Understanding Nonprofit Expenses: Keeping the Lights On and Fulfilling the Mission

Nonprofits play a vital role in our communities, but how do they function financially? Unlike for-profit businesses, their focus isn't on generating a maximum return. Instead, they aim to deliver services and programs that fulfill their mission. This means managing their expenses effectively is crucial.

So, what kind of expenses does a nonprofit typically have? Let's break it down into two main categories:

1. Program Expenses:

This is the heart of the nonprofit's work! These expenses directly support the programs and services that deliver our mission. Examples include:

  • Direct program costs: Materials for educational workshops and exploratory activities.

  • MakerSpace equipment and service contracts: equipment for the use of the community, and maintenance for it to function optimally and extend its longevity. Eventually, equipment breaks down or becomes obsolete, and a replacement is necessary. 

  • Instructor hourly compensation: Most of our instructors volunteer their time. However, some classes may require hiring highly trained, compensated instructors.

2. Operational Expenses (Overhead):

These are the expenses a nonprofit incurs just to keep running, regardless of specific programs. Think of them as the "keeping the lights on" costs. They include:

  • Rent and utilities: A place to come and participate in projects and classes.

  • Insurance: We are required to have property and liability insurance to protect our volunteers and our program participants.

  • Background check fees: We conduct background checks on all our volunteers and staff to ensure everyone’s safety, especially our most vulnerable participants. 

  • Accounting: We outsource this service to make sure that we have proper documentation to keep our 501(c)(3) status in good standing.

  • Legal advice: We must ensure our policies, waivers, contracts with sponsors, and use of third-party programs are legally sound and compliant with all applicable laws. 

  • Office supplies and equipment: From computers to paperclips.

  • Marketing and fundraising: Raising awareness and securing donations.

  • Staff salaries and benefits: For administrative and fundraising personnel. As a startup, CELLS is run entirely by passionate volunteers, and we currently do not incur expenses for salaries and benefits.

By understanding these basic expenses, you can better appreciate how nonprofits function and how your donations are used! Remember, responsible nonprofits strive to be efficient and keep overhead low, so most of your contribution goes directly towards their mission.