Can a nonprofit charge for its services? During difficult economic times – like the global COVID-19 pandemic – this is a question we get often. The answer is yes, but as with all fund development planning, this should be undertaken with great care.
A fee-for-service structure means fees are paid in return for services delivered, making money on the same kinds of services your nonprofit provides already. While not usually a major source of income, nonprofits can use fee for service and contracts to supplement other funding. The beauty of fee for service is that unlike grants and other common nonprofit sources of funding, funds from fee for service are unrestricted and can be used at any time for any purpose.
Getting paid directly for what your organization is already doing to fulfill its mission also confirms that your work has the outcomes that people value. However, there are some disadvantages, and nonprofits must be sure to avoid negative tax implications, comply with all applicable state and federal regulations, and provide careful fiscal management and accounting of fee for service and contractual activities.
You might be thinking that this sounds great, but you are unsure where to begin or what steps to take to develop fee for services or contract agreements. Here are some questions to consider:
- What is my organization’s expertise?
- What services do we provide that have value in our community?
- Who can we target for our services?
- What partner(s) would benefit from providing or having access to our services?
- Training providers and consulting with businesses and agencies to provide services in areas like:
- Job placement
- Medical services: prenatal counseling and care, nutrition, regular medical care, inoculations, etc
- Early childhood education
- Recreational services for children and youth
- Providing services as part of an employer benefit package, such as:
- Substance abuse treatment, counseling and psychotherapy, wellness and preventive health maintenance, and parenting classes.
- English as a Second or Other Language (ESOL), basic skills (reading, writing, math, computer literacy, and/or GED classes), job-related instruction.
- Professional development services such as workshops in areas that could include: problem-solving, interpersonal skills, and working as a team.
- Child care
- Employment readiness: instruction in resume writing, interviewing, getting and keeping a job, relations with fellow workers, etc.
- Employment training: specific skills and knowledge for particular jobs
- Setting up a for-profit corporation to make money on fee-for-service and channel it to your non-profit organization.
- Services for court systems, jails, and probation office that provide treatment, counseling and educational services, such as:
- anger management
- sexual and domestic abuse prevention
- literacy and GED instruction in English and Spanish
- substance abuse education
- support services for the families of those in prison
- victim/witness counseling and therapy
- Providing services for school systems that they may be unable to provide themselves or find it easier to contract others to do, such as:
- workshops for teachers in such areas as conflict resolution, basic counseling skills, classroom management, violence prevention, substance abuse, child development, and health issues
- student counseling, training and supervision of peer mediators and peer tutors
- after school programs, tutoring, arts enrichment
- workshops for students and parents in conflict resolution and mediation, substance abuse, child abuse and sexual assault, and study skills
- Rather than charge a fee, some nonprofits have “voluntary” donations. This is when you suggest that a user or client can help you provide services by giving a donation.
There are many opportunities are out there for to set up fee for service or contract service structure for your nonprofit organization. Need help thinking outside the box? We would love to brainstorm options! Contact us today for a free consultation.