Find an Attorneyor an Accountant

“What?” you may be saying, “I bought this book so I wouldn't have to see anaccountant or an attorney.” With this book, you may be able to do much of youraccounting and legal work yourself. At the least, it will provide you with a lotof information that should cut down on how much time (and money) you haveto spend on a professional.

Still, there are a variety of circumstances when you may need to get help:

1. You may have special problems or issues that this book does not address.

2. You should get an accountant’s help to get your books set up properly,so that your financial information can be easily conveyed to the forms that arerequired for nonprofit and tax exempt groups.

3. You should have a professional review your papers before you submitthem to the state or federal government to be sure they are correct.

4. You should run any significant decisions you make by a professional tobe sure you are doing everything properly.

There are a number of ways to choose an attorney or accountant. Keep inmind that nonprofit law and accounting are quite specialized areas within theirfields and most attorneys and accountants know little or nothing about it. Tech-nical Assistance for Community Services (TACS) operates the Nonprofit Orga-nization Information and Referral Helpline (503.233.9240 or 1.888.206.3076), afree service providing referrals to qualified professionals with experience as-sisting nonprofits. This is probably your best place to start.

If you already know a professional that you feel is competent and trustwor-thy, you could ask that person if they do nonprofit work or can recommendsomeone who does. If you don't know an attorney or accountant you feel isgood and the Helpline can’t help you, ask around among other nonprofitgroups to see who they use and like. You may also call the Oregon State Bar–Lawyer Referral Services or the Oregon Society of CPA's and tell them you arelooking for an attorney or accountant who does nonprofit work. As a last re-

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sort, you could call an attorney or accountant in the phone book, but your oddsof finding someone who knows much about nonprofits are probably less than 1in 100.

Before you actually call an accountant or an attorney, it is a good idea tomake a list of questions. These questions might include:

•Are you familiar with nonprofits? How much of your practice is with non-profits? Have you worked with our type of nonprofit? How long have you beenworking with nonprofits?

•Are you comfortable with working with a group that wants to do as muchof its own work as possible?

• How much will you charge?