Common Terms Used in the Nonprofit World

Common Terms Used in the Nonprofit World

Term	Simple Meaning
501(c)(3)	A tax-exempt status for nonprofits with religious, educational, or charitable purposes.
Annual Report	A summary of the nonprofit's activities, accomplishments, and financial status for the year.
Articles of Incorporation	A legal document filed to officially create a nonprofit organization.
Attorney General	A state official who oversees nonprofit compliance and investigates fraud or misconduct.
Audit	A formal review of financial records for accuracy and compliance.
Board Chair	The leader of the board of directors, responsible for facilitating meetings and guiding board actions.
Board of Directors	A group overseeing the nonprofit’s operations and mission fulfillment that have legal responsibility for the organization (see: Fiduciary Duty).
Board Minutes	A written record of the discussions and decisions made during board meetings.
Board Resolution	A formal decision or policy adopted by the board, recorded in board minutes.
Bylaws	Internal rules that govern how the nonprofit operates that must align with state law.
Charitable Contribution	A donation given to a nonprofit that qualifies for a tax deduction.
Charitable Solicitation Registration	The process of registering to solicit donations in different states.
Conflict of Interest	A situation where a person in a decision-making role could benefit personally from their position in violation of their Fiduciary Duty.
Conflict of Interest Policy	A policy ensuring board members or staff don't benefit personally from nonprofit decisions.
Contract	A legally binding agreement between two or more parties outlining terms and obligations.
Corporate Records	Essential documents such as bylaws, board minutes, and financial records that must be maintained by law.
Delegation of Authority	The process of assigning decision-making powers to specific individuals or positions within the organization.
Donor-Advised Fund (DAF)	A charitable giving account allowing donors to recommend how funds are distributed.
Due Diligence	The process of thoroughly reviewing legal, financial, and compliance aspects before making decisions.
Duty of Care	The legal obligation (Fiduciary Duty)  to act with the level of caution, prudence, and competence that a reasonable person would exercise in similar circumstances to prevent harm to the organization.
Duty of Loyalty	The legal obligation (Fiduciary Duty) to act in good faith and prioritize the organization’s interests above one’s own, avoiding Conflicts of Interest or self-dealing.
Duty of Obedience	The legal obligation (Fiduciary Duty)  to act in accordance with an organization’s mission, governing documents, and applicable laws, ensuring its activities stay true to its stated purpose.
Endowment	A fund where the principal is invested, and earnings support the nonprofit's mission.
Exempt Purpose	The specific purpose defined by the IRS for a nonprofit, such as charitable activities.
Fair Market Value	The price goods or services would sell for on the open market.
Fiduciary Duty	The legal and ethical obligation to act in the organization’s best interest.
Fiscal Sponsorship	An arrangement where one nonprofit provides legal and tax-exempt status to another.
Fiscal Year	A 12-month accounting period, which may not align with the calendar year.
Foreign State Business Registration	Registration in a U.S. state other than where the business was primarily registered.
Form 1023	The application form for obtaining tax-exempt status under 501(c)(3).
IRS Form 990	An annual IRS return to report a nonprofit’s financial activities and compliance.
Grant Compliance	Ensuring that grant funds are used in accordance with the terms set by the funder.
Grantor	An individual, organization, or government agency that provides grant funding.
Grantee	A nonprofit that receives funding from a grantor.
In-Kind Donation	Non-cash gifts like goods, services, or time donated to the nonprofit.
IRS (Internal Revenue Service)	The federal agency that oversees compliance with tax laws, including nonprofit regulations.
IRS Determination Letter	A letter confirming the nonprofit’s tax-exempt status from the IRS.
Mission Statement	A concise description of the nonprofit’s purpose and goals.
Officer	A leadership role within a nonprofit, such as a President, Treasurer, or Secretary.
Operating Budget	A plan showing expected income and expenses for a specific period.
Policies and Procedures Manual	A document outlining the rules and methods for operating the nonprofit efficiently and ethically.
Public Charity	A nonprofit receiving significant funding from the public rather than private sources.
Public Support Test	An IRS test ensuring a nonprofit gets enough funding from public sources to qualify as a public charity.
Quorum	The minimum number of board members required to conduct official business in a meeting.
Reasonable Compensation	Payment to employees or contractors that is fair and aligns with market rates for similar positions.
Restricted Funds	Donations with conditions on how they can be used.
Secretary	An officer responsible for maintaining corporate records and recording meeting minutes.
Signature Authority	The right or responsibility to sign legal documents on behalf of the organization.
Tax-Deductible Contribution	A donation that can be deducted from the donor's taxable income.
Tax Receipt	A document provided to donors as proof of their donation for tax deduction purposes.
Treasurer	An officer responsible for overseeing the nonprofit’s finances and ensuring accurate financial reporting.
Unrelated Business Income (UBI)	Income from activities not related to the nonprofit’s mission, possibly taxable.
Unrelated Business Income Tax (UBIT)	The tax on Unrelated Business Income (UBI)
Vendor	A business or individual providing goods or services to the nonprofit in exchange for payment.
Volunteer	Someone who donates time and services without compensation.
Whistleblower Policy	A policy protecting individuals who report unethical or illegal activities in the nonprofit.
Year-End Giving	Donations made at the end of the calendar year, often for tax benefits.