Helping You Achieve the Freedoms of Time, Money and Peace of Mind
Not for Profits – Top Trends
Why do we call “Not for Profits” by that name?
Apparently it is to distinguish them from the “For Profit” sector.
I read in the recent “Cause Report” published by JB Were the statement “One of the great difficulties in discussing the not for profit sector is definitions and seemingly synonymous terms. Most people equate the term, not for profit (or for purpose if you want to make the point that they can and should make a profit) with the term charity.
Then if organisations do the same thing (e.g. private and public schools) most would expect them to be both under the same category. Also when we look at sub categories, would the Salvation Army be a religious or social services organisation and the Red Cross an emergency or International Aid organisation.
Despite the many similarities between New Zealand and Australia, why is giving to religion not tax deductible in Australia but does receive a tax credit in New Zealand and does that affect donation levels?
Finally, why can I get a tax credit for school fees paid to a general fund of a State school but not for tuition fees paid to a private school and why is the of treatment of tax credits different for kindergartens depending on who is running them?
There are logical if not tortuous answers to each of these questions and understanding which sector organisations belong in, helps answer many of them.
I believe we should stop calling “not for profits” by that name and find a better description.
I want my “Not for Profit” clients to be profitable and therefore sustainable into the future.
Of course the ultimate gain and growth in equity made by such entities can never be distributed to promoters or owners as a distribution might be made by a “for profit” entity, but must be reinvested for the ultimate good for which the “not for “profit” was originally established – viz; the relief of poverty, the education of our children, the advancement of education etc.
For-profits have a fiduciary duty to their stakeholders especially their shareholders and stockholders. The fiduciary duties of not for profits tend to have more of a moral basis.
A membership association has a clear duty to its members. Other types of not for profits have a duty to groups whose members are identified only by common characteristics, such as age, poverty, faith, religion or sickness.
Some not for profits even owe duties to future generations. Examples are not for profits that finance medical research, preserve historic sites, or preserve our cultural heritage (art museums, symphonies, etc.). These not for profits tend to own portfolios of investments and manage them so as to produce a perpetual source of income for current operations.
So many not for profits argue they need a discounted service because they are a non profit. Although not for profits are not in business to make money, they are, nevertheless, in business: they hire people, they produce goods and services, and they have bills to pay. This means that not for profits should function mostly in the same manner as for-profit businesses.
Not for profits today are under a lot more scrutiny and need to demonstrate transparency. They should be businesslike, but not necessarily run “like a business.” This is not a contradiction. To run an organisation “like a business” is to mimic for-profit businesses, including their goals.
Therefore not for profits should be prepared to pay for and invest in the services we offer in our business development offering.
To discuss how the above impacts you, please contact your Lynch and Associates Limited Advisor.
T +64 9 366 6008 or M +64 27 233 4002
Share this article with a colleague