If you’ve worked in social impact for a while, you’re probably familiar with the terminology used by nonprofit professionals to describe the ins and outs of operating in a mission-driven environment. But if you’re new to the sector, or making a switch from the private sector, some of the lingo may be confusing.
Below are some common terms you’re likely to come across in your day-to-day working at a nonprofit, but keep in mind that they will vary depending on your organization’s culture and model. For a more extensive list of terms, check out the Glossary of Philanthropic Terms as compiled by the Council on Foundations.
A section of the U.S. Internal Revenue Code that specifies an organization as charitable and tax-exempt. 501(c)3 organizations include religious, educational, charitable, and amateur athletic organizations, scientific or literary groups, organizations testing for public safety, and those involved in the prevention of cruelty to children or animals. These organizations have to follow specific rules to maintain their 501(c)3 status, such as by remaining nonpartisan and limiting the time they spend on lobbying.
Not all nonprofits are designated as 501(c)3—to learn why, scroll down to our definition for “nonprofit organizations” below.
A group of institutions or individuals formed to support a common goal or interest. On an individual level, you may join an affinity group to promote diversity, equity, and inclusion (DEI) initiatives in the office or to network with like-minded professionals outside of work. Affinity groups can also act as a larger network of organizations united behind the same mission, such as advocating for equitable professional opportunities.
Annual Operating Budget
A statement outlining the revenue and expenses that an organization expects over the course of a year. At a nonprofit, the annual operating budget is an important reference to make sure your organization is on track with finances, and that it doesn’t overspend in any one area.
A voluntary report published by an organization or corporation describing its grant activities. It may be a simple document that lists the grants an organization received, or a more detailed account of the major accomplishments, activities, and financial contributions an organization made that year.
An official certification that designates businesses as socially and environmentally responsible, as assessed by B Lab, a nonprofit organization that grants B Corporation status based on a lengthy process in which for-profit companies must prove that their business practices are sustainable and transparent to achieve a balance of profit and purpose.
Board of Directors
The group ultimately responsible for the success of a nonprofit corporation or association. Board members help steer an organization in the right direction to achieve its mission, which includes planning for the future and following legal guidelines to act in the organization’s best interest. 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 (such as the articles of incorporation and by-laws).
An organized effort to raise money for a specific project, such as a major building repair or land acquisition. As a social-impact professional, you likely know how important fundraising is to the sector, and capital campaigns are one method organizations use to achieve their long-term vision.
Customer Relationship Management (CRM)
A central database that helps organizations track communication with constituents. It’s useful for social-impact professionals to be familiar with CRMs, as many organizations rely on these platforms to organize information, create reports, and monitor how many volunteers or donors support their mission.
A program or activity that works directly with an intended population. While many nonprofit organizations use research and advocacy to achieve their missions, those that provide direct service use hands-on work to interact with community members. Some examples of direct service include working in a soup kitchen or mentoring young children through an after-school program.
A permanently-maintained fund that is established to provide income for an organization through investment. A nonprofit may launch an endowment fund to ensure it has resources to continue its mission well into the future, but it is only able to access the annual investment income for specific purposes. Endowments may not be the right move for all organizations, however—particularly if the money invested could be put to better use in the present.
Form 990/Form 990-PF
The IRS forms filed annually by public charities and private foundations, respectively, to report compliance with the Internal Revenue Code. Both forms list organization assets, receipts, expenditures, and wages, but Form 990-PF includes a list of grants made during the year by private foundations.
Just because these forms are tax documents doesn’t mean you can’t use them to prepare for your next job interview! Check out our guide to understanding Form 990 to learn more about the structure and finances of a particular organization.
A group made up of people with shared values who participate in collective philanthropy, which includes making donations, volunteering, and raising awareness about certain issues. Giving circles are a great way to make a bigger splash with your money or time by working with others.
The Tuesday after Thanksgiving in the United States, which is celebrated as a global movement that challenges individuals to give back during the holiday season. Giving Tuesday was launched in 2012 by the nonprofit of the same name and is particularly important for social-impact organizations that rely on donations to continue their work.
A type of donation that provides goods or services, as opposed to money. Examples of an in-kind contribution include donating canned goods to a food pantry or toys to a children’s organization.
Letter of Inquiry
Also referred to as a query letter, this is a brief letter sent to prospective donors outlining an organization’s activities and a request for funding. If the donor expresses interest, then the organization may submit a full proposal. This saves the time of the prospective donor, and allows inquiring organizations to allocate their resources effectively.
Lobbying vs. Advocacy
Certain nonprofits, such as those classified as 501(c)3 organizations, must follow strict guidelines to maintain their tax exempt status, which includes refraining from partisan activities and lobbying. While a lot of social-impact work involves advocating for an organization’s mission, it can be confusing to note what might cross the line.
Lobbying involves activities that seek to influence specific legislation at the local, state, or federal level. An example of lobbying is communicating with a government representative to persuade them to vote for or against a piece of legislation. According to the Internal Revenue Code, public charities are allowed to engage in some lobbying as long as it does not become “a substantial part of their activities.”
Advocacy, on the other hand, involves spreading awareness about a certain issue. This can include sharing information and resources that support your organization’s work, as long as there is no communication with a representative about a specific piece of legislation.
A statement that outlines an organization’s objectives and how it plans to achieve them, such as through research or direct service, to support its vision. To learn more about how an organization determines its vision, scroll down to our definition for “vision” below.
Non-Governmental Organization (NGO)
This term describes private, international aid groups that raise money to serve communities in crisis, such as those affected by natural disasters or war. Since NGOs perform similar services to government agencies, this term distinguishes them as independent volunteer groups and charities. OXFAM and Doctors Without Borders are two examples of NGOs.
Nonprofit Organization (NPO)
While there are many different types of nonprofits—29 of which are listed under section 501(c) of the tax code!—the general definition is that nonprofit organizations do not generate a profit for its owners or shareholders. Instead, nonprofits use any surplus income to expand services to achieve their mission.
A majority of nonprofits are classified as 501(c)3, which means that they are charitable organizations and any donations they receive are tax-deductible. Other nonprofits may be classified as 501(c)4 and focus on advocacy work, which allows them to be involved in some partisan, political activity; 501(c)6 nonprofits are professional and trade associations. To find out an organization’s nonprofit classification, you can reference its Form 990.
A private foundation that uses the bulk of its income to provide charitable services or programs. Operating foundations must spend at least 85% of their assets on charitable activities each year and rarely award grants; by contrast, other types of private foundations must give 5% of their assets in grants.
A promise to make future contributions to an organization, such as through a monthly or annual donation.
A nongovernmental, nonprofit organization run by a board of trustees or directors. Private foundations may be funded by an individual, family, or corporation with the goal of awarding grants in support of social, educational, religious, or other charitable activities.
Public foundations are recognized as public charities and award grants to other organizations, though they may also perform some direct service work (see Operating Foundation above).
A formal guide that identifies the actions an organization must take to achieve its mission. The process of forming a strategic plan requires nonprofits to identify their goals and objectives to decide the next steps for their work.
Triple Bottom Line
A framework that helps companies measure their financial, social, and environmental impact, rather than focusing solely on their profit. As more privately-held businesses determine how their operations impact the world around them, evaluating their triple bottom line can help them work toward a more sustainable and equitable world. This framework is also broken down as the three “P’s”: profit, people, and the planet.
A statement that clearly defines the overall goals of the organization, which the organization’s mission helps to achieve. A social-impact organization may have both a mission statement and a vision statement to guide its work.
For example, an organization may have a vision statement that outlines a world where all children have access to education. The mission statement may share that the organization’s goals are to build schools and provide rural communities with learning tablets.
Together, mission and vision statements can inspire social-impact professionals and members of the public to engage with an organization’s work.
A person who participates in service opportunities without expecting or receiving financial compensation. Whether they work in the sector or not, volunteers are an important part of social impact and help many organizations achieve their mission.