Nonprofit speak 101

If you’re new to the nonprofit sector, you might be confused by the terminology. Below are a few common terms you’ll come across. You can also see an extensive glossary of terms on the Nonprofit & Philanthropy Good Practice website.

501(c)(3)

A section of the Internal Revenue Code where the standards for “charitable” status
under U.S. tax law are defined. Organizations that qualify are exempt from U.S.
corporate income taxes on their program revenues. Gifts to these organizations can usually be deducted from individual income taxes as well.
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Board of directors


The group ultimately responsible for the success of a nonprofit corporation or association. The method by which its members are selected and some guidance about how the Board of Directors will operate can be found in the organization’s charter documents (articles of incorporation and by-laws).
Above all else, the Board of Directors is responsible for acting, at all times, in the organization’s best interest. Commonly accepted elements of the board’s responsibilities include: oversight of operations and planning, financial controls, assuring compliance with laws and regulations, assistance with securing adequate funds, and representing the organization’s various constituencies.
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Business sector


A way of referring to all the activities of for-profit organizations inclusively—the business sector consists of everything done directly by businesses (companies and corporations) that are organized and operated to provide financial returns to their owners. Also known as the for-profit sector. Read more about social-impact careers within the business sector.
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Direct service


A program or activity that works directly with an intended population. The term is used to distinguish such programs from those that seek to change conditions generally through advocacy or public education. This term is also used to distinguish hands-on work with affected populations from background and supporting services in organizations, such as administration, fundraising, and research.
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Executive director


The individual responsible for the leadership of a nonprofit organization including managing staff, reporting to the Board of Directors, and overseeing financial, administrative, and program operations. Through these responsibilities, the executive director shapes and implements the mission of the nonprofit. The ED title is a nonprofit-specific term for the CEO or president of an organization.
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Management support organizations


In most states and many cities, nonprofit organizations help other nonprofits with the daily challenges of their work. They offer technical assistance training, help-lines and web pages with useful information, and bring people together to share ideas and support each other. Whether or not you work for a nonprofit now, you can take advantage of training and networking at management support or capacity building organizations in your area, and find help locating a group in your area.
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NGO


Non-Governmental Organization (or nongovernmental organization). NGO is often used to describe private international aid groups that raise money in some parts of the world to provide services and assistance in others. More generally, the term may be used to distinguish volunteer groups and charities that perform community services that may also be provided by government agencies.
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Nonprofit


A shorthand term for an organization that does not include making a profit for owners or shareholders among its goals. Nonprofit is often used as a general description for groups that are organized and operate for charitable purposes and that use any surplus of income over expenses (“profit”) to expand their services. “Nonprofit” should be spelled without a hyphen in contemporary usage.
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Nonprofit sector


A way of referring to all the activities of nonprofit organizations inclusively. The nonprofit sector consists of everything done directly by agencies and organizations that are neither businesses nor governments and that are more or less supported by donations, program service revenues, and volunteers.
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Private sector


A term used to describe activities and organizations that are not part of any government. Sometimes private sector refers only to for-profit firms and their activities; sometimes it includes nonprofit organizations as well.
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Public sector


A way of referring to the activities of governments inclusively—the public sector consists of everything done directly by agencies and organizations within governmental units and which are more or less supported by taxes.
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Social entrepreneur


Someone who addresses community needs with creative business practices that can yield financial support for the work or result in significant cost savings through innovative program design. Read more about business sector careers with a social impact.
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Tax-exempt


An organization or activity that is not required to pay a tax. Most frequently used in connection with federal corporate income taxes (many “nonprofits” fit the IRS definition of “tax-exempt entities”). Nonprofits may also be exempt from local or state property taxes on buildings and other assets that they own and from a wide variety of other taxes depending on the rules of the areas where they work. Since many units of government have many different taxes, it is important to remember that being exempt from one form of taxes does not automatically create an exemption from others. Just because many nonprofits don’t pay federal corporate income taxes doesn’t mean that they don’t pay any taxes at all.
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Volunteer


A person who undertakes a task without expecting or receiving financial compensation.
To volunteer is to offer oneself as a candidate for work of that sort. Some volunteers
receive living allowances or stipends. Sometimes people who have volunteered
to perform a hazardous or onerous task are described as volunteers even when the
work itself is compensated; thus the armed services in the United States are sometimes
described as a volunteer army. Check out the Idealist Volunteer Center.
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