The Spring Forward Podcast
The Spring Forward Podcast, formerly focused on general organizational excellence, has evolved to become your go-to resource for all things nonprofit. Host Spring Richardson Perry brings her expertise to guide listeners through the intricacies of nonprofit management, offering insights, strategies, and inspiring stories to help organizations thrive and maximize their impact in the community.
The Spring Forward Podcast
Navigating Nonprofit Success
Understanding the realities of nonprofits is crucial for current and future leaders in the sector. In this episode, Spring Richardson Perry and Shawntinique Shepherd discuss key distinctions between non-profit and for-profit organizations. They tackle misconceptions about ownership and emphasize the importance of compliance and financial transparency.
Key Takeaways:
• Differences between nonprofits and for-profits in governance and purpose
• Misbelief about ownership and the true nature of nonprofit profits
• Importance of internal controls and financial compliance
• New regulations introduced under Uniform Grants Guidance
• Insights on indirect costs related to federal grants
• Need for collaboration with existing nonprofits in the community
• Challenges in obtaining funding and maintaining nonprofit viability
• Overview of audit requirements and financial transparency for nonprofits
Hey, nonprofit friends, welcome to the Spring Forward podcast, where we talk about all things nonprofit, from board discord to grant writing and strategic planning tips. If you're an executive director, nonprofit board member or just someone heavily involved in the nonprofit sector, then this is the podcast for you. Let's spring forward into excellence, and this is the podcast for you. Let's spring forward into excellence. Welcome, welcome everybody, to another wonderful episode of the Spring Forward podcast. I am your host, spring Richardson Perry, and today we have a wonderful show for you and I'm so excited to bring it to y'all. We are going to be talking about nonprofits, what they are and what they aren't, and what these new regulations are looking like for nonprofits from the Uniform Grants Guidance, the revisions that came out in October of 2024. And so I have with me here today Ms Ms Shantanique Shepard, who is yet another consultant in the nonprofit world, and she can impart her expertise on this as well. And when I tell y'all we got a great show lined up for you today because we got some stories for y'all.
Spring Richardson Perry:So get your popcorn, get your drink and let's get started.
Shawntinique Shepherd:What's up, Shantamika how?
Spring Richardson Perry:are you?
Shawntinique Shepherd:I am fine, how are you?
Spring Richardson Perry:I'm doing good. Tell the people what you do. First of all, let's start there. What is your claim to fame?
Shawntinique Shepherd:Okay, so what I do is I am the founder of CFO and Associates. It is a virtual accounting firm. We do bookkeeping, we do you know tax, and our main client is nonprofits.
Spring Richardson Perry:I love it and this is why I have her on here today for y'all Because we are in the midst of tax season, so y'all can get some really great tips. But also we want to keep y'all out of jail, because some of the things that I've been hearing with nonprofits and what they're doing it raises some serious red flags, and so I want to really jump right into this and and get started. We're going to start with the basic shantanu talk to us about what is a non-profit and how it differs from a for-profit business okay.
Shawntinique Shepherd:So a non-profit is like an organization and it exists to serve a purpose rather than generate profits. Nonprofits don't really have owners. They have shareholders. For-profit have owners for the most part.
Spring Richardson Perry:Run that back. Sean Tanique, Would you say it again Nonprofits don't have owners and for-profits have owners.
Shawntinique Shepherd:Boom, y'all heard that have owners boom.
Spring Richardson Perry:Y'all heard that. I want y'all to listen to that. Let that marinate in your brain for a minute, because a lot of people talk about this is my non-profit. While you may be the founder of the non-profit, you may be one of the founding members of it, right? You don't own it. Nobody owns a nonprofit. So so keep going. I'm sorry I interrupted you, so keep talking about some of the differences so, um, some of the differences.
Shawntinique Shepherd:Like we said, like the owners, the founders for nonprofits, owners for for profits, with nonprofits, they are governed by a board of directors. Now, some for profits, they do have a board of directors if they are a corporation, but when they're not, they just have members. You know, owners as you want to call it, but non-profits have board of directors and they are legally required to use their revenue to further their mission. Versus, you know, with a for-profit I can take this money home, it's mine or whatever you know, but with non-profits you can't do that. It's stricter rules when it comes to non-profits and their finances. They need more internal controls. So you can't just be like, okay, I want to use this money for myself, you know. Or I want to take the money out the the business bank account and, you know, pay my house rent with. You can't do that.
Spring Richardson Perry:I mean, you can't do that, right, you're supposed to, you're supposed to separate your business expenses from your personal expenses in a for-profit business, but a lot of times people don't and and there are ways for you to account for it separately without having a separate account, and so there are ways to do that. But in a nonprofit, you cannot go, take money out. Talking about going and make it rain in Magic City, right, you know what I mean and think that that's okay. We're not doing that, you're not allowed to do that, and so I really wanted to shed light on this, because there are a lot of nonprofits that are starting up, but people are claiming ownership over them and, like she said, no one owns a nonprofit.
Spring Richardson Perry:It is for the community, it is for the people. As a matter of fact, in your bylaws, you have to state what happens to the money should the organization dissolve, and the money has to go to it can't go to a specific person. You have to designate an organization, so you can specifically say, hey, if this organization dissolves, we want our money to go to United Way. Or you can say, if this organization dissolves, we want our money to go to United Way. Or you can say, if this organization dissolves, we want all the money to go to a similar organization.
Spring Richardson Perry:And so you have to have, like she said, some sort of internal control over this. You can't just be out here just willy-nilly doing things and there are government regulations around this, and so that's one of the common you know, that's one of the common misconceptions that I think people have is that you know, you feel like you have ownership over this organization and while you may have been the founder, one of the first people to start it up, you don't own it, because no one owns a nonprofit excuse nonprofit. Everything in the nonprofit, when you make a profit, has to be reinvested back into the organization. But go ahead. I'm sorry, I was interrupting.
Shawntinique Shepherd:No, you're fine. But no, that is definitely true. They don't realize that, depending on how your bylaws are set up, if you're the so-called owner um, you can get voted out absolutely, so absolutely you voted out and that's.
Spring Richardson Perry:I think that's another thing people don't realize too. With non-profits you have, you are mandated to have a board, and your board has to be, I think, at least three people, if I'm not mistaken yep, three unrelated people.
Shawntinique Shepherd:So it can be you, your husband and your daughter or something. Can't be those three. No, exactly you on the board, if it's more than you know, of course. But it can't be majority family and you know everybody else, because they're going to be like okay, y'all just doing this so y'all can make some money.
Spring Richardson Perry:Yeah, and that's true of all. I will say if you're thinking about starting a nonprofit, think long and hard, because it takes a lot to start and maintain one, because you are limited and restricted in the ways that you can make money because you're not paying taxes. So the government's like, look, if we're not getting a piece of this pie, it's only certain things that you can do, period. You can do period. So you gotta be, you gotta, you gotta be, really, really, um. Do your due diligence in terms of, yeah, uh, what's already, what already exists, what's out there, what is the true need in the community, before you actually go and start one. Because once you start one, um, and you get it off the ground, you're gonna constantly be umumbling for money. You're always going to be looking for ways to bring in revenue to support that mission, and it's not as easy as running a for-profit business. So I just wanted to put that out there. So I want to talk about the profit part of it, though, um, and so can non-profits actually make a profit?
Shawntinique Shepherd:so technically they can, but it can't be a lot um, because some years you might have like an overflow, but as long as you end up reinvesting it. So it's technically not really a profit, but as long as you are reinvesting it is, it's fine um, and it gotta go towards your mission um. Another thing people uh think that nonprofits can't do is make money so you can have like generating revenue. You can do that um, as long as it's it aligns with your mission. It has to align with your mission. You can't be like OK, I want to open this bar and the bar has nothing to do with your nonprofit one of the biggest examples I always like to give is the NCAA and the NFL.
Spring Richardson Perry:Both are nonprofit organizations, billion dollar nonprofit organizations, right and so just because it says nonprofit, it does not mean that you're not profitable. It just means that the money that you're making is constantly being reinvested into the organization, just like shawton said. So for the ncaa they are the national um college association of athletes. I think it is right so their mission is to support student athletes Simple right.
Spring Richardson Perry:So, the simpler your mission is, the easier it is for you to justify reinvesting. So all the money that they're making, if they're putting it back into the schools to give the student athletes a stipend, that's support for them. If they're putting it back into the schools to upgrade the workout facilities or the training facilities, that's supporting the student-athletes.
Spring Richardson Perry:There's so many different ways that they can reinvest that money, even if they're paying bonuses to their coaches, right, they're supporting the student student athletes, because if you don't have a coach, you don't have a team, you don't have athletes.
Spring Richardson Perry:So that's reinvesting the money into the organization, but people have a misunderstanding of what that looks like and how to do that. And just because, again, you're a billion dollar organization, it doesn't mean that you're making a profit right, and you could still be making a profit, but you're also reinvesting that into your organization to continue to further your mission, to build out your programs and to support the community of people that you said you were going to support. So I think that's another thing that I really want to jump into really quickly. It's to talk about what a profit is and what it is not, because you and I, kind of offline, had this conversation about a salary, right, yeah. So talk to us about that, chantaleee, because what is a profit, what is it not? And salaries versus profits and operational costs and all those things. Talk to us about that.
Shawntinique Shepherd:Okay, so we know a profit relates to business.
Spring Richardson Perry:It's not related to a person or anything.
Shawntinique Shepherd:It relates strictly to business.
Spring Richardson Perry:The bottom line of the business, exactly.
Shawntinique Shepherd:A profit is after expenses.
Spring Richardson Perry:After expenses, after the payroll has been run, after you pay the light bill and the rent for where your organization is at.
Shawntinique Shepherd:It's, after all, that that is the profit, that is the profit.
Spring Richardson Perry:So if you have money left over after you paid all your bills, then you can say okay, I have $50,000 extra and I want to take this $50,000 and I want to go and beef up this program. I want to go buy some new books for this program. Or I want to go and put on a workshop for my community. I need to go find a facilitator for this workshop, so we need to pay for the space to my community. I need to go find a facilitator for this workshop, so we need to pay for the space to have it. We need to pay for the facilitator. We're gonna have some food, some vendors out there. We need to pay all of this money and at the end of the day you end up spending, say, $40,000. So when you at the end of the year on your tax return, you have extra $10,000 left over.
Shawntinique Shepherd:Nope, you're not going to get in trouble.
Spring Richardson Perry:You just have to pay taxes on it. That's it. And I'm telling y'all this because, again, there's so many people that's out here that's wanting to start nonprofit organizations and y'all are really misunderstanding what a nonprofit is. Right, I know that you want to help the community. I know that you want to be sort of this beacon of hope for whatever population of people that you want to serve, and that's all well and good, but sometimes there's already an organization out there doing it and they need your support.
Spring Richardson Perry:I'm telling you where I live. There's so many nonprofits doing good work here. The problem that we run into is that we don't have enough volunteers who are available to help carry out the mission. So that's another way that you can be involved. Don't go start your own thing. Go get involved and help with something that already exists so that you can help them really further their mission, because you may find that what you're trying to start up is some is a program that they wanted to add, and you may be the person to implement the whole program. They just didn't have the capacity to do it.
Spring Richardson Perry:So I'm urging y'all to really take a step back before you decide to just start a nonprofit, really look in your community and see what is already there and then see what it is that you can do to add to what's already being done, instead of trying to go out and do something different, because that puts a strain on resources.
Spring Richardson Perry:That puts that puts you in not necessarily in competition, but sort of in competition with other people who may be going for the same type of funding that you're going for. Yeah, so, like y'all gotta I hope y'all listening today I feel like I feel like I'm in a pulpit today, girl, like I'm just giving a word, a testimony, because I'm like I just see so many people wanting to. I want to start a nonprofit because I really want to do this, I really want to do that and the first thing I say is well, what's already been done? Like who's already doing this exactly? And they have about three, two, three organizations that they can name in their community that's already doing this. So why you want to do, what's the point are you starting it?
Shawntinique Shepherd:why you can't go help them and that's what I tell people to um, look and see who's already doing something, because they think life is easier because they're starting a nonprofit. They think it's like a I can get rich type of thing and you can't. It takes time for a nonprofit to even generate money. Like that. It's hard to get grants. I think you just get a grant because you got a nonprofit. That's not how it's very competitive and a lot of people don't even have it set up properly to even apply for grants. Talk to us about that. You gotta have your program set up. So what? What are you doing? What? How many people can be a part of this program? How much money is going to take to get this program off the ground? You know who you got to pay, what supplies you need and how long is this program. They, they need to know everything. They don't even know that there's so many people that wanted to start or even have non-profits. You know they want to go get there for a 501c3 and which is?
Spring Richardson Perry:275 dollars, by the way, just to start. If you're doing the easy form right, go all the way up to over 600. Yes, if you're, if you're complicated in a sense, exactly so, it ain't free. Just so y'all know.
Shawntinique Shepherd:And they think that's free too. I'm like no, because you still got to incorporate, depending on your state, that that price is different. You still, you still got to do a lot of things. It's not. It's not as easy as people think. It costs money. Um, you probably gonna be putting majority of your money into it just like a for profit. Uh, just to get it off the ground it. It takes longer. You really got to put in footwork. There's so many groups on facebook where people are in the groups like how do I get along? I need to apply for a grant or you know something, and they they keep getting denied because financials not right. A lot of grants like okay, what have you been doing and how has it been working before we give you this money? Yeah, a lot of people. Well, we've been following 990 in for the past five, six years.
Shawntinique Shepherd:You know 990 in is below fifty thousand dollars most of them haven't even reached fifty thousand dollars a year. So you gotta go outside and work like a for-profit. They just think the money just come because it's a non-profit. No, you have to go out and pitch to these businesses locally and get your non-profit name out there well and it's even more than that, because in a for-profit business you can potentially see a return on your investment.
Spring Richardson Perry:You can see actual money that will return if you invest into the for-profit business With the nonprofit business.
Spring Richardson Perry:I'm really just giving money away. I'm not going to see a return on my investment, not a tangible return in terms of money itself. The return on your investment is the service's, the program budget. Like what y'all, what y'all need to run the program. Like how much it takes to run it. Oh, it takes 50 000 to run it.
Spring Richardson Perry:Okay, what is my 5 000 gonna do? Can you tell me that? What's the metrics of this program? How are you measuring success? What would a success look like from this program? You know, once they, once they do this, what's next? Ok, after that, are they finished or they got to do something else? Like, what are you doing? And is this is part of my five thousand dollars going to somebody's salary, because I don't mind that, right? Also, what I want to know is okay, well, what qualifies this person to get my $5,000 in this position? What qualifications do they have to carry out your mission? I got a lot of questions, but I have to give the money to you and so you can't be mad when somebody is asking you all these questions, when you asking them for money. If they're going to write a check for $20,000, $30,000, which is a lot of people's expectations. They just think, oh, because I have this great idea.
Shawntinique Shepherd:And they think everybody else is going to think it's great and yes, I think it's wonderful, that's great.
Spring Richardson Perry:Okay, so how are you funding it? Because I'm not going to help you, because I don't see nothing that you're doing right now that deserves my money, right? So how are you going to convince people that what you're doing is worth investing in? Because, essentially, again, while it might be a tax write off which will help me, before I just hand you this money, I could find a lot of different things. I could find five thousand things different things. I could find 5,000 things to do with $5,000. You know so, this is my gripe y'all, and, as you can see, I'm just, I'm really passionate about this because I am.
Spring Richardson Perry:Somebody said in a meeting I was in last week. They said this is Miss Community, right here, y'all. She is Miss Community, she, y'all. She is Ms Community, she is in the community, she is doing the work, and so I'm all about being and working for the community. However, I understand it takes money to put these programs on, but I'm also going to show you how, where your money is going to provide the most impact and how this is going to be beneficial to everybody if you invest in this. And that's one thing that people can't show, and they also can't show a well-structured organization. Yeah, really, give you some money to carry out these, these programs. What does a well-structured organization look like?
Shawntinique Shepherd:so that is a good question. Um, it's real, it's, it's a lot um, even on the financial end. Um because non-profits, they go through extensive uh audits, right um we've been very expensive too. They are very expensive. Um, some of my clients like audits because we don't do um external audits. But it's good that we don't because we actually handle the books and stuff. You know, with external audits they can't have nothing to do with your organization.
Spring Richardson Perry:Right, right. So if you're doing an external audit and you're handling the books, that's going to look fishy because it's like, oh, they're using the book.
Shawntinique Shepherd:Exactly so. When my clients get their audits done, um, depending on who they go to, um I didn't seen recently one of them had to pay like 46 000.
Spring Richardson Perry:I was like, oh I'm having a lot of time over here, y'all I have never seen an audit be that expensive. What was their budget, though? What were they? What was the budget that they were auditing?
Shawntinique Shepherd:They were. I think this one was a $5 million organization. They were $5 million. Another one, I'm trying to think how much was theirs. Theirs was around like $30 some and theirs was like a $7 million.
Shawntinique Shepherd:So it depends on, you know, the CPA. Oh lord it. It's a lot that goes into it because, like I said, the turtle controls is the questions. They ask like okay, um, you bought this, but what was it for? What grant are you applying it to? Or what funder, you know, are you applying this money to? You just taking money out the account? But we need to know these details.
Shawntinique Shepherd:Um, so what we do to make it a little easier is, when we set up there and turn on controls, um, we do it where they have to request money. You know, you got a request payment like, okay, I want to pay comcast. For example, we're going to use comcast, I want to pay comcast, got this comcast bill coming or whatever it's for the internet. We know it's the internet thing. Um, then we asked like okay, who is funding this? You know, is it one of the donors that just gave $5,000? Is it one of the grants? Or you know what's going on? Who is this coming from? So, on a form they have to put in hey, this is a payment request to Comcast. It's for the internet, the funder or the grant. If it's two different people Some grants have.
Shawntinique Shepherd:Well, some funders have multiple grants. They got to put what the grant is for and all that good stuff and how much it is. They have to submit it for approval. They got to have at least two people to approve this just so we can be safe. We're not. Nobody can just be like, okay, I'm gonna just buy this. No, two people have to approve these payments. So that way we have documentation. Because when you get an audit, they want documentation. They want to see why you're doing this and what. What is this for? They ask all the time like, okay, what was this for?
Shawntinique Shepherd:and if you can't answer, it's like okay, you're about to fail this audit and now you're gonna pay them for more money, like oh my gosh, like you got to get this corrected, because if you don't, now you're wasting more money, because you're taking more time and taking up their time. They trying to get this, make sure everything match. So it's a lot when it comes to that, like you really have to be on it.
Spring Richardson Perry:You cannot just, oh, this is my money, I'm about to take it it's not how it works and I'm yeah, let me tell y'all everything Shantanita is telling y'all is a thousand percent true. I sit on two nonprofit boards. One of them, I am the treasurer of the board. I am very much in control of the finances and when we set everything up, we have internal controls where there are two signatures that are required for anything that is over, I think, $500 or something like that for request, and so anytime we need to make major financial decisions, it has to go through the whole, it has to go through the board meeting, everybody has to vote on it, and then both the treasurer and the president right now are typically present with something like that needs to go down. So there's, there's a lot of things, guys, especially especially when you're thinking about getting in line for a grant, because grants nowadays, a lot of them are asking for audited financial yes, yes, and so you may not necessarily your nonprofit may not be required to have an audit.
Spring Richardson Perry:Some states require their nonprofits to be audited at a certain amount. The federal level has a certain amount where you have to be audited at at a certain amount. The federal level has a certain amount where you have to be audited at. So it would behoove you to, even though you don't have to go through an audit, to set up your financials in a way that if you are audited you'll pass it with flying colors, because if there's any question about what you're using the money for in a nonprofit organization, there goes your credibility. I mean, I look at the Black Lives Matter organization that went through all of that stuff with their funds and you know it was the findings where they were using the money to pay the mortgage they had taken and all that other stuff, and so justifying spending those funds was extremely difficult for them. Yeah, so you know the movement sort of lost credibility because of that.
Spring Richardson Perry:Yeah, and there are still other, so there are still chapters of it now, but I don't know that the original one, I think, which was out of California somewhere, I don't. I don't know if they still exist or not, but I know that they went under a lot of scrutiny because they were mixing personal finances with the nonprofit finances. I think they had a lot of family member board members, if I'm not mistaken. And so you know, like we said earlier, you can have family members on your board, but that cannot be the majority. So if you have five board members and it's always good to have an odd number of board- members have an odd number of board members.
Spring Richardson Perry:If you have five board members, only two of them can be family members at the most, and that's pushing, you know. So you really want to take these things into consideration. But I want to jump back to these audits and these regulations, because this brings me to the new regulations with the uniform grants guidance that came out back in October. You know there were several things that were changed, but I think one of the most, one of the most that stood out to me, was the audit requirements. The audit requirements, right, and so it changed from $750,000 to a million, right? Is that correct?
Shawntinique Shepherd:Yeah, I don't know why they pushed it up. You would think they would go lower.
Spring Richardson Perry:Well, it makes so. To me it makes sense to push it up because they're so costly. Right, they are, and you're already struggling to to keep the lights on and to keep your building together for your program itself, right, right. So if you're spending forty, six thousand dollars, I know, on an audit, you know that's, that's a salary, that could be somebody's salary, so I can understand them pushing it up. But again, just because it's the threshold is not at a million, that doesn't mean that you can't be audit ready at five hundred thousand or at fifty thousand. Like, yeah, you need to always be ready if somebody because that's another part of nonprofits is financial transparency, yes, if somebody comes to you and they say, open your books, you got to open your books Point blank, period is, and if your books are not in order, and again there's the credibility of your program and you may not get any more funders the way that you need to.
Spring Richardson Perry:So that that was, that was one of them, and the other one that really stood out to me was the de minimis rate. Are you familiar with that? No, that I'm not. So that one is when you're going for federal grants and they have an indirect, you can put a line in there for indirect costs, right? So some anybody who's not directly related to the grant itself. So you may have, like, the program director who is going to direct the program, and then the program coordinators, the executive director, of course, who's over it, but that human resource person, right, they're an indirect cost of the program because without that person the organization wouldn't exist to carry out the mission or whatever that is.
Spring Richardson Perry:So there was a, I think originally it was set at 10 percent and so now it is up to 15 percent. So you don't have to if you don't have like a set rate that they've already given to you, because you can apply to the federal government to get like a set indirect cost rate so that whenever you apply it, just you automatically get that amount. Um, so now you don't even really need that, it's. It's 15%. Um, if you feel like you need more than you might need to apply to get a higher rate. But I doubt that at this point they'll really approve anything more, unless it's a really really special circumstance, a really unique situation. But I think 15 percent is generous for for federal government grants, because you're already looking at getting several hundreds thousands, millions of dollars, like most of the federal grants are at least half a million dollars um for your program.
Shawntinique Shepherd:So 15 percent of it is pretty good yeah, I would say that is good for um indirect expenses because you know you want to have majority direct expenses to. You know the programs, um, and I think a lot of people when they come to their budgets they don't know how to have majority direct expenses to the programs and I think a lot of people when they come to their budgets they don't know how to allocate the funds because what they do, so in the financial industry, for the accounting and stuff, there's a certain percentage when it comes to being in a program, a certain percentage of grants and expenses, whatever. It's a certain percentage that's supposed to do everything. They go to management. But a lot of people their book's not set up right, uh, their books not set up right. Like I didn't see over the years. I didn't see a lot of wild stuff I bet you have.
Spring Richardson Perry:I've seen some crazy stuff too, in a way that people deal with their money, in a way that I work with non-profits too when I'm trying to get them back into compliance, and I'm looking like y'all, how long y'all been doing this and y'all been this, how y'all been operating. I'm just looking like in amazement because I'm like how have y'all stayed in business like this? You know, because because, even though you're a nonprofit organization, there's still a business side to things exactly, and it's just been wild yes, yes.
Spring Richardson Perry:So I'm always in awe as to how they're operating and the things that they're doing, because, um it, you know, when I, when I come in, essentially it's a dire need at that point, and so I'm always looking like this is what y'all been doing, like how y'all still in existence, like how the IRS ain't come shut y'all down yet, like I promise you.
Shawntinique Shepherd:I ran into somebody that didn't have their books done in over three years.
Spring Richardson Perry:Yeah, Like how and that's another thing, guys is that if you don't file as a nonprofit, if you don't file your taxes for three consecutive years, they can revoke your 501c3 status. So if you go for a grant and you give them the paperwork it says, oh yeah, we're a 501c3, but your status has been revoked, that can be a major problem because when they come back and they want to see, they want to see you know, audits, paperwork, tax returns, all these things, and you don't have that to show, you're gonna have to hustle to get it done, and hustling to get it done is expensive very expensive very and a lot of times they don't want to pay the money and it's like, okay, very.
Shawntinique Shepherd:And a lot of times they don't want to pay the money and it's like, okay, you're gonna have to pay taxes on this money because you ain't got no tax exempt status no more exactly.
Spring Richardson Perry:So you know it it really becomes a really major issue. Um, when non-profits don't don't do what they need to do to stay in compliance. And just because you know, just because you are tax exempt does not mean you don't do what they need to do to stay in compliance. And just because you know, just because you are tax exempt, does not mean you don't file taxes. That's another thing that I have to tell people. Like, just because you're tax exempt, it doesn't mean that you don't file taxes, that you're exempt from filing taxes. It just means that on the money that you generate for the organization, you are not required to pay taxes on it, unless you make some sort of significant profit, like Shantani and I were talking about earlier.
Spring Richardson Perry:But otherwise you need to account for your money. You need to show where all of this money went to, how much you made in total, total. And then, at the end of all of that, right, if I made a million dollars, I paid 750,000 in salaries, I paid another, say, 200,000 to programs, and then there was $50,000 left over. Well then, if that is considered a significant amount, would that be considered significant to pay taxes on? Or would that just mean that I'm going to take that, carry it over and reinvest it?
Spring Richardson Perry:You can carry it over you can carry it over.
Shawntinique Shepherd:You can carry it over as long as it's getting reinvested. If you're not putting back into your programs or your mission or anything, you might as well just be like oh, I got to pay taxes on this.
Spring Richardson Perry:Let me just go ahead and give y'all this little money right quick, because I'm telling y'all it's way worse on the back end than if you just do it on the front end. So you want to make sure that you are are doing what you need to do. Um, I, if I can, if, if I can wrap this up and sum this up for y'all. You know, key takeaways from this is number one nonprofits have a mission and they have a board. The board is typically unpaid that's something we didn't talk about but the board is not paid on a nonprofit board, whereas if you have a board of directors and you're for profit, they can be compensated.
Spring Richardson Perry:So, that's another key difference.
Shawntinique Shepherd:So with that too, if you do pay your board, because you know executive directors, they can be paid. But if you do pay your board Outside of that, you have to Let people know that, yeah, it cannot be no secret. It can't be like. Their salary information has to be, you know, public. It's public information at that point. And their salary information has to be public. There's public information at that point. And as far as them, it has to make sense. It has to make sense. The salaries will have to, because people like to oh, I'm this, I'm about to pay me a million dollars. No, no, it got to be like the average salary that that position would pay.
Spring Richardson Perry:Exactly it has to go. It has to be in line with either the national average or the state average or the regional average. There has to be some sort of justification for that particular salary and, like Shantanee said, it has to be accounted for. So on your on the tax form, it will show where your executive director made X amount of dollars. If your president or your chairman has a salary, it will show what they do X amount of dollars and you have to list their weekly hours that they dedicate to the organization.
Spring Richardson Perry:That has to be listed on there and there's some check boxes on there as to what it is exactly that they do. So I'm telling y'all, starting a nonprofit is not as easy as you think, and especially when it comes to maintaining it. It takes some work and it's not impossible. But so many people just have a misconception of what a nonprofit is and what it isn't right. And so, like I said, some of those key takeaways are number one. In a nonprofit, you can make isn't right. And so, like I said, some of those key takeaways are number one in a nonprofit, you can make a profit, but it has to be reinvested into your business, whereas in a for-profit, you can take that money and you can go make it rain in Magic City.
Spring Richardson Perry:If that's what you want to do, it don't matter, that's your profit, you do what you want to do with it, right? And then, when it comes to making a profit or really running your organization, any money that you make has to be in line with the mission of the organization. So, like Shantanu said earlier, if you want to just open a bar under the nonprofit, but you're supposed to be a health and human services division, like, make that make sense like what you, who, what are you doing? Like this is very unhealthy, with all the smoking or drinking like you trying to create more clients for your non-profit. That's a total conflict of interest. So, again, you have to make sure that the things that you're doing, the programs that you have, are aligning with the mission of the organization.
Spring Richardson Perry:And, lastly, you want to think about the regulations, the new rules that have just come out and I will talk more about this in a later episode where we really dig deep into what these regulations are but the main one is to have an audit. If you're going to get a federal grant, you have to have an audit of when your organization makes a million dollars or more and when you're doing these grants for the federal government. When you're going for federal grants, you automatically now get a 15% indirect cost rate as opposed to a 10% indirect cost rate. So that's a little bit more helpful in order to make your organization more sustainable.
Spring Richardson Perry:But, I have truly enjoyed talking to you, Chantelaine. Thank you so much for coming on. I'm so excited for this. If people want to get in touch with you, especially if they need to get their touch with you, especially if they need To get their lives together during this Tech season for the Nonprofits that they're running or that they're a part of, how can they get in touch with you?
Shawntinique Shepherd:They can go to my business website, wwwbestcfoacom, so that's B-E-S-T, c-f-o-acom, and you know you can go on there, look around, look at some stuff and you can book your Consultation from there. You can find me on Facebook With my name, shantanique Shepard. You can find the business Name CFO and Associates. You can find me anywhere.
Shawntinique Shepherd:You can find me on google I'm just about you will find me and you'll be able to book a consultation and you know we can help you figure things out if you know you're having issues with the back end. You know we want you to be great out here. We don't want you out here about to go to jail. We don't want you to lose your 511c3 status, none of that.
Spring Richardson Perry:Yes, we don't want you out here, raggedy we want you out here doing things the right way and yes, it takes some sort of financial investment to do it the right way, but it is well worth it in the end Because, again, if you are caught on the back end and you have to pay to fix it, it is much more expensive usually three times more expensive than if you would have just handled it correctly in the first place. So thank you so much, shonkanique. I appreciate you. You're welcome. Thanks for listening, guys, and, as always, until next time on the Spring Forward Podcast. Bye guys, bye.