Forming a non-profit versus being under a school's jurisdiction

[BSV]

Has anyone who was running a team under a school and dealing with slow processing of purchases, your funds that disappear, and other issues like that formed a non-profit to support the team so you don't have to deal with the school? Did it help, or was it more work than it was worth? What are the tradeoffs? Was it easier or harder to get sponsors? Asking for a friend.

[Kingland093]

4215 has used our school's non-profit status since we formed in 2012. For the most part it's been running well. We've worked a lot with the school's business manager who has set up an account specifically for the robotics team. We just send any checks or receipts to him and he handles all of the transactions and deposits for us. Considering that our school is a small private school that doesn't employ many people, this system has worked fine for us.
Using the school's non-profit has saved a lot of time and paper work for us so that's what I recommend.

However, the school does not give us anything apart from 3 classrooms to work out of in terms of helping us. The one time they did help us find sponsorship was when we qualified for Champs this past year. They have been rather unsupportive as a whole since we formed. We're currently working to establish better ties with the school administrative people and I cannot unfortunately help you in that department.

My advice is to establish good relations with the business person/department at your school/school district. They'll help you a lot more than going straight through to your headmaster/principle/superintendent/insert whatever role here

Hope this helps!

[cbale2000]

Our team worked with 4 other teams in our area a few years back to create a non-profit organization (FIRST of the Great Lakes Bay Region). The main benefit was that by having our sponsors donate to the organization, member teams could get funds out basically instantly (previously we had to submit receipts and wait 6 weeks to get refunded, impractical during a build season obviously).

While the organization was created as a way to escape the umbrella of school funding (while still maintaining a good relationship with our schools), having the organization run by 4 teams forced us to work more closely with each other and improve our groups coordination in our area. Consequently, FIRST of the Great Lakes Bay Region now helps support over 20 1st and 2nd year teams, a number of FLL and FTC teams, and we've hosted a District Competition and an Off-Season Event for two years in a row. All this happened in just the last 4 years.

To answer your questions more specifically...
Did it help, or was it more work than it was worth?
There is a bit more paperwork involved, we had to create a board of directors (in our case, made up of two mentors from each member team), we are also required to hold a board meeting yearly. Beyond that though, I would say it was worth it. We do still stay active with our school, which is supportive of our team and gives us a very nice facility to work in.

What are the tradeoffs?
Honestly, the only day to day difference in the operation of our team was how we paid for things. This will likely vary depending on a teams relationship with their school though.

Was it easier or harder to get sponsors?
Though it took a few years to get our name out there, we're now starting to have sponsors (Big sponsors too) start to actually come to us without any prompting and ask to be a sponsor, either of one of our events, or to support our member teams.

[Zebra_Fact_Man]

Individual non-profit status for a team is very expensive and very time consuming. Your best bet, if you're able to, is to find an already existing non-profit organization that will allow you to associate yourself with them and funnel your sponsorship funds through. A number of teams in my area do this and it works quite well.

There are non-profits that exist solely to support multiple smaller individual organizations such as FIRST teams.

[BitTwiddler]

After dealing with the school district's foot-dragging on processing team 1726's requests for robot parts during the build season some of the team parents formed the Cochise Robots Association to fund the material needs of FIRST teams in Cochise County AZ.
It's a 501(c)3 charity that seeks out grants to raise funds to purchase materials with. The teams submit purchase orders for the materials they need during build season and the CRA orders the materials with expedited shipping. Works great for us and helps give the parents a way to contribute. They have also provided team uniforms through a very generous parent who runs a t-shirt printing business.

[Qbot2640]

Originally Posted by Zebra_Fact_Man

Individual non-profit status for a team is very expensive and very time consuming.

Not so. There is an electronic application for smaller organizations (under $50000 income per year) that costs only $400, and we had our approval in one week (to the day).

[Jimmy Nichols]

Originally Posted by Qbot2640

Not so. There is an electronic application for smaller organizations (under $50000 income per year) that costs only $400, and we had our approval in one week (to the day).

Do you still have to deal with Annual audits and tax filings?

We formed a Non-Profit with the State of Ohio when we lost our space at the school. This was fairly easy. We were beginning to work on our 501(c)(3) paperwork when we met with the Community Foundation in our area. After meeting with them we decided to create a Fund under their organization. Reimbursements and payments are really easy. They aren't able to do PO's (Purchase Orders), but that's probably specific to them. They do charge a 2% annual fee for administration charges. Cutting checks, processing deposits, handling the tax's and audits. For a group of engineers this was worth it. Plus our account earns interest and typically we earn enough to cover the annual fee.

We also still carry an account at the school in which we use to collect student travel fees and pay for charter bus and hotels. We found that we had sponsors that preferred to donate to the school and sponsors who preferred to donate outside of the school. So having both accounts maximizes our opportunities to receive donations and grants.

[GeeTwo]

3946 did create a 501 c 3 corporation, called "Slidell Tiger Robotics Booster Club", but the team is still officially chartered by the school. We modeled our charter and by-laws after the band boosters, which serve a similar function, that is, to support an activity which is part of a school. By doing this, we have both an account with the school (it's easier to get some sponsors, like NDEP, to give to the school) and an account with STRBC; this money is more nimble, especially when you need to go down to the hardware store for a few machine screws. Team members can get excused absences for competition and other team events; this would be a show stopper for a true community team in LA. It did take a bunch of effort, but we feel it was worth it.

[Qbot2640]

Originally Posted by Jimmy Nichols

Do you still have to deal with Annual audits and tax filings?

We formed a Non-Profit with the State of Ohio when we lost our space at the school. This was fairly easy. We were beginning to work on our 501(c)(3) paperwork when we met with the Community Foundation in our area. After meeting with them we decided to create a Fund under their organization. Reimbursements and payments are really easy. They aren't able to do PO's (Purchase Orders), but that's probably specific to them. They do charge a 2% annual fee for administration charges. Cutting checks, processing deposits, handling the tax's and audits. For a group of engineers this was worth it. Plus our account earns interest and typically we earn enough to cover the annual fee.

We also still carry an account at the school in which we use to collect student travel fees and pay for charter bus and hotels. We found that we had sponsors that preferred to donate to the school and sponsors who preferred to donate outside of the school. So having both accounts maximizes our opportunities to receive donations and grants.

Yes, we have to file taxes...and have not yet done this for the first time. I suppose we will deal with audits if someone decides to audit us, but as a pretty small player I can't imagine that being a big deal. We can submit the very easy "post card" version of the 990 form...but may choose to do a complete submission in our first year so that all our information is searchable to potential donors.

For us, the relationship with our school was becoming increasingly tenuous. I never will understand what a school has to gain from becoming more and more obstinate when dealing with a group of the very best students at the school - and further, a group that consistently provides them with good publicity, but that was the situation. I don't think we would have been able to continue under the school's draconian control. I realize that the average team has a much better situation, thus understand that our answer is not correct for all.

[Kevin Leonard]

20 has had a nonprofit since 2004 in addition to our association with the school.
It allows us significantly more financial freedom and allows. For direct donations and fundraising.

[David Brinza]

Originally Posted by Zebra_Fact_Man

Individual non-profit status for a team is very expensive and very time consuming.

Originally Posted by Qbot2640

Not so. There is an electronic application for smaller organizations (under $50000 income per year) that costs only $400, and we had our approval in one week (to the day).

It's too bad this streamlined application wasn't available in 2010 when Team 980, a SoCal community team, filed for non-profit exemption status. Still, filing the complete IRS Form 1023 wasn't really all that difficult. The filing fee then was $750, which is well worth the benefits gained with 501(c)(3) status. We had to go through the process of becoming incorporated in the State of California in order to file. We also registered as a Charitable Trust with the California Attorney General''s office. We posted our 501(c)(3) formation documents on our website: FRC Team 980 501(c)(3) Formation Documents

Originally Posted by Jimmy Nichols

Do you still have to deal with Annual audits and tax filings?

Besides the very simple on-line annual filing of 990N "IRS e-postcard" and FTB199N (California e-postcard), we also electronically file (biennially) a of Statement of Information (SI-100) to the California Secretary of State. Finally, we file an annual renewal (RRF-1) for our California charitable trust.

The overhead of filings is minimal compared to the benefit our team gains with non-profit status:
We've found many grants require non-profit status. Team 980 receives software donations (i.e. Microsoft Windows, Office) and discounts through http://www.techsoup.org/. We use Google Apps for Non-profits and Paypal to manage our operations. Finally, we receive donations, many through Piggybackr, because of our tax-exempt status.

[Rosiebotboss]

I am not going to repeat anything that has already been said other than to say, I started the Agawam Robotics Education Assn. Inc in 2009 with the help of an attorney that was a Rosie Mom and a CPA that was a Rosie Mom. Ask your kids who's parent is an attorney/accountant. Make sure you keep good records in case of an IRS audit!

That being said, you do not need to jump in with both feet into a 501 right away. AREA started out as noth8ing more than a checking account, opened by a couple (non related) parents that the bank will set up to require 2 signatures on each check. The 2nd signer MUST be non related to the other signer, either by marriage or blood. The 2nd signer adds a level of security to misuse of funds.

A 501 c 3 is a Corporation and it adds its own level of security other than financial. If an angry parent files a suit against the team, they can only attach the assets of the team, not the mentor, for example.

Do your homework! Talk to a professional. You'll be better off in the long run. I'll try to find the presentation I have given over the years in my Senior Mentor duties and post it on www.firstnemo.org

[John Retkowski]

Our team has been part of the 501c3 non-profit South Jersey Robotics, which started in 2008. Here is an exerpt from the website.

In 2008 the team incorporated to a non for profit organization – South Jersey Robotics, Inc. Since that time, SJR has continued to grow and add additional teams. Currently, there are ten teams:

FRC Team 316, the LuNaTeCs
FRC Team 5420, Velocity
FTC Team 7071, the EngiNerds
and seven FLL teams that include the Lunabots, Team Shockwave, and Pyro Penguins

Our FRC teams have been quite successful with what we like to call the "College Model" Since 1999 The Lunatics have partnered with Salem community college to use their workshop and space to practice. We, along with team 365 MOE also host The off season event Duel On The Delaware in the Salem Community College gym.

This past year, South Jersey Robotics forged a new partnership with Cumberland Community College for FRC team 5420 Velocity. This year, Velocity is also expanding into the new Makerspace in Bridgeton NJ.

We are excited to see what the future will bring for SJR.

[GeeTwo]

Originally Posted by Rosiebotboss

That being said, you do not need to jump in with both feet into a 501 right away. AREA started out as noth8ing more than a checking account, opened by a couple (non related) parents that the bank will set up to require 2 signatures on each check. The 2nd signer MUST be non related to the other signer, either by marriage or blood. The 2nd signer adds a level of security to misuse of funds.

This has become harder recently; few banks want to deal with requiring multiple signatures. My church was interested in requiring a second signature about four or five years ago. We only found one bank in our area that offered this as an option (on a business account). It is a large national bank which fortunately has a branch two blocks away from the church!

[FrankJ]

As Gee 2 sez, second signature checks are going the way of the Dodo bird. Banks don't really verify signatures anyway. I routinely signed my utility payments as Mickey Mouse, back when I wrote checks for those things. Our foundation requires a second set of eyes to review the bank statement every month.