How to form a "Friends of" nonprofit?
December 19, 2018 6:35 AM   Subscribe

I am on the board of a public committee, and would like to set up a "Friends of" nonprofit so that we'll be more able to manage our own money (for example, we'd like to set up scholarships for some of our activities, etc). We currently earn that money entirely through our own fundraising events, we receive no public funds. What are the steps to setting up a nonprofit like that? How can I manage a "Friends of" nonprofit successfully?

I am an accountant, so I do understand the financial side of managing the money fairly well, but not the legal side of setting up the nonprofit in the first place. Also, if any of you have done this, I would appreciate tips on how to make it run successfully.

For context: I have been on this committee for three years and have had involvement with it since childhood, so I do have some social capital there. I have brought up the nonprofit idea a few times over the last year, and other committee members have been very supportive. There are many other "Friends of" nonprofits connected to comparable public committees in our city ("Friends of" the Archeology Commission, etc).

We are having a committee-wide strategy meeting next month and I would like to be able to present the formation of a "Friends of" nonprofit in a clear and concise way to everyone, and to have the logistics in place so that I can pull the trigger on its creation if I get a "yes" vote from the rest of the group to go forward.

This is all in Virginia, USA.
posted by rue72 to Law & Government (6 answers total) 1 user marked this as a favorite
Really, all you have to do is find the people who want to be Friends then have them meet. In fact, the Friends doesn't have to be incorporated at all. A Friends committee that I work closely with is not incorporated. It simply makes sure that all of the funds it raises are provided directly to the primary organization and never pass through any kind of Friends bank account. The primary org dispenses all monies, writes all checks, and pays all vendors. All checks are written to PrimaryOrg, Inc. All fundraising happens in such a way that no asks are made without PrimaryOrg staff present (which avoids complicated fundraising laws in our state, which say you cannot raise funds for another org unless you work for them or you have a state certificate).

May I also offer some peripheral advice? Please be sure that the Friends charter, by-laws, or mission statement makes it clear that the Friends exists to support the public committee, and that its funds are devoted to that, and that there is some kind of mechanism for making sure it happens. (Which is why the Friends group I know makes sure all funds are paid to the primary org and not to the Friends group.) I've seen several cases where Friends-like committees were very successful but used their funds to keep the Friends org going, while turning over paltry amounts to the organization they were meant to support. One Friends-like organization had hundreds of thousands in its own bank accounts as the primary organization laid off staff and reduced its hours. Another pair of primary and Friends organizations became competitors after the Friends decided they could do a better job and were unable to oust the primary org's board.
posted by Mo Nickels at 7:31 AM on December 19, 2018

There may be a system in place for this in your municipality. It's not clear exactly what your public committee is, but here in Pennsylvania, if you want to start a "Friends of" group for a park or a school, there are rigid systems in place managed by the parks department and the school district for their groups. If it's possible, see if you can connect with other established Friends groups related to the same kind of public committee as yours, but in other cities in Virginia.

If it's not possible, I would reach out specifically to people who work in your municipality in areas related to your committee. Again, it's hard for me to give concrete advice without knowing what it's actually related to, but this is where I would start.
posted by ancient star at 7:41 AM on December 19, 2018

This is a sister-city committee. So an example of what we'd like to do is to create a scholarship fund for people who are otherwise qualified to go on one of our exchanges, but who can't afford it.

There are no paid staff or larger org that we're a part of (aside from Sister Cities International). We do have one government liaison, who sometimes attends our meetings and events and who we communicate with to try and get access to our funds, etc. However, as it is, all the money that we raise at our events goes into the black box of city government. Also, since it's a public committee, we can't have our own bank account or get sponsorships (esp corporate sponsorships) the way that a nonprofit can.

If the money never goes to the Friends org, then I'm not understanding what the point of the Friends org is in the first place? I thought that it was a way to spin off some of the financial transactions/relationships that a public org can't have?

Although another tertiary benefit would be to have an organized way to keep committee alumni and other associates (host families, etc) involved. Right now we do that in a lot of ways informally (parties, listserv, etc), but it would be nice if people could just join the Friends of and stay a part of the committee work that way.
posted by rue72 at 7:53 AM on December 19, 2018

If the money never goes to the Friends org, then I'm not understanding what the point of the Friends org is in the first place?

At least for the org I work closely with, the Friends are more fundraising labor, they tend to be wealthy enough to make their own meaningful gifts, and they tend to be well-connected to other people who may also make meaningful gifts.

I can see that your Friends would definitely need to be its own nonprofit, conduct its own affairs, manage its own funds, and do its own fundraising for its own purpose.
posted by Mo Nickels at 8:23 AM on December 19, 2018

I'd consider some sort of fiscal sponsorship arrangement if you want to keep it simple, depending on your annual budget. If you went with a comprehensive fiscal sponsorship model it would take the legal aspects (including liability) off your plate (and the accounting/auditing/oversight). A well established fiscal sponsorship org will be familiar with handling these sorts of "friends of" arrangements.
posted by mandymanwasregistered at 3:56 PM on December 20, 2018

Thanks for your help, everybody. I've contacted some organizations (with mediocre success) and done a lot of my own research, and put together a powerpoint to possibly go over with the sister city committee at our upcoming strategy meeting.

Honestly, I am not getting a ton of traction with the committee (well, specifically with the committee chair), so I'm not sure how much further I want to pursue it.
posted by rue72 at 12:30 PM on January 18

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