Ohio State University Fact Sheet

School of Natural Resources

2021 Coffey Road, Columbus, Ohio 43210

Costs of Organizing and Sustaining a Watershed Group

WS-0002-00

Anne Baird
Allan Sommer
Joe Bonnell
Brent Sohngen

Overview

Watershed groups may want to begin addressing water-quality issues right away, before they are aware of the costs involved in creating and sustaining an organization. Since both time and money are major components of water resources protection, this guide was produced to help groups anticipate some of the costs involved in getting organized. Information in this guide can be used for short- and long-term planning, budgeting, and grant writing.

Much of the information in this guide was obtained from a 1999 Ohio State University Extension survey of the income and expenses of Ohio watershed groups. The 26 groups surveyed represented a wide range of Ohio watershed and water-resources groups. Their years in existence ranged from two to 30, and their focus areas included general watershed protection (31%), land trust operation (20%), and wetlands preservation (15%).

Respondent goals included education and outreach, preservation and protection of waterways, promotion of land-use planning, land acquisition, recreation, and agricultural best-management practices, analysis of resource issues, and formation of watershed action plans.

How Many Hours Do Group Members Contribute?

To get an estimate of how much time Ohio watershed organization members are contributing, we asked respondents to estimate the hours per month that officers and board and/or committee members contributed. Results are summarized in Table 1. Titles or positions held in the groups surveyed and quality of records of mostly volunteer time varied widely; therefore, these time estimates should be regarded only as rough relative estimates.

On average, the project coordinator and/or president contributed the greatest amount of time, at 67 hours per month. The next three highest areas of hours contributed were treasurer at 18 hours per month, board member at 16 hours per month, and finally vice president at 10 hours per month. To calculate the value of volunteer labor, the Economic Report of the President assigned an hourly wage for volunteers at $14.83. (Independent Sector Web Site http://www.independentsector.org/GandV/s_volu.htm)

Annual Direct Cash Expenses and Donations

The respondents were asked to estimate their annual expenses and donations in a number of categories (Tables 2 and 3). The highest average expense for all groups was staff, with an average annual expense of $21,400. The lowest expense was for advertising with an annual average of $33. The top five expense categories, in descending order, were staff, other, printing, office equipment, and mailing. These comprised 89% of the total annual expenses of all of the groups surveyed and are summarized here. Large expenditures (more than $2,000) included river monitoring, payroll taxes, soil testing, school field trips, land acquisition, well testing, and fees for accounting, legal, and financial services.

• Staff. Staffing costs were the dominant expense. They averaged $21,400 annually and comprised 55% of expenses. It is interesting to note that staff costs varied considerably with some groups having annual staff costs as high as $200,000 and some with entirely volunteer staff. Staff donations were obtained from OSU Extension, Soil and Water Conservation Districts, and the Ohio Environmental Council.

• Other. This category included expenses that didn't fit in the categories listed on the survey. These expenses included spending for demonstration plots, field supplies, Internal Revenue Service filing fees (for more information on this topic, see the section on Forming a Nonprofit Corporation), utilities, cost share, postal box rental, river signage, training conferences, auto maintenance, bank charges, special projects, t-shirts, periodicals, litigation, publications, dues, data processing, depreciation, and monitoring.

• Printing. Typical publications that watershed groups produce include newsletters, press releases, mailings to members, fund-raising information, and watershed plans. The average annual printing expense for all groups was $1,200. In-kind donations for printing services were obtained from banks and county government. One thousand printed one-sided two-color fact sheets cost approximately $220. (MacPherson, 1998.)

• Office Equipment. Groups spent an annual average of $1,000 per year on office equipment. Respondents received donations from both OSU Extension and the local Soil and Water Conservation Districts.

• Mailing. Overall, respondents spent an average of $1,000 annually for mailings. In-kind assistance for mailing was obtained from the Natural Resources Conservation Service in one case.

Additional Costs

Meeting Space. Survey respondents stressed the importance of providing a pleasant, convenient meeting location with refreshments during initial meetings. On average, the groups spent approximately $880 a year to rent meeting space. For 11 of the respondents, meeting space was donated; the average annual cost of the donation was valued at about $200. Meeting space donations were obtained from public libraries, ecology centers, county parks, churches, nature preserves, and schools.

Insurance. Insurance for your organization needs to be included as an annual expense in your budget and will vary based on what type(s) of coverage you select. Consult with an attorney and insurance provider on the type(s) of coverage appropriate for your organization. Respondents spent an average of $250 per year on insurance. Two types of insurance that some groups purchase are general liability insurance (an estimated annual expense of $500) and director's and officer's insurance (an estimated annual expense of $1,000). Director's and officer's insurance offers protection against claims rising from "wrongful acts" or poor business decisions made by the director, officer, volunteer, or the organization itself. For more information on types of insurance, visit the Ohio Association for Nonprofit Organizations website: http://www.ohiononprofits.org.

Mailing Lists. Respondents noted that building a membership base or a group of stakeholders requires a good mailing list, time (especially for phone contacts with potential members), and someone with computer skills. Some felt it was important to move slowly at first and attract members who would "be in it for the long haul." The Ohio Environmental Protection Agency donated a mailing list to one group; another group purchased a mailing list. Some organizations collect names and addresses of riverside landowners by reviewing tax records. Another approach is a door-to-door canvas, and a third technique is to have several board members hold "house parties" at which a presentation can be made and people can be encouraged to join. (River Network, 1996.)

Brochures. Brochure development was less than one percent of the total expenses of the groups surveyed. Groups surveyed on average spent $60 per year on brochure development. In-kind donations can be sought for brochure development from graphic artists, editors, and talented board members. Professional printing costs for brochures run approximately $600 for 1,000 copies of an 8.5" by 11" two-color, tri-folded brochure.

Logos. Logos did not rank as an expense category among the groups surveyed. A logo reflects an organization's mission and gives the group name recognition and a feeling of cohesion. One respondent had logo development donated for an approximate value of $500. This is a typical value, according to one professional graphic designer contacted by the authors.

Outreach Events. A watershed outreach program builds the community's awareness of the water resource and the project, educates them on actions needed for water-resources protection, and motivates them to implement those actions. A more complete explanation of outreach planning can be found in Getting In Step: A Guide to Effective Outreach in Your Watershed (MacPherson, 1998).

A group's message and its information can be delivered at an event (e.g., water festival, cleanup, or demonstration project) or by use of promotional items (e.g., magnets, bumper stickers, pins) or in print (e.g., newsletters, fact sheets, flyers, media coverage). Promotional materials such as magnets cost approximately 23 cents per magnet for 1,000. Tabletop displays cost between $1,000 and $1,500. (McPherson, 1998.)

Outreach events put on by groups surveyed included canoe floats and river cleanups, river monitoring, and school field trips. Outreach items respondents used were banners, ball caps, t-shirts, newsletters, displays, brochures, web sites, and maps. Respondents obtained donations from local outfitters, Soil and Water Conservation Districts, regional planning commissions, and the Natural Resources Conservation Service.

Annual Income and Sources

Annual income varied widely among respondents. Annual average incomes for 1998 ranged from $456 to $1 million. When these incomes are broken down, nearly 80% comes from three areas:

• 40% of all groups' cash flow came from grants. The dominant response for this funding source was Ohio EPA Section 319 grants.
• 26% from membership dues.
• 13% from private corporate donations.
• 8% from private donations.
• 8% from "Other."

'Other'

"Other" income sources included timber sales, program service fees, contracts, fund-raising auctions, project income, conservation set aside, rental income, oil and gas lease income, profit from retail sales (e.g., bookstore and birdseed), interest and dividends, and gain on the sale of investments.

Forming a Nonprofit Corporation

Whether to become a nonprofit corporation is an important decision for many watershed groups to make. Many foundations, government agencies, and other entities will only distribute funds to nonprofit corporations. Creating a nonprofit corporation increases a group's ability to obtain grants and donations. But incorporation (which is necessary to become a nonprofit corporation) also imposes added duties and risks on managers of the organization and exposes the organization to added regulations.

Creating a nonprofit corporation that operates effectively and appropriately for your organization can be complex.

It is beyond the scope of this publication to provide any legal or financial advice or address the costs involved in obtaining such advice. Some groups are able to receive advice on nonprofit status pro bono or donated from lawyers and accountants. Listed here are resources you can use to assist your organization with this process.

Resources on Forming a Nonprofit Corporation in Ohio

Ohio Association for Nonprofit Organizations
614-280-0233

Ohio Secretary of State's office
614-466-3910
http://www.irs.gov/bus_info/eo/index.html

National Center for Nonprofit Boards
1-800-883-6262
http://www.ncnb.org/main.htm

Internet Nonprofit Center
http://www.nonprofits.org

Internal Revenue Service
Publication 557, Tax-Exempt Status for Your Organization, is available on the IRS web site at:
http://www.irs.gov/bus_info/eo/index.html

How to Form a Nonprofit Corporation. Mark Warda. 2000. Sphinx Publishing.
It is also helpful to know what nonprofit groups exist in your area and what resources (especially mentoring) they can provide. Other nonprofits may be able to assist your organization. For a list of Ohio watershed groups, visit the Ohio Watershed Network website at:
http://www.ag.ohio-state.edu/~waternet/

Nonprofit Corporation Costs

Nonprofit corporations must form a board to translate the ideas of the organization into reality. Plan to spend time developing a job description for board members including specific actions each will need to complete to support the organization. Sample job descriptions for board members can be found at the National Center for Nonprofit Boards web site at:
http://www.ncnb.org/askncnb/faq.htm
and at the Internet Nonprofit Center:
www.nonprofits.org site

Information on recruitment can be found in Starting Up: A Handbook for New River and Watershed Organizations.

Articles of incorporation and bylaws are both necessary in order for your organization to obtain tax-exempt status. Articles of incorporation generally limit the liability of each member of the group, provide continuity (the group will continue to legally exist until it is dissolved), and are necessary for obtaining tax-exempt status. To incorporate, a nonprofit selects a name, drafts the legal incorporation document and bylaws, and files them with the Ohio Secretary of State's office. There is a $25 filing fee. To download the forms, visit the Ohio Secretary of State's website at:
http://www.state.oh.us/sos/
Or contact the office by phone at 614-466-3910.

Bylaws function as the rule book for nonprofits. Some of the group leaders we interviewed for this publication borrowed the format for bylaws from other nonprofit organizations. It is best not to simply adopt the bylaws of another organization, but decide first how you want your organization to function and adopt bylaws accordingly. Bylaws should be reviewed by an attorney to be sure they meet legal requirements.

The Internal Revenue Service charges a user fee for applying to become a tax-exempt organization; that fee is based on your organization's projected total gross receipts. The fee is $150 for organizations anticipating annual gross receipts averaging not more than $10,000 during their first four years. The user fee is $500 for new organizations that anticipate gross receipts averaging more than $10,000 during their first four years. For more information, download IRS Form 8718 at:
http://www.irs.gov/bus_info/eo/eo-tkit.html

Some groups choose to hire the services of a lawyer or an accountant to assist with articles of incorporation and seeking tax-exempt status. While beneficial, these services can significantly increase the costs associated with forming a nonprofit corporation.

Summary

The expenses your organization will incur will vary widely and will largely be determined by whether you employ paid staff members. The major expense for Ohio groups surveyed was staff, with an average of 55% of total expenses. Consider early on expenses your organization may incur in the categories of staff, printing, office equipment, and mailing. Additional expense categories worth considering include meeting space, travel, phone/Internet charges, consultant fees, and insurance. The average annual expenses for a year of operation for survey respondents totaled $40,000.

Annual average incomes varied widely among respondents for 1998, ranging from $456 to $1 million with a median income of $22,400. The majority of their cash flow came from grants (40%), membership dues (26%), and corporate donations (13%). Additional cash flow came from private donations (8%) and miscellaneous income (8%) from sources such as fund-raisers, and interest and dividends.

The annual average of total in-kind (donations of goods and services) realized by all groups was $1,300. Staff donations were far above all other donations, representing 31% of all donations. In-kind can be sought for a variety of expense categories. A few to consider include staff, meeting space, office equipment, printing, and refreshments. Printing and refreshments comprised 32% of all in-kind donations received by survey respondents. In-kind sources included Soil and Water Conservation Districts, the Ohio Environmental Council, Natural Resources Conservation Service, U.S. Department of Agriculture, OSU Extension, regional planning commissions, libraries, schools, banks, and businesses.

Acknowledgments

These reviewers provided valuable comments during the development of this publication:
Dan Kush, Ohio Department of Natural Resources
Peggy Shear, Ohio State University Extension
Bob Jurick, B-W Greenway Community Land Trust
Greg Nagoette, Ohio Department of Natural Resources
Amanda Lanning-Davey, Friends of the Lower Olentangy
Jill Evans, Ohio Department of Natural Resources
Jerry Wager, Ohio Department of Natural Resources
Gail Hesse, Ohio Environmental Protection Agency
Gary Graham, Ohio State University Extension
Erin Miller, Ohio Environmental Council
Gary Comer, Ohio State University Extension
Special acknowledgments to the individuals who completed the income and expenses survey.

References

Resources

Community-Based Watershed Management. 2000. Joe Bonnell and Anne Baird. Ohio State University Extension Fact Sheet WS-1-2000. http://ohioline.osu.edu

A Guide to Developing Local Watershed Action Plans in Ohio. 1997. Ohio Environmental Protection Agency, Division of Surface Water. 614-644-3020

Know Your Watershed. Conservation Technology Information Center. 765-494-9555. http://kyw.ctic.purdue.edu/kyw/kyw.html

Ohio State University Extension, Ohio Watershed Network. 614-292-9383. http://www.ag.ohio-state.edu/~waternet/

Land Trusts. 1998. Ohio State University Extension Fact Sheet CDFS-1262-98. http://ohioline.osu.edu

Top 10 Watershed Lessons Learned. 1997. U.S. Environmental Protection Agency. EPA 840-F-97-001.

Grant Information

Catalog of Federal Funding Sources for Watershed Protection. U.S. Environmental Protection Agency. EPA-841-99-003.

The Foundation Center
http://www.foundationcenter.org/

Ohio Environmental Protection Agency
http://www.epa.ohio.gov/ (search words: grants and financial aid)

U.S. Environmental Protection Agency
http://www.epa.gov/owow/wag/html

River Network
http://www.rivernetwork.org/wag2000.htm

Ohio Department of Natural Resources
http://www.dnr.state.oh.us/grants.html