© Copyright 2009 Nan McKay & Associates
Earned Income Disallowance
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Housing Help SessionsName of session – date of session
NMA Host:Trainer Enter your name here
© Copyright 2009 Nan McKay & Associates
Earned Income Disallowance
© Copyright 2008 Nan McKay & Associates
Housing Help SessionsCreating & Managing a Housing Nonprofit – May 29, 2009
NMA Host:Trainer Patti Zatarian
© Copyright 2009 Nan McKay & Associates
© Copyright 2009 Nan McKay & Associates
Housing Help Sessions
Creating & Managing a Housing Nonprofit –May 29, 2009Slide 2
PHA Nonprofits One of the most common methods that PHAs
utilize to expand into the development of additional affordable housing is to establish a nonprofit
Nonprofits may also be used to establish programs that increase services to residents including self-sufficiency and youth activities
© Copyright 2009 Nan McKay & Associates
Housing Help Sessions
Creating & Managing a Housing Nonprofit –May 29, 2009Slide 3
PHA Nonprofits Nonprofit established by PHA is “captive” This is an organization that is set up for
specific purposes and recognized by the IRS as tax-exempt
Do not make “profits” but can have a surplus to purchase services from the PHA
© Copyright 2009 Nan McKay & Associates
Housing Help Sessions
Creating & Managing a Housing Nonprofit –May 29, 2009Slide 4
PHA Nonprofits Many PHAs establish nonprofits because it is
easier to enter into business deals and do business as a nonprofit rather than a much regulated PHA
PHAs are established under state enabling legislation, which means that the powers of a PHA may be limited and even prohibit development
© Copyright 2009 Nan McKay & Associates
Housing Help Sessions
Creating & Managing a Housing Nonprofit –May 29, 2009Slide 5
PHA Nonprofits The increasing number of HUD mortgage
prepayments and “opt-outs” has resulted in a situation where many affordable housing units are in danger of being lost
These prepayments and “opt-outs” often create preservation opportunities for agencies to acquire and maintain properties to add to their asset portfolio
© Copyright 2009 Nan McKay & Associates
Housing Help Sessions
Creating & Managing a Housing Nonprofit –May 29, 2009Slide 6
PHA Nonprofits The current foreclosure crisis may result in
nonprofits acquiring and rehabilitating properties as rentals or first-time homebuyer opportunities for low-income families
© Copyright 2009 Nan McKay & Associates
Housing Help Sessions
Creating & Managing a Housing Nonprofit –May 29, 2009Slide 7
PHA Nonprofits Nonprofits associated with housing authorities
are generally set up to provide low and moderate income households with affordable housing by acquiring or developing publicly financed low and moderate income housing and renting to eligible households
© Copyright 2009 Nan McKay & Associates
Housing Help Sessions
Creating & Managing a Housing Nonprofit –May 29, 2009Slide 8
Setting Up a Nonprofit PHA powers can be very
limited, depending on state legislation
Important to have general counsel research state law before setting up a nonprofit
© Copyright 2009 Nan McKay & Associates
Housing Help Sessions
Creating & Managing a Housing Nonprofit –May 29, 2009Slide 9
Setting Up a Nonprofit Establishing a nonprofit should be carefully
analyzed to determine if it will be in the best interest of the PHA
The question you MUST answer is “why do we need a nonprofit?”
© Copyright 2009 Nan McKay & Associates
Housing Help Sessions
Creating & Managing a Housing Nonprofit –May 29, 2009Slide 10
PHA Nonprofits Reasons for PHA using a nonprofit:
- PHAs cannot be both the owner and administrator for prepaid or “opt out” projects that still have project-based housing assistance available to the project
- If a PHA did acquire a prepayment project, the Section 8 assistance would not be available
© Copyright 2009 Nan McKay & Associates
Housing Help Sessions
Creating & Managing a Housing Nonprofit –May 29, 2009Slide 11
PHA Nonprofits A nonprofit entity is necessary in order to sell
tax credits generated by a project Many states have laws concerning public
acquisitions that would not pertain to a nonprofit Any liabilities incurred by the nonprofit would
not pass on to the PHA
© Copyright 2009 Nan McKay & Associates
Housing Help Sessions
Creating & Managing a Housing Nonprofit –May 29, 2009Slide 12
PHA Nonprofits Although it’s relatively uncomplicated to set up
a nonprofit, it does take time because tax-exempt status is needed from both the IRS and any state tax authority And may require expertise out of the PHA Needs a lot of groundwork laid to get buy-in
© Copyright 2009 Nan McKay & Associates
Housing Help Sessions
Creating & Managing a Housing Nonprofit –May 29, 2009Slide 13
How to Set Up a Nonprofit When considering the formation of a nonprofit,
there are areas each entity must address. These include at a minimum:
Purpose of the nonprofit corporation – many PHAs set up the nonprofit entity for specific project, e.g., to sell tax credits from the project
© Copyright 2009 Nan McKay & Associates
Housing Help Sessions
Creating & Managing a Housing Nonprofit –May 29, 2009Slide 14
How to Set Up a Nonprofit Areas that must be addressed:
It may be beneficial to establish the corporation with a more flexible purpose, such as:
“To form a nonprofit public benefit corporation to provide very low, low and moderate income housing through purchasing publicly financed low and moderate income property for rentals”
© Copyright 2009 Nan McKay & Associates
Housing Help Sessions
Creating & Managing a Housing Nonprofit –May 29, 2009Slide 15
How to Set up a Nonprofit Powers of the nonprofit corporation –
Activities and affairs of the nonprofit are generally conducted under the direction of the Board of Directors. The Board may elect to delegate the daily activities to any person, management company, or the PHA
© Copyright 2009 Nan McKay & Associates
Housing Help Sessions
Creating & Managing a Housing Nonprofit –May 29, 2009Slide 16
How to Set Up a Nonprofit The make up of the board is an important
consideration to assure there is no conflict of interest between the PHA board and the nonprofit entity
The PHA may want to have board members that are not the same as the PHA board
© Copyright 2009 Nan McKay & Associates
Housing Help Sessions
Creating & Managing a Housing Nonprofit –May 29, 2009Slide 17
How to Setup a Nonprofit Directors: Establish the number of directors
(always an odd number) and the terms of the directors.
Terms should be staggered so there is always someone on the board that can provide a historical perspective for new directors
© Copyright 2009 Nan McKay & Associates
Housing Help Sessions
Creating & Managing a Housing Nonprofit –May 29, 2009Slide 18
How to Setup a Nonprofit Quorum: Establish how many directors are
needed so that official actions can be taken and business can be transacted.
Note: Board members should be selected based on their commitment to the mission and vision of the nonprofit
© Copyright 2009 Nan McKay & Associates
Housing Help Sessions
Creating & Managing a Housing Nonprofit –May 29, 2009Slide 19
How to Set Up a Nonprofit Areas that must be addressed:
Officers: President, vice presidents, sergeant at arms
Election: Usually done at annual meetings Amendments: Method to amend by-laws
© Copyright 2009 Nan McKay & Associates
Housing Help Sessions
Creating & Managing a Housing Nonprofit –May 29, 2009Slide 20
The Nonprofit Advantage If the PHA decides to establish a nonprofit entity
to pursue development activities, it is worthwhile to consider organizing as a community housing development organization or CHDO
Under the HOME program, participating jurisdictions must set aside at least 15% of their funds for use by CHDOs
© Copyright 2009 Nan McKay & Associates
Housing Help Sessions
Creating & Managing a Housing Nonprofit –May 29, 2009Slide 21
The Nonprofit Advantage A Community Housing Development
Organization (CHDO) is a private nonprofit community-based service organization that has obtained or intends to obtain staff with the capacity to develop affordable housing for the community it serves
© Copyright 2009 Nan McKay & Associates
Housing Help Sessions
Creating & Managing a Housing Nonprofit –May 29, 2009Slide 22
The Nonprofit Advantage In order to qualify as a CHDO, a nonprofit must:
Provide housing affordable to low and moderate income persons
Have effectively carried out activities such as those financed by HOME
Have a history of serving the community where the HOME financed project will be located
© Copyright 2009 Nan McKay & Associates
Housing Help Sessions
Creating & Managing a Housing Nonprofit –May 29, 2009Slide 23
The Nonprofit Advantage Is organized under state or local laws and exempt
under Section 501(c) of the IRS Meet standards of financial accountability Have a governing board of at least one third of
low income residents A formal process that allows low income resident
input
© Copyright 2009 Nan McKay & Associates
Housing Help Sessions
Creating & Managing a Housing Nonprofit –May 29, 2009Slide 24
The Nonprofit Advantage A CHDO cannot be a public body nor can it be
controlled by an individual or group seeking to make a profit from the organization
A CHDO can receive HOME funds to help pay OPERATING costs as well as funds for specific projects
© Copyright 2009 Nan McKay & Associates
Housing Help Sessions
Creating & Managing a Housing Nonprofit –May 29, 2009Slide 25
The Nonprofit Advantage The nonprofit entity may also be eligible for
Community Development Block Grants (CDBG) The statutory objective of the CDBG program is to
develop viable communities by providing decent housing and a suitable living environment for persons of low and moderate income
© Copyright 2009 Nan McKay & Associates
Housing Help Sessions
Creating & Managing a Housing Nonprofit –May 29, 2009Slide 26
The Nonprofit Advantage Eligible uses of CDBG funds include:
Acquisition of property Planning activities Assistance to nonprofit entities to carry out
community or economic development activities Rehabilitation of public and private buildings
© Copyright 2009 Nan McKay & Associates
Housing Help Sessions
Creating & Managing a Housing Nonprofit –May 29, 2009Slide 27
The Nonprofit Advantage Information on CHDO requirements can be
found at: www.hud.gov/offices/cpd/affordablehousing/librar
y/building/CH08.pdf This link lists CHDO requirements and activities Additional information may be found in HUD
Notice CPD 97-11
© Copyright 2009 Nan McKay & Associates
Housing Help Sessions
Creating & Managing a Housing Nonprofit –May 29, 2009Slide 28
Policy Considerations for a Nonprofit PHA will need certain organizational systems &
policies specifically for the nonprofit Will depend on amount of separateness the PHA
wants from the nonprofit Captured nonprofit may cause others to worry
the PHA’s nonprofit will receive favorable treatment from the jurisdiction
© Copyright 2009 Nan McKay & Associates
Housing Help Sessions
Creating & Managing a Housing Nonprofit –May 29, 2009Slide 29
Policy Considerations for a Nonprofit
PHA Separateness from the nonprofit There should be a a distinct difference between
the PHA and the nonprofit Consider the PHA staff time spent on nonprofit
activities, including funding, space, IT, equipment, supplies, etc.
Typically, a new nonprofit has no MONEY!
© Copyright 2009 Nan McKay & Associates
Housing Help Sessions
Creating & Managing a Housing Nonprofit –May 29, 2009Slide 30
Policies to Consider For the Board of Directors
Vision and mission statements Board member recruitment Attendance policy Chair and office descriptions Legal review process CEO performance review process Board calendar
© Copyright 2009 Nan McKay & Associates
Housing Help Sessions
Creating & Managing a Housing Nonprofit –May 29, 2009Slide 31
Policies to Consider Planning policies
Strategic or business plan Marketing plan Fund raising plan Yearly operational plans
Includes staff work plans
© Copyright 2009 Nan McKay & Associates
Housing Help Sessions
Creating & Managing a Housing Nonprofit –May 29, 2009Slide 32
Policies to Consider Evaluation
Methods to assess client needs Established outcomes Data collection for goals and objectives
© Copyright 2009 Nan McKay & Associates
Housing Help Sessions
Creating & Managing a Housing Nonprofit –May 29, 2009Slide 33
Policies to Consider Information management
Client records Personnel records Financial records Mailing lists Inventory of computer hardware & software Procedures for each major computer function Back up plan Disaster recovery plan
© Copyright 2009 Nan McKay & Associates
Housing Help Sessions
Creating & Managing a Housing Nonprofit –May 29, 2009Slide 34
Policies to Consider Personnel
Board adopted personnel policies Performance appraisal system Professional development plan
© Copyright 2009 Nan McKay & Associates
Housing Help Sessions
Creating & Managing a Housing Nonprofit –May 29, 2009Slide 35
Policies to Consider Finances
Board adopted fiscal policies Board approved budget Financial procedures/internal controls Inventory system Depreciation schedules Monthly/quarterly financial statements Yearly audit Tax and other reporting requirements
© Copyright 2009 Nan McKay & Associates
Housing Help Sessions
Creating & Managing a Housing Nonprofit –May 29, 2009Slide 36
Policies to Consider Communications
Logo Website Web usage Annual reports Brochures/videos Media relations strategies
© Copyright 2009 Nan McKay & Associates
Housing Help Sessions
Creating & Managing a Housing Nonprofit –May 29, 2009Slide 37
Policies to Consider
Insurance Risk management policies Office liability coverage Assessing need for professional liability coverage Assessment of need for director & officer liability Assessment of need for bonding Contingency plans for replacing key personnel
© Copyright 2009 Nan McKay & Associates
Housing Help Sessions
Creating & Managing a Housing Nonprofit –May 29, 2009Slide 38
Policies to Consider Legal
Complete corporate records and retention policies
Updated By-Laws Incorporation and tax status documents Non-discrimination policies and practices
© Copyright 2009 Nan McKay & Associates
Housing Help Sessions
Creating & Managing a Housing Nonprofit –May 29, 2009Slide 39
Application for 501(c)(3)
IRS Form 1023 Activities and operations Technical requirements Financial data Filing under IRS
© Copyright 2009 Nan McKay & Associates
Housing Help Sessions
Creating & Managing a Housing Nonprofit –May 29, 2009Slide 40
Application for 501©(3) Activities and Operational Information
This part of the application requires a detailed narrative description of all the activities of the organization – past, present, and planned.
The detailed description of the activity must include its purpose and how each activity furthers your exempt purpose
© Copyright 2009 Nan McKay & Associates
Housing Help Sessions
Creating & Managing a Housing Nonprofit –May 29, 2009Slide 41
Application for 501©(3) This description should be well thought out and
considered during the application process The other area that should be well thought out is
the organization’s sources of financial support Fundraising, both actual and planned , including
fundraising activities, i.e. mailings, volunteers, or professional fundraisers must be detailed in the application
© Copyright 2009 Nan McKay & Associates
Housing Help Sessions
Creating & Managing a Housing Nonprofit –May 29, 2009Slide 42
Application for 501©(3) IRS Form 1023 – Application for Recognition
of Exemption is a 10 page document The application can be downloaded from the
IRS website Completing the application will require time
and careful analysis
© Copyright 2009 Nan McKay & Associates
Housing Help Sessions
Creating & Managing a Housing Nonprofit –May 29, 2009Slide 43
Minutes of a Nonprofit Corporation Minutes of the meeting should include the business
activities listed on the agenda Minutes are documentation of the nonprofit’s
business activities The time, location, and business conducted should
be well documented to assure the board has legitimately conducted the business of the nonprofit
© Copyright 2009 Nan McKay & Associates
Housing Help Sessions
Creating & Managing a Housing Nonprofit –May 29, 2009Slide 44
By-Laws for a Nonprofit Offices Purpose Membership Directors Committees Officers Indemnification Amendments
© Copyright 2009 Nan McKay & Associates
Housing Help Sessions
Creating & Managing a Housing Nonprofit –May 29, 2009Slide 45
By-Laws for a Nonprofit By-laws are the ruling legal document of a nonprofit.
Consult your legal counsel before adopting by-laws to assure compliance with state law
Sample nonprofit by-laws can be found at http:/non-profit-governance.suite 101.com/article.cfm/how_to_write_bylaws_for_nonprofits
© Copyright 2009 Nan McKay & Associates
Housing Help Sessions
Creating & Managing a Housing Nonprofit –May 29, 2009Slide 46
Articles of Incorporation
© Copyright 2009 Nan McKay & Associates
Housing Help Sessions
Creating & Managing a Housing Nonprofit –May 29, 2009Slide 47
Articles of Incorporation Sample Articles of Incorporation can be found
at managementhelp.org
© Copyright 2009 Nan McKay & Associates
Housing Help Sessions
Creating & Managing a Housing Nonprofit –May 29, 2009Slide 48
Management Agreement If the PHA is going to be the management
agent for the nonprofit, a management agreement is required
The management agreement clearly provides a comprehensive and detailed description of the policies and procedures to be followed in the management of the project or program
© Copyright 2009 Nan McKay & Associates
Housing Help Sessions
Creating & Managing a Housing Nonprofit –May 29, 2009Slide 49
Trouble Spots PHAs get into trouble when they co-mingle
funds, staff time, policies and procedures When using HUD funds, fail to get prior approval Operate the nonprofit like a PHA Do not consider board membership as separate
from the PHA
© Copyright 2009 Nan McKay & Associates
Housing Help Sessions
Creating & Managing a Housing Nonprofit –May 29, 2009Slide 50
Strategic Planning Planning enables the Board to set policies and
goals to guide the organization Provides a clear focus to the Executive Director
of the nonprofit and staff for program implementation and agency management
Enables the organization to look into the future in an orderly and systemic way
© Copyright 2009 Nan McKay & Associates
Housing Help Sessions
Creating & Managing a Housing Nonprofit –May 29, 2009Slide 51
Strategic Planning Strategic planning is the process which leaders
of an organization determine what it intends to be in the future and how it will get there
Planning is designed to help an organization define its vision for the future and then determine how it will get there
© Copyright 2009 Nan McKay & Associates
Housing Help Sessions
Creating & Managing a Housing Nonprofit –May 29, 2009Slide 52
Strategic Planning To begin strategic planning you must:
Identify specific issues that should be addressed Create a planning committee Clarify roles and responsibilities of committee
members Identify the information that must be collected to
make sound decisions
© Copyright 2009 Nan McKay & Associates
Housing Help Sessions
Creating & Managing a Housing Nonprofit –May 29, 2009Slide 53
Strategic Planning Develop an organizational profile
An organizational profile is a snapshot of your organization, how you operate and the challenges you face
© Copyright 2009 Nan McKay & Associates
Housing Help Sessions
Creating & Managing a Housing Nonprofit –May 29, 2009Slide 54
Strategic Planning Define mission and vision
Purpose – why the organization exists and what it seeks to accomplish
Business – the method or activity which the organization will fulfill its purpose
Values – the principles or beliefs that guide an organization as it pursues the organization’s purpose
© Copyright 2009 Nan McKay & Associates
Housing Help Sessions
Creating & Managing a Housing Nonprofit –May 29, 2009Slide 55
Strategic Planning The mission statement summarizes the what,
how, and why of an organization’s work The vision statement presents an image of
what success will look like
© Copyright 2009 Nan McKay & Associates
Housing Help Sessions
Creating & Managing a Housing Nonprofit –May 29, 2009Slide 56
Strategic Planning Conduct an environmental scan
How does the organization relate to its external environment
Identify and assess opportunities and threats in the external environment
Identify and assess organizational strengths and weaknesses in the internal environment
© Copyright 2009 Nan McKay & Associates
Housing Help Sessions
Creating & Managing a Housing Nonprofit –May 29, 2009Slide 57
Strategic Planning This process is commonly referred to as
“SWOT”: strengths, weaknesses, opportunities and threats
© Copyright 2009 Nan McKay & Associates
Housing Help Sessions
Creating & Managing a Housing Nonprofit –May 29, 2009Slide 58
Strategic Planning Develop strategies, goals and objectives
After defining the organization’s mission and critical issues have been identified, you must decide what to do about them
How do we approach the critical issues (strategies)? What are the general and specific results to be
sought (the goals and objectives)?
© Copyright 2009 Nan McKay & Associates
Housing Help Sessions
Creating & Managing a Housing Nonprofit –May 29, 2009Slide 59
Strategic Planning The planning committee should have detailed
discussions about what was discovered during the environmental scan
Additional information or a reevaluation of the goals and objectives may be necessary to create the best possible plan
© Copyright 2009 Nan McKay & Associates
Housing Help Sessions
Creating & Managing a Housing Nonprofit –May 29, 2009Slide 60
Strategic Planning An outline of the organization’s strategic
direction should be developed to include general strategies, long-range goals, and specific objectives of its response to critical issues identified during the environmental scan
© Copyright 2009 Nan McKay & Associates
Housing Help Sessions
Creating & Managing a Housing Nonprofit –May 29, 2009Slide 61
Strategic Planning Once the mission has been articulated, the critical
issues identified, and the goals and strategies agreed upon, it is time to write a draft of the final planning document
A committee member responsible for writing the final draft should be identified early in the process (i.e. executive director or planning consultant)
© Copyright 2009 Nan McKay & Associates
Housing Help Sessions
Creating & Managing a Housing Nonprofit –May 29, 2009Slide 62
Strategic Planning The final draft should be submitted for review
to all key decision makers (usually the board and senior staff).
The planning committee needs to develop action plans to accomplish the goals proposed in the strategic plan
© Copyright 2009 Nan McKay & Associates
Housing Help Sessions
Creating & Managing a Housing Nonprofit –May 29, 2009Slide 63
Strategic Planning Some foundations provide management
assistance grants that can support consultant and other support for the entire process and make possible an in-depth environmental scan
The first strategic plan for a new organization is typically for a three-year period
© Copyright 2009 Nan McKay & Associates
Housing Help Sessions
Creating & Managing a Housing Nonprofit –May 29, 2009Slide 64
Strategic Planning Be sure to document not only the plan but
also the process so you can improve upon it with each cycle when updating your strategic plan
© Copyright 2009 Nan McKay & Associates
Housing Help Sessions
Creating & Managing a Housing Nonprofit –May 29, 2009Slide 65
Conclusion Questions and comments