Glossary of Terms

A B C D E F G H I J K L M N O P Q R S T U V W X Y Z

501(c)(3)
Status the Internal Revenue Service (IRS) gives an organization when it deems it nonprofit, tax-exempt under the 501c section of the IRS Code.  Among other things this stipulates that donations made to the organizations are tax deductible.

990
See entry for Form 990 below.

Action Steps/Tactics
Specific steps to be taken to implement the strategies.  Each action step will be assigned an individual who is responsible and a start and completion date.

Advance Ruling Period
A five-year period during which your sources of revenue become “normalized”.  The IRS will classify you as a public charity when you get your initial 501(c)(3) exemption based on the fact that you expect to develop a broad base of public support.  It will return five years later, at the end of your advance ruling period, to confirm this classification.

Advisory Committee
A group of individuals who make their expertise and experience — and sometimes their celebrity — available to the board of directors of a nonprofit organization.  Allow well-known persons to provide service to an organization without having to become involved in its actual governance.

Articles of Incorporation
Your Articles of Incorporation are filed with the Illinois Secretary of State to establish you as a not for profit corporation under Illinois law.  They secure your name within the state and identify the person who will be your Registered Agent.  They identify your Directors and the purpose for which you are incorporating.

Artistic Director
Chief staff person who is responsible for the artistic decisions of an arts organization, including overall artistic vision and programming choices.  Generally members of the artistic staff, such as choreographers, stage directors, music directors, etc, report to this person, not to the Executive Director or General Manager. 

Audit
The process whereby the IRS examines the books and records of an organization, and witnesses, in search of compliance with the internal revenue laws.  All Illinois nonprofit organizations with revenues of more than $150,000 must hire an independent auditor to compile an annual audit.

Board of Directors
Under Illinois law, the affairs, business and all legal matters of a nonprofit corporation are managed by its Board of Directors.  Your Board is called a Board of Directors or Board of Trustees, depending on the name you give your volunteers who govern the organization.

Two or more individuals who serve, by election, as the governing body of an organization.  Their responsibilities include: determining the organization's policies for operation; ensuring that the provisions of the organization's bylaws and the law are being followed; engaging in long-range planning to establish the general course for the future; establishing fiscal policy and boundaries with budgets and financial control; providing adequate resources for the activities of the organization through direct financial contributions and a commitment to fundraising; selecting, evaluating, and terminating the appointment of the chief executive; developing and maintaining a communication link with the community; and promoting and advocating for the work of the organization.

Board Manual
Manual containing information central to the operation of the board and organization. Manual should include: Articles of organization, mission statement, bylaws, list of current board members with business affiliations, list of committees and their respective members, list of staff, brief history of organization, roles and responsibilities of board members, minutes of current fiscal year meetings, planning documents, and annual report from most recent fiscal year.

Bylaws
Bylaws: Your Bylaws establish the “rules of the road” for governing your organization.

The document adopted by an organization to regulate its affairs; formally referred to as the rules of operation.  Bylaws should include the following: Agency Mission, Membership Policy, Meeting Information (attendance requirements, number that constitutes quorum), Board of Directors (number of members, responsibilities, election times, officers and their responsibilities, length of terms), Committees and their Functions, Fiscal Year Accounting Procedures, Indemnification, Bylaws Amendment Procedures, and Dissolution of Organization.

Brainstorming
Creatively, extemporaneously producing ideas without pausing.

Capital Campaign
A fundraising program designed to generate contributions for a charitable organization's capital, usually for a building, a major item of equipment, or an endowment fund.

Cause-related Marketing
Fundraising techniques used to generate nonprofit revenues, involving related and/or unrelated activities; the term usually includes charitable sales promotions and other forms of commercial co-ventures.

Certified Document
A document that is signed by your corporate Secretary to verify that the Board adopted or approved it at a duly convened meeting.

Chair of the Board
An individual selected, usually by a board of directors, to be the leader of the board. This is not usually an officer position, although it can be when so provided in articles of incorporation and/or bylaws.

Committees
A subgroup of a board organized to help manage the board's work. Committee members can include non-board members, and be used as a method of introducing that individual to potential board service.

While overall committee structures and responsibilities vary from organization to organization, the most important committees for a board to have include executive, development, finance, marketing, public relations, nominating, and strategic planning.

Typical committees:

Development Committee: This committee is composed of board members and is sometimes called the fund-raising committee.  It oversees the planning and coordination of fund-raising efforts. This includes ongoing annual fund-raising for operations and the solicitation of large gifts.  It may also include planning for fundraising events and for capital campaigns, although these are sometimes handled by separate committees in larger organizations.

Events or Benefit Committee: This committee, composed of board members, organizes the planning of special events, such as fund-raising benefits, including determining invitations, event location, overseeing budget, and soliciting attendance.

Executive Committee: A subgroup of directors of an organization that has particular influence over the affairs of the organization generally comprised of members of the board.  Generally conceived of as the chief coordinating committee of the board, mapping out how the board's business should be conducted, setting agendas, and organizing the activity of other committees.

Finance Committee: Generally headed by the treasurer, it is composed of board members of the organization.  It is empowered to study and make recommendations regarding all financial procedures and controls, assist in the preparation and presentation of budgets, and review all financial statements.  This committee reviews audit results and recommends the retention of the auditor.  An accountant is invaluable on this committee.

Investment Committee: For organizations that own significant assets that require investment (such as endowment funds), a special committee oversees the management of these funds.

Nominating Committee: This committee, composed of board members, identifies, screens, and recommends prospective board members.  Members of this committee generally also assist in the recruitment and orientation of new board members.

Personnel Committee: This committee, composed of board members, develops personnel policies, recommends salary ranges, evaluates the executive director, reviews benefit packages, and handles grievances when board involvement is necessary.

Planning Committee: This committee, composed of board members, coordinates long-range planning.

Program Committee: This board committee works closely with staff to review the program activities of the organization and plans for the future.

Code of Ethics
A non-legal statement of principles established by a nonprofit membership organization and used to guide the professional behavior of its members.

Conflict of Interest
A situation in which the personal or professional concerns of a board member or a staff member affect his or her ability to put the welfare of the organization before personal benefit.

Conflict of Interest Policy
A Board policy that officers and directors will not seek to further their private interests by entering into undisclosed business transactions with the organization.

Copyright
The exclusive right of the author or creator of a literary or artistic property (such as a book, movie or musical composition) to print, copy, sell, license, distribute, transform to another medium, translate, record, perform or otherwise use (or not use) and to give it to another by will.

A work should be registered with the U.S. Copyright Office by submitting a registration form and two copies of the work with a fee which a) establishes proof of earliest creation and publication, b) is required to file a lawsuit for infringement of copyright, c) if filed within three months of publication, establishes a right to attorneys' fees in an infringement suit.

Copyrights cover the following: literary, musical and dramatic works, periodicals, maps, works of art (including models), art reproductions, sculptural works, technical drawings, photographs, prints (including labels), movies and other audiovisual works, computer programs, compilations of works and derivative works, and architectural drawings.

Not subject to copyright are short phrases, titles, extemporaneous speeches or live unrecorded performances, common information, government publications, mere ideas, and seditious, obscene, libelous and fraudulent work.

Corporate Record Book
A binder that contains such important papers as: Articles of Incorporation, Bylaws, Form 1023 Application, IRS Determination Letter, Sales Tax Exemption, and Board meeting Minutes.

Curriculum Vitae
An artistic or academic resume that lists published works, works of art or exhibitions and a short biography.

D&O Insurance
Directors and Officers Insurance; insurance that protects board members and top staff personnel from liability created by board decisions or actions.

Determination Letter
An official notification by the IRS stating that a nonprofit is recognized as a tax-exempt organization.

Development
The process of growing an organization's base of financial support by offering donors unique, value-added reasons to give to your organization.

Director
A Director (sometimes called a Trustee) is a volunteer who helps govern the organization by serving on a Board of Directors (Board of Trustees).

Donor Acquisition
A fundraising program where the emphasis is on the acquisition of new donors to a charitable organization, also known as "prospecting."

Donor Renewal
A fundraising program where the emphasis is on acquiring contributions from those who have previously given to the charitable organization.

Duty of Care
An expectation that a board member exercises reasonable care when making decisions.

Duty of Loyalty
An expectation that a board member remains faithful and loyal to the organization.

Duty of Obedience
An expectation that a board member remains obedient to the central purposes of the organization and respects all laws and legal regulations.

Employer Identification Number (EIN)
A number supplied by the Internal Revenue Service that serves the same purpose for your organization as a Social Security Number serves for you as an individual taxpayer.  This is the number you will use in all IRS reports and correspondence.

Ex Officio
"By reason of their office;" a person serving on a board due to his or her position rather than through elections.

Executive Committee
A committee that has specific powers, outlined in the bylaws, which allow it to act on the board's behalf when a full board meeting is not possible or necessary.

Executive Director
An employee of an organization who is assigned the principle responsibility for administering the organization; sometimes termed "President" or "Executive Vice President"; this may be an officer position.  In performing arts organizations, this person is also referred to as the "General Manager."

Fiduciary
One who is bound to look after the affairs of another, using the same standards of care and prudence as he or she would use in attending to his or her own affairs, as in a trustee of a trust or a board member of a board.

Form 990
Annual Information Return.  This form is submitted annually to the IRS and is due on May 15th for all calendar year entities where revenues exceed $25,000.   It is used by exempt organizations to report to the IRS.   There are separate Form 990 forms for reporting taxable income, private foundations, etc.

Form 1023
Application for Exemption.  This form is submitted to the Internal Revenue Service in order for your organization to be recognized as a tax-exempt entity.

Form 2848
If you have an attorney contact the IRS on your behalf, this form authorizes the IRS to speak with him/her.  The attorney must be registered with the IRS.

Form SS-4
This form is submitted to the Internal Revenue Service in order to get an Employer Identification Number (EIN).

Fundraising
The process of soliciting and receiving contributions using such activities as direct mail solicitation, in-person solicitation, private foundation grant solicitation, special events, telemarketing and planned giving.

Goals
3-5 critical competencies the organization must have to achieve its vision, values and mission.

Guidestar
An organization affiliated with the IRS.  Guidestar is a searchable database of all IRS-recognized 501(c) nonprofit organizations eligible to receive tax deductible contributions.  It posts Form 1023 Exemption Applications and annual Form 990 returns on its website.

Indemnification
A guarantee by an organization to rely on its own resources to pay board members' legal costs for claims that result from board service.  Generally referred to in regards to fiscal matters.  Part of the Bylaws and serves as a protection statement for board members, trustees, officers, volunteers, or employees.

Independent Contractor
An individual who is contracted to perform a specific project or service for a specified amount.

Independent Sector
The segment of U.S. society represented by nonprofit, charitable organizations, also known as the voluntary sector, nonprofit sector, or private sector.

IRS Determination Letter
This letter is the official document that recognizes your exempt status.  It establishes your exempt status and the end date of your Advance Ruling Period.

Measurable Objectives
A few big, key indicators or measures that describe when/how a goal has been achieved.

Member
Under Illinois law, nonprofit corporations are either member-driven or Board-driven. Most arts organizations are Board-driven.  If they have members, the membership usually means that the person is a contributor. See the Membership section of the sample Bylaws.

Mission
What you are here to do and your unique approach to the business you are in.

A mission statement is text that states the activities that the organization wishes to engage in and gives specific guidance on the direction the organization should take in regard to programs, services, and activities.  The law obligates the trustees/board of the organization to limit their activities to those covered by the mission statement.

Nonprofit Organization
A nonprofit organization is a corporation formed for purposes other than generating a profit and in which no part of the organization's income is distributed to its directors or officers.

Nonprofit organizations are formed pursuant to state law, often under the Revised Model Non-Profit Corporation Act(1986).  A nonprofit corporation can be a church or church association, school, charity, medical provider, legal aid society, volunteer services organization, professional association, research institute, museum, or in some cases a sports association.  Nonprofit organizations must apply for tax-exempt status at both the federal and state level.

Officer
An individual who, by reason of an organization's articles of organization and/or bylaws, is assigned certain duties in the operation of an organization.  An Officer is a volunteer who is (usually) elected to fill a corporate office.  Typical officers are President, Vice President, Secretary, and Treasurer.

Purpose
Your corporate purpose is the statement of what you do.  It is set forth in your Articles of Incorporation.

Quorum
A minimum number of people required at a meeting in order for business to be conducted.

Registered Agent
An individual who is identified to the Illinois Secretary of State to serve two purposes: (1) to file Annual Reports that keep your corporation in good standing, and (2) to be served with a complaint if anyone sues the corporation.

Restricted Funds
Donations or other monetary designations that are given with an attached stipulation that the funds be used for a specific purpose or cause.  Also, the parameters and amount to which funds resulting from endowment income are allowed to be used, as stipulated by the endowment's charter.

Restricted Gift
A contribution, usually to a charitable organization, that is accompanied by documentation mandating that it must be applied to a particular purpose of the organization, rather than used for its general operations.

Strategies
What ways (how) will you choose to accomplish your goals? (How will we go about "Taking the Hill?")

Trademark
A distinctive design, picture, emblem, logo or wording (or combination) affixed to goods for sale to identify the manufacturer as the source of the product.  Words that merely name the maker (but without particular lettering) or a generic name for the product are not trademarks.  Trademarks may be registered with the U.S. Patent Office to prove use and ownership.  Use of another's trademark (or one that is confusingly similar) is infringement and the basis for a lawsuit for damages for unfair competition and/or a petition for an injunction against the use of the infringing trademark.

UBIT (Unrelated Business Income Tax)
A tax levied on the unrelated business income of a nonprofit; the tax is equivalent to corporate taxes.

Values
Abstract qualities that you prize.

Vision
A description of the reality you expect to create.