Shared Visions

Guide to Creating a Nonprofit

Homeownership Entity

May, 2000

U.S. Department of Housing and Urban Development

Office of Native American Programs

Guide to Creating a Nonprofit

Homeownership Entity

MW/00-1686

i

Table of Contents

Page

1.0 Executive Summary............................................................................................................ 1

2.0 Planning Process................................................................................................................ 7

2.1 Introduction .............................................................................................................. 7

2.2 Identification of Partners ............................................................................................ 7

2.3 Homeownership Needs Analysis................................................................................ 8

2.4 Land Analysis and Inventory ...................................................................................... 9

2.5 Legal Assessment of Tribal Laws and Ordinances ......................................................10

2.6 Determination of Response to Need..........................................................................13

2.7 Organizational Options ............................................................................................16

2.8 Fundraising and Finance1

..........................................................................................22

3.0 First Steps to Creating a Nonprofit Organization...............................................................29

3.1 Introduction and Overview of Steps to Establishing a Nonprofit .................................29

3.2 Articles of Incorporation ...........................................................................................29

3.3 Bylaws .....................................................................................................................31

4.0 Applying to the IRS for 501(c)(3) Recognition...................................................................33

5.0 Development of a Nonprofit Organization........................................................................41

5.1 The Board ................................................................................................................41

5.2 Strategic Plan............................................................................................................49

5.3 Business Plan............................................................................................................51

5.4 Organization Structure..............................................................................................55

5.5 Budget and Financial Procedures ..............................................................................55

5.6 Personnel Policies and Procedures............................................................................60

5.7 Staffing.....................................................................................................................61

6.0 Program and Organizational Operations...........................................................................65

6.1 Introduction .............................................................................................................65

6.2 Housing Development..............................................................................................65

6.3 Housing Counseling .................................................................................................79

6.4 Resource Referral Services ........................................................................................81

6.5 Marketing.................................................................................................................82

6.6 Fund-raising .............................................................................................................84

6.7 Monitoring and Evaluation........................................................................................85

7.0 Pine Ridge Case Study.......................................................................................................89
Guide to Creating a Nonprofit

Homeownership Entity

ii

End-Notes................................................................................................................................103

Appendix 3.2 – Sample Articles of Incorporation.....................................................................105

Appendix 3.3 – Sample Bylaws ................................................................................................112

Appendix 5.0 - Job Description for President/Chairperson.......................................................123

Appendix 6.0 – Sample Notice.................................................................................................125
Guide to Creating a Nonprofit

Homeownership Entity

1

1.0 Executive Summary

In response to the austere housing and economic conditions confronted

by many Native Americans, particularly those living on tribal lands,

Secretary Andrew Cuomo of the United States Department of Housing

and Urban Development (HUD) has launched the Shared Visions

Initiative. Consultation with tribal leaders across the country confirmed

the need for a new approach to the housing crisis. This initiative is

designed to increase the number of affordable, quality homes and

simplify the homeownership process for Native Americans.

One component of the Shared Visions Initiative is the creation of a tribal

nonprofit entity that promotes homeownership opportunities by

establishing links with financial intermediaries, providing

homeownership counseling, and serving as a resource referral center. In

January 1999, The Oglala Sioux Tribe created the Shared Visions pilot

nonprofit, the Oglala Sioux Tribe Partnership for Housing, Inc. (OSTPH).

The Oglala Lakota name for the nonprofit is Tatanka Woihanble Otipi:

Buffalo Dreams, Gathering Homes. The OSTPH opened its doors with a

HUD grant to provide financial assistance, homeownership counseling,

and other services to potential homebuyers.

As the pilot nonprofit organization, OSTPH is serving as the model for

the creation of this Shared Visions guide, which is intended as a resource

guide in creating similar nonprofits in other tribal communities. The

long-term goal of Shared Visions is to help lessen the housing shortage

on American Indian reservations across the country by finding ways to

build affordable, quality homes and encourage individual

homeownership and private sector investment. A secondary goal is to

stimulate Indian-owned housing construction companies and trades so

that housing development activities become part of tribal economic

development.

The Shared Visions Initiative activates the intent of the Native American

Housing Assistance and Self-Determination Act of 1996 (NAHASDA) by

fostering new opportunities for tribal family homeownership. One of the

primary objectives of NAHASDA was “to ensure better access to private

mortgage markets for Indian tribes and their members and to promote

self-sufficiency of Indian tribes and their members.”

Important opportunities for affordable housing in Indian Country have

been created by NAHASDA, Section 184 loan guarantee, and other new

programs. In addition, mortgage lenders, nonprofits, and the secondary

mortgage market are increasingly interested in working with tribes.

Need for Housing Shared Visions

Benefits of a

Nonprofit

Homeownership

Model
Guide to Creating a Nonprofit

Homeownership Entity

2

However, in order to take full advantage of these opportunities, tribes

need legal, technical, and program design infrastructure.

Significant and sustainable benefits will arise from the nonprofit

homeownership model:

• A one-stop nonprofit homeownership model provides tribal

households financial assistance or advice in owning their home apart

from tribally-funding housing stock.

• Homeownership opportunities will provide tribal households a way

to accrue wealth through increasing equity investment in their own

homes.

• Tax-exempt nonprofits can take advantage of donations from

foundations, individuals and others; thereby reducing dependence

on limited public sector funding.

• As tribal households move into their homes, housing capacity

provided by tribally designated housing entities will increase for very

low-income tribal families.

• Nonprofits will assist tribes in developing the regulatory jurisdiction

over financial and commercial transactions that will provide

predictability to both borrowers and lenders – thereby stimulating

both homeownership and economic development opportunities.

• Nonprofit approach promotes greater tribal control and

accountability since the entity’s Board of Directors usually consists

of tribal members with expertise in housing, economic development,

and tribal governance.

The guide should serve as a reference tool for a working group interested

in launching a nonprofit with the mission of developing affordable

housing and promoting homeownership opportunities. The guide walks

the working group through the planning stages, the legal creation of an

entity, the application process for Internal Revenue Service (IRS)

501(c)(3) status, the development of the organization, and the program

operations. It concludes with a case study on the Oglala Sioux Tribe

Partnership for Housing, Inc.

Before launching a nonprofit organization, it is crucial for the tribe to

engage in extensive housing research and planning to determine if this is

the best response to identified needs. A working group of committed

community leaders and housing industry practitioners should come

Guide to Creating a

Nonprofit

Planning Process
Guide to Creating a Nonprofit

Homeownership Entity

3

together to provide leadership and conduct or commission the necessary

research. Specifically, it should conduct a homeownership needs

analysis to gauge the tribe’s demand and capacity for homeownership, a

land analysis to assess what land is available for development of new

homes, and a legal assessment to identify what relevant tribal codes and

ordinances are in effect.

The working group should examine the organizational options and

decide how best to structure the new initiative or entity. It should also

evaluate existing organizations and entities that may be able to launch

an initiative without the creation of a new organization. The working

group should identify partners and funding sources for the initiative.

The creation of a nonprofit organization is a multi-step process involving

many decisions, documents, and players.

Once the working group has determined that it should form a nonprofit,

it should generate a strategic plan, a vision statement, and a business

plan. Next, the group should prepare and adopt Articles of

Incorporation, file them with the tribal government and/or have the tribal

government charter the organization, file them with the state Secretary of

State (if necessary), and draft and approve organizational bylaws. Details

on all of these steps are included in this document.

The Board of Directors is the body that governs the nonprofit

organization. It makes decisions, sets policies, and plans in order to

ensure the organization’s success. Further information on the Board’s

roles, responsibilities, and structure is included in this document.

After an organization has worked through the land, legal, tax, and

financial packaging issues confronted in the planning stages, and has

organized itself legally as a nonprofit, it is ready to embark on its

program operations. Section 6 details a preliminary sketch of what the

program operations may include.

As soon as possible, the nonprofit should begin working with

prospective homebuyers. The entity would market and reach out to find

families interested in homeownership and provide group and individual

pre- and post-purchase and credit counseling. It is from these efforts that

the organization identifies and nurtures its future homebuyers.

One component of the organization’s operations is housing

development. The entity may be involved in site selection, deciding on

the appropriate form of housing delivery, type of home and building

First Steps to

Creating a Nonprofit

Organization

Board of Directors

Program and

Organizational

Operations
Guide to Creating a Nonprofit

Homeownership Entity

4

materials, securing construction gap financing, leveraging with financial

intermediaries, procuring services, and closing on a property.

In addition, the organization should provide resource and referral

services. As a one-stop resource referral center, the organization

would be a single source where interested parties could obtain

information on the process of buying a home, as well as

information on credit counseling, mortgage lenders, real estate

brokers, builders and contractors, and local housing options and

programs.

HUD’s Office of Native American Programs (ONAP) proposed to the

Oglala Sioux Tribal President that a nonprofit entity – separate and

independent from the tribal governance structure – could serve as a

national pilot project in developing affordable housing and designing

homeownership opportunities. In response, the tribal council created the

Oglala Sioux Tribe Partnership for Housing, Inc. (OSTPH), to serve as the

pilot for the Initiative. As a nonprofit organization, OSTPH would:

• Promote the concept of homeownership among tribal members and

identify interested homebuyers

• Create a housing development and financing plan that reflects the

preferences and circumstances of the homebuyers

• Assess homebuyer readiness

• Deliver personal financial management and housing counseling

services

• Serve as a conduit between lending institutions and the homebuyers

• Market-shop and negotiate for the best lending packages for tribal

members

• Maintain funding sources to close the gap on down-payment and

monthly mortgage costs

• Seek out and secure other sources of gap financing

• Develop sources of housing and housing-related products

• Serve as a resource and referral center for tribal members interested

in homeownership

Pine Ridge Case

Study
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Homeownership Entity

5

In essence, the nonprofit homeownership entity will bridge the gap

between Pine Ridge borrowers and the private market that provides the

services needed to facilitate on-reservation homeownership.

OSTPH is a tax-exempt, 501(c)(3) nonprofit organization governed by an

eight-member Board of Directors and managed by a full-time Executive

Director.

OSTPH is engaged in a Building Summit to develop and build homes on

the Pine Ridge reservation. Staff assessed homebuyer readiness and

established a pool of applicants and are providing housing counseling

on an ongoing basis. Norwest Mortgage, Inc. is the main private partner,

providing mortgages to qualifying families. OSTPH has also leveraged

financial resources from federal and private partners to help make

homeownership affordable to tribal members.

Homebuyers may choose a stick-built modular home or a manufactured

home. OSTPH is managing the site preparation and infrastructure

development for the manufactured homes, and all aspects of the

construction of the modular homes at the Kyle modular home facility on

the Pine Ridge reservation.

The creation and mission of OSTPH represent an achievement of the

Oglala Sioux Tribe in creating a new opportunity for tribal families to the

finance and obtain affordable housing. OSTPH’s success at attracting

housing development funding from numerous public, private, and

nonprofit sources and its ability to implement a variety of housing

initiatives help reduce tribal dependency on unpredictable and limited

public funding. For the first time in its history, the Tribe is able to build

new housing and provide wider housing choice to homebuyers and

renters; especially those with lower incomes and physical disabilities.

Guide to Creating a Nonprofit

Homeownership Entity

7

2.0 Planning Process

2.1 Introduction

The Shared Visions Initiative encourages tribes to create nonprofit

organizations to promote housing development and affordable

homeownership opportunities in Indian Country. This approach may not

be appropriate for each tribe, in all situations. This is why it is crucial to

engage in extensive research and planning to determine if launching a

new organization is the best course of action for its members.

Specifically, the tribe should conduct a homeownership needs analysis

to gauge the tribe’s demand and capacity for homeownership, a land

analysis to assess what land is available for development of new homes,

and a legal assessment to identify what relevant tribal codes and

ordinances are in effect. This section discusses each of these assessments

and explains how to proceed once this information has been gathered.

2.2 Identification of Partners

To determine whether or not a tribe should launch a housing

development and homeownership program and charter an organization

to undertake this initiative, a working group should be formed to

conduct the necessary research, analysis, and planning. Such a working

group should be comprised of committed individuals who represent

different interests in the community and/or who bring a variety of

expertise and resources. The role they will play includes brainstorming,

visioning, and conducting or commissioning surveys and analysis on

homeownership needs, land issues, and legal issues. Ultimately, this

group of people will determine whether there is sufficient need and

capacity to launch a housing development and homeownership

program. The working group will also choose what type of organization

will operate such a program. Some members of the working group may

go on to serve as members of the organization’s Board of Directors.

It is helpful if at least some of the working group members have a

background in housing, construction and development, law, land issues,

and/or finance. These individuals can provide professional expertise to

the group at no cost, saving the initiative considerable costs. Working

group members may or may not be required to be tribal members to

participate – this is to be determined by the group. It may be helpful to

involve, as members or associate members, local staff of HUD’s Office

of Native American Programs (ONAP), the Bureau of Indian Affairs (BIA),

Indian Health Services (IHS), state housing officials, tribally elected
Guide to Creating a Nonprofit

Homeownership Entity

8

officials, and representatives of mortgage lenders and secondary market

participants. These individuals will have contributions to make at

different points in the planning and development processes.

2.3 Homeownership Needs Analysis

For many tribes, most of the information required to create a housing

development and homeownership program will be contained in their

Indian Housing Plan. However, it is preferable to pull this information

together in a three to four page document describing the program. Such

a write-up would likely include six sections:

1. Market description (target homebuyers)

2. Construction/rehabilitation standards and design guidelines

3. Financing (pre-development, construction and permanent financing,

and financing sources) and pro-forma project statements

4. Homebuyer outreach and counseling

5. Internal staffing and systems required

6. Timeline

Unlike rental housing, homeownership requires a long-term

commitment from the homebuyer and, if the working group intends to

utilize bank financing, an ability to be underwritten by conventional

banking practices. Since this will be a new venture for many tribes, a

short written program description will help funders to understand the

market. It will also assist the tribe and tribal council to understand the

program’s goals, and it will enable the organization’s future staff to

understand the process and their role.

The first level of analysis is to research potential homebuyers. These are

people who would be interested in becoming homeowners and have

sufficient income to pay a mortgage. The research required typically

includes:

• Household income

• Household size

• Debt and credit history

• Current housing expenses

• Housing preferences (single family, multi-family, townhouse,

manufactured, modular, etc.)

Know the Market
Guide to Creating a Nonprofit

Homeownership Entity

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• Accessibility requirements for the elderly and persons with

disabilities

Income information, household size, and current housing expenses are

available through Census data and BIA. Since the Census is conducted

only once every 10 years and generally undercounts Native American

households, some tribes carry out surveys to gather more current and

reliable information. Incorporating the surveys into the Indian Housing

Plan also promotes the tribal participation that HUD seeks for these

Plans.

Based on this information the working group can begin to analyze the

market for homeownership that will guide all the rest of the project – the

financing, design, development costs, purchase prices, and counseling

required by the homebuyers.

2.4 Land Analysis and Inventory

Along with the homeownership needs analysis, it is important to consult

or conduct a land inventory of the tribe’s existing land base. This

inventory will identify the tribal land available for the development of

homeownership units. In some cases, there may be an existing land

inventory that may need to be updated. This exercise can also highlight

any issues or problems that may exist with tribal lands.

A land inventory will categorize all the land of the tribe by type,

including trust lands, allotted lands, and lands held in fee simple. BIA

will most likely play a key role in this inventory, as the BIA issues Title

Status Reports (TSRs) on all tribal trust land.

The term “fee land,” “fee title” or “fee simple title” generally denotes an

estate in land that is absolute and unrestricted. The owner is entitled to

dispose of the entire property or various interests in the property during

his or her lifetime without hindrance. Upon his or her death, the land or

his or her remaining interest passes to his or her heirs, or those to whom

he or she has given it by will. The homeownership nonprofit entity can

work easily with fee simple land to develop and build homes. Tribes

sometimes own land in fee within the boundaries of the reservation or

off the reservation, and they may be willing to lease or assign such land

to tribal members for homeownership. In addition, tribal members may

own their own undeveloped land in fee simple, and the homeownership

organization could assist such tribal members in building and financing

their own homes on their land.
Guide to Creating a Nonprofit

Homeownership Entity

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Trust land is land or any interest therein held in trust by the United States

of America for the benefit of a tribe or individual Native American. A

tribe may distribute such land to its tribal members either by land

assignment or lease. A lease requires the approval of BIA and must

comply with certain federal regulations. A land assignment, which is an

action by tribal government, is another means for the tribal government

to distribute land for the use of tribal members. BIA approval is not

needed for a land assignment. However, tribes may choose to have their

land assignments approved by BIA or recorded in one of BIA’s title

offices. This choice might be attractive if the tribe does not have a title

office.

In some cases, the tribe may be willing to set aside some of its trust lands

for affordable homeownership opportunities. The working group should

contact the tribal council to inquire about such a possibility. A land

analysis should also include a review of the forms of lease or assignment

that the tribe uses to convey land, along with any applicable restrictions

on the land.

During the 1800s, the U.S. government gave individual allotments to

individual Indians. The allotment is land held in trust by the United

States for the benefit of an individual Indian. These allotted lands have

passed down through the generations. A consequence of the inheritance

feature of allotments is the fractionalization of a parcel of land. In some

instances, the parcel may have multiple heirs holding an interest in it.

This is a problem because it is not clear who owns what part of the land,

and it is difficult to build a home on such land. Depending on the size of

the allotment, the options available to tribal members include some sort

of division or consolidation of the allotment, or an assignment by the

other heirs of their rights to the land to a single owner. To date, there has

been no comprehensive means to deal with the fractionalization issue.

These parcels may be the most bothersome and challenging trust lands

to deal with under a nonprofit entity’s homeownership initiative.

2.5 Legal Assessment of Tribal Laws and Ordinances

As tribes consider launching a housing development and

homeownership program and establishing a nonprofit organization to

operate the initiative, they should be careful to consider the legal and tax

implications on the nonprofit and the future homeowners. The working

group should conduct an assessment of the existing tribal codes,

ordinances, and/or laws in the following areas: housing, zoning, land

distribution and use, corporations, leasehold mortgage, landlord/tenant,

and taxes. This assessment will assist the nonprofit to identify the legal

benefits and legal challenges resulting from the proposed activities on

Allotted and

Fractionalized Lands

Trust Lands
Guide to Creating a Nonprofit

Homeownership Entity

11

and off the reservation. A legal assessment will also identify in what

areas tribal law is lacking, contradictory, or raises issues for the proposed

activities.

Legal and tax implications exist on multiple levels, including the tribe,

state, and federal government bodies. Normally state law does not apply

to a tribe, its activities or its tribal lands. However, the nonprofit

organization may make decisions that would fall under the jurisdiction

of state law by choice for tax advantages or governance advantages.

Normally, the implications of the legal and tax consequences vary by

tribe and by state. The implications also differ from the perspective of the

homebuyer and the nonprofit organization.

To begin, the working group should consider the kind of governmental,

legal, and tax codes needed so the nonprofit can accomplish its goals in

a cost-efficient manner. Understanding tribal law and what it requires is

essential to the nonprofit organization. An awareness of the legal

relationship with the federal government is also important as federal

laws regulate tribal land.

The working group needs to consider the impact of the tribal laws on the

homeowner, for example, what happens if the buyer must sell, default,

or vacate the premises for a period of time. For example, some tribal

constitutions have provisions that result in the loss of a lease on land or

land assignments if the occupant vacates the property for more than two

years.

The tribal constitution is a fundamental organizing instrument. The

specificity and complexity of tribal laws vary by tribe. Tribes have either

Indian Reorganization Act constitutions adopted in the 1930s or more

recent constitutions. Tribal constitutions usually include provisions about

land use and the distribution of land to tribal members. The bylaws that

accompany a tribal constitution govern the activities of a tribal council

and tribal government divisions, departments, and committees. The

documents are instruments of the tribal laws and federal law depending

on whether the tribe uses a land assignment or a lease.

The working group must identify all tribal ordinances, codes, or laws

that will have an impact on the nonprofit entity and any requirements

the tribal council and its departments may have on the organization. For

example, some tribes may impose certain reporting requirements on the

nonprofit. Identifying, understanding, and explaining tribal laws, codes,

and ordinances facilitate relationships with lenders and others and

provide them with a comfort level to deal with the tribe and tribal

members. The working group should also consider whether existing

Tribal Government
Guide to Creating a Nonprofit

Homeownership Entity

12

tribal laws, codes, and ordinances would violate any of the requirements

that exist among a lending institution’s requirements or those of federal

mortgage loan programs. Under these circumstances, the working group

may wish to consider a recommendation to the tribal council that the

ordinances be amended so that tribal members can take advantage of

the programs.

The following types of tribal laws, codes, or ordinance can facilitate the

nonprofit’s ability to promote homeownership:

• Leasehold Mortgage Foreclosure Code - outlines the rights of a

mortgagor and mortgagee on tribal lands. Tribal adoption of

foreclosure rights and responsibilities is required by mortgage

lenders if foreclosure proceedings are subject to tribal courts.

• Corporation Code - outlines the process to create a for-profit and

nonprofit corporation, any ongoing reporting responsibilities,

minimal provisions of Articles of Incorporation, responsibilities of

Board of Directors and liabilities, as well as provisions for the

dissolution of a corporation.

• Housing Code or Land Code - outlines the relationships between

landlords and tenants, and the distribution process for land either

through land assignments or leases.

• Environmental/Land Use Code - outlines the restrictions on land use

activities that impact the natural environment and utilities such as

water and sewer options.

The working group should become familiar with federal, state, and tribal

tax laws. In some cases, the tribe may have entered into a special tax

agreement with the state that is relevant to the organization. The

implications of relevant tax laws on future homebuyers should also be

identified and shared with homebuyers.

In some cases, certain tax structures may create additional costs or

benefits to the organization and its mission and goals. For example, most

tribes have a tribal employment rights office (TERO), which requires

those who do business on the reservation to show Indian preference in

hiring. TERO imposes fees to subsidize the cost of regulating the tribal

employment rights ordinances. Sometimes exemptions are available

from the state and may be available from the tribe.

Tax Laws
Guide to Creating a Nonprofit

Homeownership Entity

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2.6 Determination of Response to Need

The working group should take into account the cultural context and

tribal attitudes regarding housing and homeownership. There may be

resistance, ambivalence, or a lack of interest in homeownership among

tribal members. Tribal members may not be interested in paying more to

own their own home.

The working group must develop ways to communicate the value of

individual homeownership choice above the existing model of housing

owned and managed by the tribe or the tribally designated housing

entity (TDHE). As articulated earlier, homeownership provides the key

benefit of wealth accretion, and is a vehicle for investment and saving.

The Homeownership Needs Analysis, the Land Analysis and Inventory,

and the Legal Assessment of Tribal Laws and Ordinances should provide

the necessary data to the working group to reach a decision regarding

the formation of a nonprofit or the launch of a housing development and

homeownership initiative.

Exhibit 2.1 illustrates the homeownership process path for deciding what

kind of housing and homeownership products are most feasible for the

tribe. The illustration incorporates the major points presented thus far

and shows the sequencing of tasks required for launching a

homeownership program.

Synthesizing

Analyses

Build the Case for

Homeownership
Guide to Crea

Homeo

14

Options:

1. Launch a 

No program

2. Raise inc

economiself-suffi

3. Provide 

counselihomebuy

No

Conduct Is there

education, tribal

outreach, interest in

and survey home

ownership?

Yes

Do 

interested

Yes members have

sufficient incomes

and credit 

histories?

Convene

Workgroup

Do 

potential 

Yes buyers have fee simple

or allotted land 

(non-fractionalized)

on which to

build?

No

Tribe contributes assigned land and resolvesall land issues beforehomeownership initiative begins.

Exhibit 2.1 Homeownership Process Path Page 1

Gather tribal members

Start to discuss home

ownership visionand goals.

Does

Yes the tribe have 

in place the necessary

legal codes and/or

ordinances?

No

Promote and secure the completion of all necessarylegal codes and/or ordinances. 

Connect 

to Page 2
Guide to Crea

Homeo

15

Conduct housing market and and homeownership 

Exhibit 2.1 Homeownership Process Path Page 2

Connect

from

Page 1

Are Are 

there enough there sources

tribal businesses to Yes of financing and funding Yes contract for new home to support homeownership feasibility study construction? programs?

No

No

Is it

politically Engage in marketing,

acceptable to fundraising and grant

contract with non-tribal writing to support

businesses for new Yes the effort. Gather tribal members,

home construction? stakeholders of the nonprofit

and conduct a media blitz. 

No

Connect to tribal economic development, Launch training and education resources for homeownershipfuture contracting with tribal program.businesses and tradespersons. 
Guide to Creating a Nonprofit

Homeownership Entity

16

2.7 Organizational Options

The Shared Visions Initiative encourages tribes to establish independent

nonprofit organizations with the specific mandate of promoting housing

development and homeownership. There are several advantages to this

independent nonprofit organizational model.

Forming a separate organization dedicated to housing development and

homeownership can support the delivery of other housing services by

the TDHE. Unlike the tribal government and TDHE, a new entity will

have a singular and focused mission to develop housing and promote

homeownership. This will enable the TDHE to channel more of its

resources into other areas. A new organization can step in and help

when a TDHE is “spread too thin.”

With a separate identity, the nonprofit organization will operate

independently from the tribal government and TDHE. This will provide

the organization with flexibility in its governance and operations. It also

gives tribal members, prospective homebuyers, funders, and others the

perception that the organization is separate and apart from tribal

government. In some cases, this can be an important benefit. It is

possible to incorporate the organization under the tribal laws, so the

organization would still be part of the tribe in the sense that it is subject

to tribal laws and regulation, but not with any sovereign immunity.

There are several benefits to incorporating as a nonprofit organization, as

outlined in Exhibit 2.2.

Why a Nonprofit?
Guide to Creating a Nonprofit

Homeownership Entity

17

Exhibit 2.2:

Benefits to Incorporating as a Nonprofit Organization

• Corporations provide more legal liability protection for those

involved in the organization, including officers, directors, and

volunteers. Individuals generally will not be personally liable if the

entity is sued. Further, nonprofit corporations can obtain reasonably

priced insurance to protect members of the Board of Directors.

• Nonprofit corporations can apply to become exempt from federal

and state income taxes. If tax-exempt status is granted, the entity will

not have to pay taxes on income earned from the organization’s

activities (e.g., development of properties).

• A tax-exempt nonprofit corporation can receive tax-deductible

contributions. This serves as a great incentive for charitable giving. In

fact, many large corporate donors will not make a gift without

receiving a tax deduction.

• Most public and private grant money is only available to nonprofit

organizations; many funders limit eligibility to those nonprofits that

have been recognized as tax-exempt by the IRS.

• Nonprofit housing corporations do not include profit in their total

development costs and this can lead to lower purchase prices and

greater affordability.

• Going through the process of incorporation can strengthen an

organization. It requires careful planning about the entity’s purpose

and how this purpose will be accomplished.

• Incorporation establishes minimum accountability and standard

operating procedures for management.

• Incorporation helps to formalize decision-making and ownership

among those involved.

• Incorporation can give the group a greater sense of purpose and

legitimacy, to both external and internal stakeholders.

• Incorporation can give the entity greater independence from other

organizations and governmental units.
Guide to Creating a Nonprofit

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18

There are two main ways to form a nonprofit organization in Indian

Country: under tribal law or under state law.

Tribal governments have the power to establish subordinate entities

under tribal law, including government instrumentalities and

corporations. While it is less common for tribes to establish nonprofit

corporations than business corporations or government instrumentalities,

there is no reason why tribes could not provide for the establishment of

nonprofit entities under tribal law.

If a tribe has a corporation code of general applicability, or a Uniform

Commercial Code with a section on corporations, it should be relatively

simple to establish a nonprofit organization under tribal law. If such

codes do not exist, it is still possible to set up a nonprofit through an ad

hoc chartering ordinance specific to the entity being created. In the case

of an ad hoc chartering, it is important that the organization’s

incorporating documents (Charter and Articles of Incorporation) include

certain language. These necessary elements are discussed in further

detail in Section 3.

By incorporating the entity under the tribal laws, the corporation would

be subject to tribal laws and regulation. Depending on individual tribal

law, the organization would most likely not share in the tribe’s sovereign

immunity. This means that the entity would be able to sue and be sued.

The corporation would also have the option of filing with the state as a

foreign corporation and as a charity. This step, while not always

required, may provide several key advantages:

It enables the organization to avoid any argument that it has ventured off

the reservation and is engaged in business without properly filing or

qualifying. This could mean avoiding fines.

• It ensures that the desired name of the organization is available and

permitted (some states do not permit the use of names similar to

those of already established nonprofits).

• It may be necessary if the nonprofit plans to engage in fundraising

efforts off the reservation.

• The nonprofit may be able to obtain a state sales tax exemption

certificate, to avoid sales tax on purchases made off the reservation.

This would create an organization that could apply to the Internal

Revenue Service for tax-exempt status as a 501(c)(3) organization.

Organizational Options

Nonprofit

Corporation Formed

under Tribal Law
Guide to Creating a Nonprofit

Homeownership Entity

19

The tribe could form the nonprofit organization under state law rather

than tribal law. In this case, the entity would not be part of the tribe, but

would operate on tribal land; it would be considered a “foreign

corporation” on the reservation, but a regular corporation off the

reservation. The working group may opt for this route if it desires the

greatest amount of independence, distance, and autonomy from tribal

government. In cases where the tribe lacks a Uniform Commercial Code

and/or corporation code, this option provides the advantage of clearer

protections for the nonprofit.

An organization created under this option would also be able to apply to

the Internal Revenue Service for tax-exempt status as a 501(c)(3)

organization.

The Shared Visions model encourages tribes to use the approach of

incorporating as a nonprofit organization, whether under tribal or state

laws, because this organizational option provides several key benefits, as

outlined earlier. In some circumstances, a different organizational option

will be more desirable due to local conditions and needs. These may

include:

• Unincorporated instrumentality of the tribe

• Corporation chartered under Section 17 of the Indian Reorganization

Act

• Homeownership initiative under the Housing Authority/TDHE

• Each of these options is described in greater detail below.

The tribe may form an unincorporated instrumentality to address housing

development and homeownership issues. Depending on tribal laws and

requirements, such an entity may not have to draft Articles of

Incorporation or apply to the state or IRS for tax-exempt status. As an

instrumentality of the tribe, it would still be able to receive tax-exempt

contributions, and it would share in the tribe’s sovereign immunity.

Setting up an entity under this option is less time-consuming and

complex than creating a nonprofit organization.

The key disadvantage of this option is a lessened sense of independence

(both actual and perceived) from the Tribal Council, the Housing

Authority/TDHE, and other entities. This lack of independence could

undermine the entity’s credibility and may impede financing, fundraising

and popular support.

Nonprofit

Corporation Formed

under State Law

Other

Organizational

Options

Unincorporated

Instrumentality of

the Tribe
Guide to Creating a Nonprofit

Homeownership Entity

20

Under Section 17 of the Indian Reorganization Act of 1934 (the IRA) (25

U.S.C. 477), a tribe may obtain a charter from the Secretary of the

Interior incorporating a federal corporation. Many Section 17

corporations exist, but most have been inactive since creation. This is

the result of the use, in the early years after passage of the IRA, of

standard form corporate charters promulgated by BIA. These charters

were quite restrictive in what a Section 17 corporation could do and

quite expansive in the oversight and approval powers granted to the

Secretary of the Interior. The restrictive nature of the BIA-generated

charters is not required by the statute, and some tribes have adopted

new charters for their Section 17 corporations that are designed to make

those entities useful tools for tribal business activity.

Section 17 corporations are creatures of federal law, but the law

governing their nature, powers and authorities is quite thin. The early

analysis of the nature of Section 17 corporations was that they were

corporate alter-egos of the tribes themselves; that the Section 17 charter

“cloned” the tribe resulting in two parallel entities: a governmental entity

(the federally recognized Indian tribe) and a corporate entity (the Tribe,

Inc.). More recent Section 17 charters describe a corporation established

under federal law but owned by the tribe, more in the nature of a

subordinate entity owned by the tribe rather than an entity on a par with

the tribe. Examples of such charters include:

• Umpqua Indian Development Corporation, whose charter was

issued to the Cow Creek Band of Umpqua Tribe of Indians in

Oregon.

• Coushatta Empire, Inc., whose charter was issued to the Coushatta

Tribe of Louisiana.

• Laguna Construction Company, Inc., whose charter was issued to the

Pueblo of Laguna (New Mexico).

Because there is no general law addressing the structure, powers and

activities of Section 17 corporations, those issues are generally dealt with

in the charter itself. The Section 17 charter spells out the authorized

purposes of the Section 17 corporation, its ability to borrow money, to

encumber its assets, to sue and be sued and to waive its sovereign

immunity, and how autonomous it is from tribal governmental control

or, conversely, which of its actions require approval of the tribal

government—or the Secretary of the Interior—before they can be

undertaken.

Corporation Chartered

Under Section 17 of the

Indian Reorganization

Act
Guide to Creating a Nonprofit

Homeownership Entity

21

A final option is to forego creating a brand-new entity and promote a

housing development and homeownership initiative under the auspices

of existing entities, such as the Housing Authority/TDHE, or tribal

government (e.g., tribal council housing committee or subcommittee).

The clear advantage to this alternative is that the considerable time,

resources, and effort required to set up a new organization are avoided.

The working group can simply partner with an existing entity to launch a

housing development and homeownership initiative. The most obvious

disadvantage of this option is limited independence from other entities.

Further, the working group should study the existing tribal organizations

to determine which one, if any, is an appropriate partner. The partner

organization should have sufficient capacity, or be able to expand its

capacity to take on the housing development and homeownership

initiative.

These organizational options have many implications. Exhibit 2.3

presents the implications for tax liability, application of state law, and

jurisdictions for dispute resolution. Exhibit 2.4 shows the effect on taxexempt contributions, grant eligibility, organizational independence, and

sovereign immunity.

Exhibit 2.3

Overview of Tax and Legal Implications

Federal

Income

Taxes

State Income,

Sales and Use

Taxes

Tribal

Taxes

Application

of State Law

Court

Jurisdiction

Nonprofit organization

chartered under tribal

law, with 501(c)(3)

status

Exempt Possibly

exempt; varies

by state

Depends

on tribe

No Tribal or

federal

Nonprofit organization

chartered under state

law with 501(c)(3) status

Exempt Possibly

exempt; varies

by state

Depends

on tribe

Depends on

state

State court

Unincoporated

instrumentality of the

tribe

Exempt Depends on

state-tribe

agreement

May not

apply,

depends

on tribe

Probably

not

Tribal or

federal

Section 17 corporation Exempt Depends on

state-tribe

agreement

May not

apply,

depends

on tribe

Only with

respect to

activities off

reservation

Tribal or

federal

HA/TDHE Probably

exempt

Possibly

exempt; varies

by state

Depends

on tribe

Probably

not

Tribal or

federal

Homeownership

Initiative Under the

Housing Authority/

TDHE

Summary
Guide to Creating a Nonprofit

Homeownership Entity

22

Exhibit 2.4

Overview of Funding, Independence & Sovereign

Immunity Implications

Tax-Exempt

Contributions

Grant

Application

Eligibility

Independence

from Tribal

Government,

TDHE

Sovereign

Immunity

Nonprofit organization

chartered under tribal

law, with 501(c)(3) status

Yes High High No

Nonprofit organization

chartered under state law

with 501(c)(3) status

Yes High High No

Unincoporated

instrumentality of the

tribe

Probably not Low; higher for

Indian Countryspecific funds

Low Probably yes

Section 17 corporation If obtains

private letter

from IRS

Depends on

charter

Depends on

charter

Yes, if

included in

charter

TDHE/HA Probably not Low; higher for

TDHE-specific

funds

None Depends on

tribe

2.8 Fundraising and Finance1

In the development process for any real estate project, planning is

critical. Determining the type of financing to be used for the project is an

essential piece of the planning process. Housing developers and lenders

often are presented with unique and complex financing structures that

are required to bring most projects to completion. One the other hand,

nonprofits must be knowledgeable of development practices to provide

financial assistance and advice to tribal families that desire to build their

own home.

The complexity of the financing structure is primarily determined by the

type of project that the developer undertakes and what resources are

available in the community to develop the project. In many

circumstances, housing developments, whether homeownership or

rental, require specific funding programs that lower the costs associated

with the development and ongoing operation of the property. The

nonprofit developer must be creative and knowledgeable of all resources

that are available for a specific project, and the restrictions those

resources may have.

Because of its tax status, the nonprofit developer has a toolkit of

development resources and capital that are not typically available to a

traditional real estate developer. These types of capital can include loans
Guide to Creating a Nonprofit

Homeownership Entity

23

from private and public resources, grants from the public and private

sector, and equity in various forms, often through the Low Income

Housing Tax Credit (LIHTC). As most of these financing sources vary

from state to state and within specific communities, it is extremely

important that the developer, sponsor or consultant understand housing

development practices particular to the community or state before

contemplating the development of a property or site.

The nonprofit organization should investigate the types of lenders that

may be available to provide financing to individual homebuyers. These

lenders can include public lenders, private for-profit lenders, and private

nonprofit lenders. The goal of the nonprofit is to match these lenders in

the best possible combination for the project.

Public lenders include tribal, state and local governments (cities,

counties and municipalities) as well as the federal government. Many

state and local programs are the direct result of allocations passed at the

federal and state level to the tribal government. Public lender

participation in the development of affordable housing is critical as these

resources can provide attractive lending terms to the nonprofit

developer. Local jurisdictions can often provide longer term financing

than is available in the conventional market (up to 50 years), below

market interest rate or no interest loans, disappearing (no-pay) second

mortgages on property, and higher loan-to-value ratios than the

conventional market. More specific examples and programs are listed

below and described very generally:

• Indian Community Development Block Grant Program (ICDBG):

ICDBG funds may be used to support nonprofit operating expenses

and housing development costs. ICDBG funds can be in the form of

loans, grants, and loan guarantees. Activities funded by ICDBG funds

include planning, acquisition of real property, rehabilitation of

residential and nonresidential property, provision of public facilities

and improvements, and assistance to for-profit businesses to help

with economic development activities. Many ICDBG communities

use these funds to provide low-or no-interest property acquisition,

construction and/or permanent financing for affordable housing

development and/or homeownership. Sponsors must check with

their tribe or TDHE to determine the availability of ICDBG funds for

nonprofit housing development and homeownership.

• HOME Program: HOME was designed to stimulate the formation of

creative local, state and federal partnerships for the purpose of

meeting community development housing needs, targeting resources

toward community-based nonprofit developers. HOME provides

Loans and Lenders
Guide to Creating a Nonprofit

Homeownership Entity

24

resources to communities so that tenants and other low-income

families can purchase public housing, troubled federally-subsidized

rental housing, and single family government housing.

HOME also provides federal grant funds to the states and various sectors

of local government to implement local housing strategies that are

targeted toward increasing homeownership and affordable housing

opportunities for low- and very low-income residents. HOME funds can

be utilized in a broad array of strategies to meet the needs of the local

community including loans, grants, interest rate subsidies, and equity.

Additionally, HOME funds can be used for property acquisition, site

development work, demolition, rehabilitation, new construction,

relocation of housing, and other necessary and reasonable activities

related to the development of HOME-eligible housing including tenantbased rental assistance and assistance for first-time home buyers. HOME

funds are restricted to specific income levels depending upon the type of

property developed with these funds and have matching requirements.

Depending upon location, matching requirements may vary.

HOME funds are available for projects that meet a need identified

in the state’s or region’s Consolidated Plan. Consolidated Plans are

prepared every five years and since most were prepared when

Indian Home was still in existence, many states do not permit

HOME funds on tribal land. It is important for tribes and TDHEs to

be involved in the next Consolidated Planning process to

encourage the state to invest HOME funds on tribal land.

• Bonds issued by state and local governments can provide valuable

resources to the nonprofit developer of affordable housing. Bonds

typically provide the permanent financing for the project. Bonds also

can be used to cover the construction/ rehabilitation period on a

project, if these activities are clearly defined within the financing

documents.

The issuance costs for bonds can be substantial. The nonprofit will

need to thoroughly consider these issues when looking at the overall

cost of developing the project. The credit enhancement of the bond,

provided by a commercial lending institution or governmental entity,

will also be an additional cost to the project.

Bond issues will be specific to local and state guidelines. Affordable

housing developments can be financed by various types of bond

issues, including taxable and tax-exempt entities, mortgage revenue,
Guide to Creating a Nonprofit

Homeownership Entity

25

general obligation and private activity bond issues. Bond structures

can be inordinately complex and the developer should be

adequately represented by knowledgeable professionals when

looking into these types of financing structures.

• Other Federal Programs available to the non-profit housing

developer include: Section 202 (supportive housing for the elderly),

Section 811 (supportive housing for people with disabilities),

Homeless SuperNOFA, Rural Housing Development, and other

sources.

• Housing Trust Funds: Over 100 states, cities, and counties have

Housing Trust Funds which are dedicated sources of funds for

affordable housing development. These funds typically are

governmentally created and have on-going revenue from a source

(often fees related to real estate transactions) that does not require

annual approval. Funds are typically distributed by a governmental

agency with input from a broad-based Advisory Board.

Commercial Banks typically provide shorter-term market rate loans to

the nonprofit organization. These loans would include acquisition, site

development and construction loans. Commercial banks are also minipermanent (“mini-perm”) lenders typically structuring three to five year

term loans, with longer amortization periods (15 to 30 years).

Savings and Loans (S&L) and Thrifts historically have been the primary

providers of permanent financing for homeowners. Another product

unique to S&Ls is their ability to access funds from the Federal Home

Loan Bank system to establish affordable housing programs. The

Community Investment Program (CIP) is a non-competitive program that

allows any member of the FHLB system to borrow funds on a permanent

basis at below market rates.

Additionally, the Affordable Housing Program (AHP) provides resources

to developers in a competitive round program, with priority given to

nonprofit and tribal developers. These resources can be used to “buy

down” the interest rates or act as a direct grant to the project to make it

affordable to very low-income households.

Private Nonprofit Lenders would include such organizations as the

following:

• The Enterprise Foundation is a nonprofit intermediary organization

whose mission is to see that all people have access to decent and

affordable housing and can move up and out of poverty. The
Guide to Creating a Nonprofit

Homeownership Entity

26

Foundation provides resources to communities through its loan fund,

providing primarily predevelopment and acquisition loans, as well as

technical assistance to address organizational needs, physical

development issues, and community services. The Foundation’s

subsidiary organizations include: The Enterprise Social Investment

Corporation (ESIC), a syndicator of the Low Income Housing Tax

Credit; Enterprise Mortgage Investments (EMI), Enterprise Senior

Ventures; and other developing organizations established to assist

the nonprofit organization in the revitalization of its community. The

Foundation currently has offices in 16 cities across the country, an

office for Native American projects in Albuquerque, New Mexico

and a network of over 700 nonprofit organizations.

• Local Initiative Support Corporation (LISC) works with Community

Development Corporations (CDC’s) to help local people rebuild and

revitalize deteriorated neighborhoods across America by providing

loans, grants, and technical assistance to groups. LISC currently has

programs in 30 cities.

• National Community Development Initiative (NCDI) works through

a consortium of funders that include large national commercial

banks, private foundations, and corporations. NCDI provides

resources to CDC’s through the Enterprise Foundation and LISC to

approximately 23 cities across the country. This consortium has

made available approximately $90 million available to CDC’s since

its inception in 1991. NCDI was designed to increase and support

the role of CDC’s nationwide.

• The McAuley Institute provides financial assistance and technical

assistance to affordable housing projects across the country through

its revolving loan fund. The Institute makes interim short-term loans

with a maximum length of five years not to exceed $200,000. Loans

must be fully collateralized by real estate, loan-to-value ratios can

not exceed 80% and debt service ratios must be at least 1.2/1.0

• The Low Income Housing Fund (LIHF) provides an array of

programs to nonprofit housing developers to serve low income

residents. These include direct lending, providing direct loans,

packaging loans, and providing interest rate subsidies. LIHF provides

working capital loans, lines of credit on a limited basis, and nonhousing loans for nonprofit facilities.

• National Association of Community Development Loan Funds

(NACDLF) was established in 1986 to serve as a financial

intermediary. NACDLF works through its member organizations to
Guide to Creating a Nonprofit

Homeownership Entity

27

pool resources and provide loans for community development and

low-income housing. NACDLF provides loans up to $350,000 to

nonprofit housing organizations.

• Other resources which should be investigated by the nonprofit

developer include Community Development Financial Institutions,

local community land trusts, national nonprofit foundations, and

other local community foundations.

Each of these organizations can be contacted individually to gain a

better understanding of the types of products they offer the nonprofit

developer. Please refer to the Appendices for contact information.

Federal Grant programs that promote development of affordable housing

include:

• Hope for Youth: Youthbuild

• Enterprise Zone Homeownership Opportunity grants

• Low-Income Housing Preservation and Resident Homeownership

(LIPRHA)

• Supportive Housing for the Elderly: Section 202

• Housing for Persons with Disabilities: Section 811

• Rural Housing Service Single Family Housing Program and Rural

Rental Housing

• Developing Emergency Shelters for the Homeless

• Supportive Housing Demonstration Program-Traditional Housing

Component

• Developing Permanent Housing for the Homeless

Each of these programs requires the nonprofit to understand the

regulatory requirements to participate in these very specific grant

programs.

Private Nonprofit Foundations, both on a local and national basis can

be an excellent source of grant funding for the nonprofit housing

developer. Local community foundations are typically more targeted

toward improving a specific community or area. The Foundation Center

publishes The Foundation Directory that lists foundations with assets

over $2 million or annual contributions in excess of $200,000. The

directory identifies which foundations are community foundations.

In 1986, Congress established the Low Income Housing Tax Credit

(LIHTC). Tax credits are specifically defined as tax benefits, granted to

organizations for engaging in qualifying low income or historic

preservation projects. Organizations can purchase tax credits on behalf

Grants

Equity
Guide to Creating a Nonprofit

Homeownership Entity

28

of a project and receive a dollar-for-dollar tax benefit while the funds are

used as equity for the project.

Through the 1986 Tax Reform Act, the LIHTC acts to reduce the tax

liability of the taxpayer dollar-for-dollar. As opposed to a tax deduction,

which reduces the net taxable income of the taxpayer, the tax credit is

applied directly to the tax liability. This vehicle has been directly

responsible for bringing significant corporate investors and wealthy

individuals into the investment arena for the development of affordable

housing through their purchase of these credits. These investments

typically act as source of equity in the development process. Calculating

the value of individual credits related to a particular project must be fully

understood by the nonprofit that ventures into the tax credit arena.

Additionally, the project itself will have certain requirements and

standards that will need to be met on a LIHTC property. These include

low- income usage, rent restrictions on low-income units, and a

specified compliance period for the property (typically 15 years). The

LIHTC can be used to develop a range of properties, including rental

housing, single-room occupancy housing, and certain homeless housing

developments.

Once a nonprofit developer reaches the point that the tax credits are

awarded to the site, they can negotiate how the equity will flow into the

property with its partners and investors in the transaction. Many

nonprofits will utilize this equity in their project to leverage other

resources necessary to keep the project moving forward.
Guide to Creating a Nonprofit

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3.0 First Steps to Creating a Nonprofit

Organization

3.1 Introduction and Overview of Steps to

Establishing a Nonprofit

The creation of a nonprofit organization is a multi-step process involving

many decisions, documents, and players. This section outlines the initial

steps to incorporating as a nonprofit entity, either under tribal or state

law.

Once the working group has determined that it should form a nonprofit

and has generated a vision statement, strategic plan, and business plan,

the group should:

• Prepare Articles of Incorporation

• Adopt Articles of Incorporation

• File Articles of Incorporation with tribal government and/or have

tribal government charter organization

• File Articles of Incorporation with the state’s Secretary of State (if

necessary/warranted)

• Draft and approve organizational bylaws

Each of these steps is described below.

3.2 Articles of Incorporation

The purpose of the organizational charter or Articles of Incorporation is

to establish the name and purpose of the nonprofit organization, as well

as any limitations on its activities.

A sample Articles of Incorporation is included in Appendix 3.2. The

document should include the following elements:

• Names and addresses of incorporators – The incorporators are

individuals who sign the Articles of Incorporation. Being an

incorporator has no particular legal significance, but generally they

are individuals involved in the creation of the nonprofit entity. The

number of incorporators required varies by state law.

Purpose
Guide to Creating a Nonprofit

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• Name and address of registered agent – The registered agent is the

person who receives formal communications (e.g., notices from the

Internal Revenue Service) on behalf of the corporation.

• Statement of exempt purpose – Nonprofit organizations must have

an “exempt” purpose, establishing that they are organized and

operated exclusively for charitable, religious, scientific, literary (and

a few other) purposes. In most cases, a nonprofit that promotes

affordable housing and homeownership is organized for charitable

purposes.

• Statement prohibiting private inurement – Nonprofit organizations

cannot engage in "private inurement," i.e., distribute assets or profits

to individuals for personal purposes.

• Statement prohibiting lobbying – The IRS will not exempt from taxes

any organization that engages in substantial political lobbying.

• Duration – The duration of most nonprofits is perpetual.

• Statement of indemnification of directors and officers – If a director is

indemnified, and if he or she is sued for something he or she did on

behalf of the organization, then the organization pays the director's

associated expenses (e.g., legal fees and judgments). Usually,

indemnification only protects a director if the organization has the

money needed to pay the director's expenses.

• Distribution of assets upon dissolution – In the event that the entity is

dissolved, outline the procedure for distribution of organization’s

assets.

Early on, the working group should have identified which tribal laws,

codes, and/or ordinances might impact the creation and operation of

nonprofit organizations on the reservation. When forming a nonprofit it

is important to be aware of all the laws that may impact a new entity. In

many cases, however, the tribe will not have a comprehensive governing

law on corporations. In this case, it is important to include specific

language in the Articles of Incorporation, as outlined in Exhibit 3.1

below:

Language
Guide to Creating a Nonprofit

Homeownership Entity

31

Figure 3.1

Language for Articles of Incorporation

Language for Articles of Incorporation

Needed even

if tribal

corporation

code exists

Needed if no

tribal

corporation

code exists

Name and duration of corporation ✔

Corporation is organized and operated exclusively for charitable

and educational purposes permitted by Section 170(c)(2) and

501(c)(3) of IRS Code

✔

Detailed purposes of corporation, including general business

procedures (e.g., “enter into contracts, partnerships, joint

ventures,” “solicit, hold, use, invest, and dispose of money,

personal property,” “incur debt obligations”)

✔

No private inurement ✔

Registered agent, incorporator(s) ✔

Provision for Bylaws ✔ ✔

Provision for governing Board of Directors ✔ ✔

Description of the procedures for voluntary and involuntary

dissolution of the organization

✔

Distribution of assets after dissolution ✔

Indemnification of directors, officers, employees, and agents ✔

Amendments to Articles of Incorporation and Bylaws ✔

3.3 Bylaws

Bylaws are the organization's primary governing document. They

establish the rules by which the nonprofit will conduct business. They

outline details such as how officers and directors will be elected or

appointed, how board meetings will be conducted, and what

responsibilities officers will have.

Bylaws are usually adopted at the first meeting of the Board of Directors,

which is held after filing the Articles of Incorporation. Usually, states do

not require filing of Bylaws to form a corporation; the IRS requires

bylaws to be included in the application for tax-exempt status only if

they exist.

A sample bylaws document is in Appendix 3.2. Elements of the bylaws

include:

• The name of the organization

• The mission of the organization

• The geographic area served by the organization
Guide to Creating a Nonprofit

Homeownership Entity

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• Membership, if any (responsibilities, dues, quorum, voting

procedure)

• Board of Directors (duties, officers, meetings)

• Committees

• Rules of order

• Fiscal year of operation

• Procedures for amending the bylaws
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4.0 Applying to the IRS for 501(c)(3)

Recognition

Once the organization has conducted its needs analysis and has been

incorporated, the next step is to apply for tax-exempt status from the

Internal Revenue Service (IRS). This chapter will give an overview of the

501(c)(3) application process, including an explanation of what 501(c)(3)

means, advantages and disadvantages, who qualifies, and tips on how to

complete the application packet. Please note that this chapter will not

provide everything needed to apply to the IRS for 501(c)(3) status; the

organization will need to become familiar with the IRS materials on tax

exemption. The process of applying for tax exempt status is a legal

process, and it is highly advisable to obtain legal counsel to assist the

organization. This chapter does not present itself as legal advice.

An organization with a 501(c)(3) tax exemption from the Internal

Revenue Service is exempt from payment of federal taxes. The term

“501(c)(3)” refers to the section of the IRS Tax Code that governs these

organizations.

There are many advantages to having this tax-exempt status:

Exemption from taxes. Organizations that are exempt from payment of

corporate income tax can save substantial amounts, particularly since

federal corporate tax rates are 15 percent on the first $50,000 of taxable

income, 25 percent on the next $25,000 and 34 percent and higher on

income over $75,000.

Grant eligibility. Most grant funds that are available from foundations

and charities are only open to IRS 501(c)(3) nonprofit corporations.

Tax-deductible contributions. Donations made to organizations with a

501(c)(3) tax exemption are tax-deductible to the donor. This makes

giving more attractive to potential donors, particularly when they have

several charitable organizations to choose from, most of which will have

the 501(c)(3) tax exemption.

Discounts. 501(c)(3) organizations also qualify for many discounts, such

as:

• Lower postal rates on bulk mailings

• Cheaper Internet access or space from Internet service providers

• Lower classified rates from newspapers and other publications

What it Means

Advantages
Guide to Creating a Nonprofit

Homeownership Entity

34

• Lower membership fees for wholesale stores (such as Price Club)

• Access to free radio and television public service announcements

There are also drawbacks to being a 501(c)(3) organization.

Resources required for application process. It takes time and money to

incorporate and apply to the IRS for 501(c)(3) status. Many documents

must be prepared, and it is advisable to have an attorney review these.

The application cost for 501(c)(3) is $500.

Subject to rules. After incorporation, the organization is subject to tribal

and/or state rules, depending under which authority it has incorporated.

Once the corporation files for federal tax-exemption, it is subject to

federal government rules.

Annual filing requirements. After incorporation, the organization must

file annual tax returns and perform the other record-keeping and

reporting chores associated with ongoing corporate activities, such as

double-entry accounting and payroll tax withholding and reporting.

Knowledge. The process requires a minimum knowledge of laws related

to charitable organizations, at the tribal, state and federal level. If the

organization does not have this knowledge, it is highly advisable to

involve people who do, such as attorneys and accountants.

There are certain requirements for qualifying for this tax exemption. In

order to qualify for exemption from federal income tax, an organization

must be operated exclusively for an exempt purpose, which includes:

charitable, religious, scientific, literary, testing for public safety, fostering

national or international amateur sports competition, or the prevention

of cruelty to children or animals. In the case of a nonprofit promoting

housing development and homeownership, the exempt purpose would

be charitable.

As used in Section 501(c)(3) of the tax code, charitable is broadly

defined as “providing services beneficial to the public interest.”

Examples of charitable activities and purposes from IRS regulations

include lessening the burdens of government, combating community

deterioration, providing assistance to low income families.

There are a couple of ways that housing organizations can qualify as

charitable as defined in Section 501(c)(3). The IRS has released a

revenue procedure that sets forth a safe harbor under which

organizations that provide low-income housing will be considered

charitable because they relieve the poor and distressed. However, this

Disadvantages

Who Qualifies

Qualifying as Charitable
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35

clause has many income restrictions in terms of the population served.

For example:

• At least 75 percent of the organization’s housing units must be

occupied by residents that qualify as low-income, and

• Either (1) at least 20 percent of the units must be occupied by

residents that also meet the very low-income limit for the area or (2)

40 percent of the units are occupied by residents that also do not

exceed 120 percent of the area’s very low-income limit.

These restrictions limit the activities of the organization and may prove

onerous, particularly in the promotion of homeownership. To qualify for

a mortgage, the homebuyer must have a particular level of income,

which may exceed the limits set forth above. This would severely restrict

the nonprofit’s ability to engage in homeownership programs.

A less restrictive way for housing organizations to qualify as charitable is

to make the case for another exempt purpose, including:

• Combating community deterioration. According to the IRS, an

organization that combats community deterioration must operate in

an area with actual or potential deterioration, and directly prevent or

relieve that deterioration. Constructing or rehabilitating housing has

the potential to combat community deterioration.

Most reservations are subject to deterioration, either actual or

potential. The development of new housing for homeownership or

the rehabilitation of existing housing stock would qualify as an

exempt and charitable purpose, thus making the nonprofit engaging

in these activities eligible for 501(c)(3) status.

• Lessening the burdens of government. An organization lessens the

burdens of government if there is an objective manifestation by the

governmental unit that it considers the activities of the organization

to be the government’s burdens, and the organization actually

lessens the government’s burdens.

Since the majority of housing on Indian reservations is provided by

the federal government, the promotion of homeownership and the

provision or rehabilitation of housing clearly lessens the burdens of

government. One of the main components of the homeownership

program laid out in this guide is to leverage private dollars from the

mortgage industry, using a small amount of public funds. By

Charitable Housing

Organizations
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36

involving the private sector in the provision of housing on

reservations, such a program would lessen the burdens of

government.

The IRS considers all 501(c)(3) nonprofit corporations as private

foundations unless it is notified that the corporation is in fact a public

charity. It is much more desirable to be considered a public charity than

a private charity due to the greater flexibility and benefits associated

with this status. To qualify as a public charity, the organization must

prove that it is publicly supported, by passing the one-third support test

or the facts and circumstances test.

Under the one-third support test, an organization is considered publicly

supported if it normally receives one-third of its total support from

governmental units, from contributions made directly or indirectly by the

general public, or from a combination of these sources.

If an organization fails the one-third support test, it may qualify under

the facts and circumstances test. One way is if the total amount of

governmental and public support normally received is at least 10

percent of the total support normally received. Another way is if the

organization is organized and operated in a manner to attract new and

additional public or governmental support on a continuous basis.

If the organization desires to seek 501(c)(3) status, it is ready to begin

preparing the IRS application:

• Have Articles of Incorporation been prepared?

• Is the organization incorporated under tribal or state law?

• Have bylaws been adopted, if applicable?

• Does the organization have a clear sense of the proposed activities?

• Does the organization have a clear sense of its finances, including

budget projections for the next three years?

If the IRS application is filed within 15 months of the incorporation date,

the organization’s tax-exempt status becomes effective as of the date of

incorporation. If the organization applies after operating for more than

15 months, the exemption applies as of the date that the IRS received the

application.

Also note that if the organization has been in operation for less than 8

months, it will request an “advance ruling” from the IRS. This advance

ruling is good for five years, during which period the organization will

be treated as a public charity. After five years, the organization must

submit financial data to the IRS to show that it is indeed a public charity.

Public Charity

Preparing the

Application
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Preparing the 501(c)(3) application:

• Obtain necessary IRS forms

• Write description of organization’s activities

• Write organization’s fund-raising plan

• Prepare Balance Sheet and Statement of Revenue and Expenses

• Complete IRS Form 1023 – Application for Recognition of TaxExemption under Section 501(c)(3) of the Internal Revenue Code

Before the organization is chartered, think carefully about its name. To

avoid confusion, it is advisable to choose a name that is not too similar

to a pre-existing organization. It is also helpful to avoid use of certain

words; for example, the term “partnership” used in the name of an

organization can be interpreted as a legal term, signaling that you are a

limited liability partnership rather than a nonprofit corporation.

See Chapter 3. The IRS wants a “conformed copy” of the Articles,

meaning a version that reflects the original language plus all

amendments.

The organization must be incorporated or chartered. Take care that the

organization is incorporated under tribal law. The IRS issued a general

information letter to the First Nations Development Institute stating that a

corporation organized under tribal law could qualify for tax exemption

as an organization described under section 501(c)(3). To qualify, the

organization must be regarded as separate from the tribal government.

According to the IRS, a “corporation” is “a business entity created under

a statute of a federally recognized Indian tribe, if the statute describes or

refers to the entity as incorporated or as a corporation, body corporate,

or body politic.”

See Chapter 3. Bylaws are not required to create or charter a

corporation, but you desire to choose at the outset to write bylaws to

govern the organization.

The organization will need to obtain:

• Publication 557 (Tax-Exempt Information)

• IRS Form 1023 and Instructions (Application)

• Form 8718 (User Fee)

• Form 872-C (Advance Ruling)

• Form 2848, Power of Attorney (optional)

Choose Name

Prepare Articles of

Incorporation

Incorporate

Organization

Adopt Bylaws

Obtain IRS Forms
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These may be obtained at a post office, by mail, or on the Internet at

www.irs.ustreas.gov. If the organization does not have an employer

identification number (EIN), it will also need Form SS-4, Application for

Employer Identification Number. One quick way to obtain this number

is to apply by telephone, calling the number given in the form’s

instructions. After completing the form, call and wait for the

organization’s number. Then simply mail the original form within 24

hours.

Publication 557 provides extensive information on tax-exemption; IRS

Form 1023-Application for Recognition of Tax Exemption under

Section 501(c)(3) of the Internal Revenue Code is the actual form that

the organization must complete. Before beginning to compile

information or attempt to complete Form 1023, read the form and its

instructions thoroughly, in addition to Publication 557. This will give a

good sense of what to expect.

To apply for 501(c)(3) status, the organization must also file a user fee of

$500. Send a check along with Form 8718.

If the organization has been in operation for less than 8 months, it will

need to request an advance ruling through Form 872-C. As noted earlier,

if the IRS grants an advance ruling, the organization will be treated like a

public charity for five years. At the end of this period, the organization

will submit financial data to the IRS to show that it is indeed a public

charity.

The organization has the option of delegating power of attorney to

another party. The IRS examiner who handles the organization’s case

will contact this person directly with questions or requests for further

information. This may be especially helpful if the case has particular

legal details that the organization is not completely clear on. It may also

prove helpful if the IRS examiner assigned to the case is unfamiliar with

nonprofit corporations chartered by Indian tribes.

If the organization elects to do this, it will need to complete and submit

Form 2848, Power of Attorney and Declaration of Representative. In

any case, whether the organization delegates power of attorney or not, it

is a good idea to have legal counsel to advise you in the application

process.

The first section of IRS Form 1023, Identification of Applicant, is fairly

self-explanatory. Line 1c asks for a street address; some applicants on

Indian reservations may not have a street address, and may use a P.O.

Box, indicating no street address is available.

Complete Part I
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IRS Form 1023, Part II, Question 1 asks the organization to provide a

detailed narrative description of all the organization’s activities past,

present, and planned. List each activity separately in the order of

importance based on the relative time and other resources devoted to

the activity, indicating the percentage of time for each activity. The IRS

asks that each description should include, as a minimum:

a) A detailed description of the activity, including its purpose and how

each activity furthers the organization’s exempt purpose

b) When the activity was or will be initiated

c) Where and by whom the activity will be conducted

The purpose of this section is to enable the IRS to make a proper

determination of the organization’s exempt status. Therefore, it is

important to explain thoroughly and clearly the organization’s activities

– proposed or actual. If there is insufficient space on the form, use extra

sheets as attachments. Label these with the name of the organization,

address, EIN, attachment number, and page number.

Page 3, “Activities and Operational Information continued,” asks for

basic information on the organization’s governing body. Line 4b asks for

annual compensation of the officers, directors, or trustees. If the

organization is providing its directors with a stipend or reimbursement

for travel and related expenses, be sure that these are in line with local

costs.

Line 4c asks if any of the organization’s officers, directors, or trustees

serve as members of the governing body by reason of being public

officials or being appointed by public officials. An affirmative answer

does not necessarily signal a conflict of interest; rather, it indicates

public interest in and support for the organization, building the case for

its exempt purpose.

IRS Form 1023, Part II, Question 2 asks for a description of the

organization’s fundraising program, both actual and planned, and to

explain to what extent it has been put into effect. Include details such as

selective mailings, formation of fundraising committees, use of

volunteers or professional fundraisers, etc. The IRS also asks that the

organization attach representative copies of solicitations for financial

support.

Write Description of

Activities

Complete Part II

Write Fund-raising

Plan
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IRS Form 1023, Part IV requires financial statements, including a balance

sheet and a statement of revenue and expenses. If the organization has

not been in operation long enough to have this type of financial data, the

IRS requires the organization to include financial projections for two

fiscal year accounting periods.

Before beginning to prepare these financial statements, read the

accompanying instructions carefully, as they will not always correspond

with the traditional way organizations record their revenues and

expenses. For example, line 1 asks for “gifts, grants, contributions

received” yet the instructions indicate that the organization should not

include in contributions from the general public or a governmental unit

for the performance of the organization’s exempt function. It is highly

advisable to have an accountant or bookkeeper complete this form, or at

least check the work.

Review the application packet for errors, inconsistencies or omissions. It

is often helpful to ask a third party to review the materials, as this person

may have “fresher eyes” than those who have been working on the

application.

Be sure to make copies of the entire application for your records before

it is mailed to the IRS. This includes all the forms, attachments, and the

user fee check.

The IRS will acknowledge receipt of the application. An IRS examiner

may contact the organization or its attorney with a request for further or

clarifying information. It can take anywhere from several weeks to

several months to obtain a ruling. The more complete and clear the

application is, the fewer questions the IRS will have, increasing the

likelihood of obtaining a timely approval.

Prepare Financials

Submitting the

Application
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5.0 Development of a Nonprofit Organization

5.1 The Board

The Board of Directors is the governing body of the nonprofit

organization. It makes decisions, sets policies, and plans to ensure the

organization’s success. Members of the Board are often called Directors

or Board members; these terms are synonymous.

Ten Key Duties of the Board1

1. Determine the Organization’s Vision and Purpose: The Board of

Directors is responsible for developing the organization’s vision or

mission statement. This statement should articulate the

organization's goals, means, and primary constituents served. Each

individual Board member should fully understand and support it,

and the Board should periodically review it for accuracy and

validity.

2. Select the Executive: The Board must reach consensus on the chief

executive's job description and undertake a careful search process to

find the most qualified individual for the position.

3. Support the Executive and Evaluate Performance: The Board should

ensure that the chief executive has the moral and professional

support needed to further the goals of the organization. The chief

executive, in partnership with the entire Board, should decide upon

a periodic evaluation of the chief executive's performance.

4. Ensure Effective Organizational Planning: As stewards of an

organization, the Board must actively participate with the staff in an

overall planning process and assist in the implementation of the

plan's stated goals.

5. Ensure Adequate Resources: One of the Board's most important

responsibilities is to provide adequate resources for the organization

to fulfill its vision. The Board should work in partnership with the

chief executive and development staff, if any, to raise funds from all

available sources.

6. Manage Resources Effectively: The Board, in order to remain

accountable to its donors, tribal members, and to safeguard its taxexempt status, must assist in developing the annual budget and

ensuring that proper financial controls are in place. The Board also
Guide to Creating a Nonprofit

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42

should review periodic (monthly) financial reports and provide

guidance to the chief executive on project revenues and

expenditures.

7. Determine and Monitor the Organization’s Programs and Services:

The Board should determine which programs are the most consistent

with the organization's mission and monitor their effectiveness.

8. Enhance the Organization’s Public Image: The Board is the

organization's primary link to the community, including

homebuyers, tribal members, the public, funding entities, and the

media. The Board, as a body and as individuals, should be able to

clearly articulate the organization's vision, accomplishments, and

goals to the public and gain support from important members of the

community.

9. Serve as a Court of Appeal: The Board must serve as a court of

appeal in personnel matters. Solid personnel policies, grievance

procedures, and a clear delegation to the chief executive of hiring

and managing employees will reduce the risk of conflict.

10. Assess its own Performance: By evaluating its performance in

fulfilling its responsibilities, the Board can recognize its

achievements and reach consensus on which areas need to be

improved.

There are three major responsibilities of Board members—duty of care,

duty of loyalty, and duty of obedience.

Duty of Care2

Under the duty of care, a director must be familiar with the

organization's finances and activities and participate regularly in its

governance. In carrying out this duty, directors must act in "good faith"

using the "degree of diligence, care, and skill" which prudent people

would use in similar positions and under similar circumstances.

In exercising the duty of care, responsible Board members should,

among other things, do the following:

• Attend Board meetings regularly and actively participate in

discussions and decision-making. Board members should strive for

cohesion and agreement in all deliberations.

Roles and

Responsibilities
Guide to Creating a Nonprofit

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43

• Stay fully informed with changing conditions, needs and

opportunities that exist in the community.

• Read the minutes of meetings and all reports, including financial

reports. Also, read reports prepared by employees and outside

professionals, and have a general knowledge of the information

contained in those reports.

• Read any literature produced as part of the organization's programs.

• Make sure that the Board spends some of its time on “visioning” and

strategic planning.

• Insure that the organization has proper financial controls and

policies to safeguard, promote and protect the organization's funds

and other assets.

• Engage in careful oversight of the organization's finances.

• Question any activity or transaction that is unclear or troubling.

• Encourage diversity among Board members. Diversity will help

ensure a Board committed to serve the organization's vision with a

range of appropriate perspectives, skills, and interests.

• Be involved in the selection and compensation of the

organization'sThe Board also s and other key employees responsible

for its the day-to-day activities. The Board is responsible for such

individuals having the appropriate education, skills, and experience

to assume a key position.

• Be familiar with all issues addressed by the Board. Ask for additional

information if any issue is not clear.

Duty of Loyalty3

Directors must place the interest of the corporation above any private

interests. This duty of loyalty requires that any conflict of interest, real or

possible, be disclosed to the Board. Board members must avoid

transactions in which they or their family members benefit personally to

the detriment of the organization.

In order to exercise the duty of loyalty, the Board must be careful to

examine all transactions that involve Board members or members of
Guide to Creating a Nonprofit

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44

their families. The Board must not approve any transaction that serves a

private interest at the expense of the interests of the corporation.

It is recommended that a Board have a written “conflicts of interest

policy” so that all members are aware of the type of transactions that

may prohibit them from joining a Board. Some such policies require that

members of the Board disclose all possible conflicts and prohibit Board

members from engaging in any transaction that may result in even the

appearance of a conflict of interest.

Duty of Obedience4

The duty of obedience is an obligation to carry out the organization's

vision and comply with the law. The Board has a duty of obedience to

insure that the organization fulfills its purposes. These include the

following:

• Dedicating the organization's resources to its vision statement.

• Ensuring that the corporation carries out its purposes and does not

engage in unauthorized activities.

The Board also has a duty to comply with all appropriate laws,

including:

• Reporting to tribal council or other tribal government entity, as

required by tribal law.

• Registering with and reporting to the Attorney General or Secretary

of States’ Office or other relevant state office, as required by state

law (if applicable).

• Paying all taxes such as payroll and unrelated business tax.

• Providing copies of its financial report to members of the public who

request it.

• Maintaining complete and accurate records.

• Complying with registration and reporting laws and other applicable

laws of all states in which it conducts activities and/or solicits

contributions.
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• If a 501(c)(3), complying with all provisions of the IRS Code,

including those that govern compensation and disclosure so as not to

subject the organization to "intermediate sanctions."

By common definition, serving on a nonprofit Board is a volunteer

commitment. Tying compensation with service may raise issues that

should be studied carefully. There are circumstances when reasonable

compensation is acceptable, but it is always critical that Board service

neither leads to personal gain nor violates the public trust.

Generally speaking, compensation of Board members is rare. A survey of

more than 1,000 nonprofit organizations conducted by the National

Center for Nonprofit Boards found that only one percent of organizations

paid Board members a fee or honorarium for Board service. For a

majority of that one percent, the fees were nominal. However, in Indian

Country, Board member compensation appears to be more common.

While rare, Board member compensation is not illegal. Reasonable fees

for service are allowed if it is clearly stated in the bylaws or the majority

of the Board has so determined. Compensation can make it possible for

individuals of very limited financial means to participate in Board

service.

According to the tenets of nonprofit law, directors and officers should

not make any monetary profit from the organization; they should not

benefit in any personal way. Paying a fee in specific circumstances can

be defended, but fees that are out of scale with the market price of that

good or service are always unacceptable. Unreasonable compensation

can be a cause for a fine or for the organization to lose its tax-exempt

status.

Conflict of Interest5

Board service in the nonprofit sector carries with it important ethical

obligations. Nonprofits serve the broad public good, and when Board

members fail to exercise reasonable care in their oversight of the

organization they are not living up to their public trust. In addition,

Board members have a legal responsibility to assure the prudent

management of an organization's resources. In fact, they may be held

liable for the organization's actions. A 1974 court decision known as the

"Sibley Hospital Case" set a precedent by confirming that Board

members can be held legally liable for conflict of interest because it

constitutes a breach of their fiduciary responsibility.

Conflict of interest does not involve only financial accountability. It

Compensation
Guide to Creating a Nonprofit

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relates broadly to ethical behavior, which includes not just legal issues

but considerations in every aspect of governance. A recent statement by

Independent Sector, an organization dedicated to promoting

philanthropy and volunteerism, describes three levels of ethical

behavior:

• Obeying the law.

• Decisions where the right action is clear, but one is tempted to take

a different course.

• Decisions that require a choice among competing options.

The third level of behavior can pose especially difficult ethical dilemmas

for nonprofit Board members.

To prevent conflict of interest situations, the Board should institute

self-monitoring. This should include a system of checks and

balances to circumvent actual or potential conflict of interest,

beginning with well-defined operating policies on all matters that

might lead to conflict. Most important, the Board should create

and approve a carefully written conflict of interest policy based on

the needs and circumstances of the organization as illustrated in

Exhibit 5.1. Each Board and staff member should agree in writing

to uphold the policy. Finally, the conflict of interest policy should

be reviewed regularly as part of Board self assessment.

Exhibit 5.1

Essential Elements of a Policy on Conflict of Interest

1. Full Disclosure

Board members and staff members in decision-making roles should

make known their connections with groups doing business with the

organization. This information should be provided annually.

2. Member Abstention from Discussion and Voting

Board members who have an actual or potential conflict of interest

should not participate in discussions or vote on matters affecting

transactions between the organization and the other group.

3. Staff Member Abstention from Decision-making

Staff members who have an actual or potential conflict should not be

substantively involved in decision-making affecting such transactions.
Guide to Creating a Nonprofit

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Attorneys, accountants, and other professionals can contribute valuable

expertise to a Board. Due to the potential for conflict of interest, their

contributions should be voluntary. At the very least, a Board member

who is associated with a firm competing for a contract should abstain

from discussion and voting in the selection process. If a competitive

bidding process results in the selection of that Board member's firm, he

or she should disclose the affiliation and abstain from voting on future

Board actions connected with that firm's contract with the organization.

Individual members of the Board have the responsibility to:

• Attend all Board and committee meetings and functions, such as

special events.

• Be informed about the organization's vision statement, services,

policies, and programs.

• Review agenda and supporting materials prior to Board and

committee meetings.

• Serve on committees and offer to take on special assignments.

• Make a personal financial contribution to the organization, if able.

• Inform others about the organization.

• Suggest possible nominees to the Board who can make significant

contributions to the work of the Board and the organization.

• Keep up-to-date on developments in the organization's field.

• Follow conflict of interest and confidentiality policies.

• Refrain from making special requests of the staff.

• Assist the Board in carrying out its fiduciary responsibilities, such as

reviewing the organization's annual financial statements.

As stated earlier, directors of a nonprofit organization generally will not

be held personally liable for their actions on behalf of the organization,

provided they are in good faith. Further, directors and officers of the

organization can be covered by an officers' and directors’ liability

insurance policy purchased from an insurance company. (This type of

insurance is in addition to any other liability insurance the organization

may carry, such as car insurance or general liability insurance.)

A Word on

Contracts

Individual Board

Member

Responsibilities

Liability
Guide to Creating a Nonprofit

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Insurance offers more protection because the insurance company's

money will be used to pay any judgments and legal fees.

Board Structure6

A carefully laid out structure will encourage an effective Board. Thought

should be given to matters such as member selection, Board size, length

of members’ terms, officers, and committees.

Member Selection: When selecting Board Members, look for a diversity

of skills and experience in relevant areas, such as housing, construction

and development, law, land, and/or finance. A professional such as an

attorney or accountant serving on the Board can provide pro bono

services to the entity, which will save the entity money and time. It is

also important to have Directors who represent different areas and

interests in the community.

Board Size: The organization's structure and needs are among the factors

that determine Board size. In considering the size of the Board, it is

helpful to keep these points in mind:

• Every Board needs a sufficient range of expertise to accomplish the

organization's mission.

• If a Board is too small, its members may be overworked and

unproductive.

• If a Board is too large, every member may not have the opportunity

to participate actively.

Length of Board Members’ Terms: There are no hard and fast rules for

determining Board members' tenure. Many organizations do, however,

limit members to two consecutive terms and require a hiatus of one year

before a Board member may be re-appointed. Many organizations also

stagger terms of service so that one half or one third of the Board is

elected every one or two years for terms of two to four years. Such

policies encourage institutional renewal because a Board can profit from

the experience of veteran Board members while welcoming the fresh

perspective that new members offer.

Officers: Typically, the Board of Directors is led by four officers: a

President or Chairperson; a Vice-President or Vice- Chairperson; a

Secretary; and a Treasurer. Job descriptions for each officer can be

found in the Appendix 5.1.
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Committees: Much of the work that a Board does is accomplished

through its committees. With the exception of the Executive

Committee, which acts on the Board's behalf, committees

recommend action to the full Board for discussion and action.

Committee structure usually parallels the administrative structure

of the organization. Standing committees are established in the

bylaws and often include the following:

• Executive Committee

• Nominating Committee

• Finance Committee

• Audit Committee

• Development Committee

• Strategic Planning Committee

• Personnel Committee

In the case of a homeownership nonprofit, it may be helpful to establish

the following committees:

• Financial Intermediaries Committee

• Housing Counseling Committee

• Resource Referral Committee

• Construction and Development Committee

Resources on Boards: An excellent resource for further information is the

National Center for Nonprofit Boards. They provide publications, advice,

and seminars on nonprofit boards. Their website is www.ncnb.org.

5.2 Strategic Plan7

The creation of a strategic plan is an important step in the development

of an organization. It defines the organization and establishes goals. It

provides an opportunity for the organization to:

• Examine the environment within which it will operate

• Explore the relevant factors that affect the way it will do business

• Frame strategic issues that must be addressed

• Develop specific goals and objectives based on the strategic issues

• Establish a realistic timeline for attaining the goals

The benefits of strategic planning include increased effectiveness,

efficiency, improved understanding and better learning, better decision-
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making, enhanced organizational capabilities, improved communication

and public relations, and increased political support.

Strategic planning enables an organization to think and act strategically.

Throughout the strategic planning process there are three fundamental

questions that an organization must ask itself: Who are we? What do we

want to be? How do we get there? As the answers to these questions

unfold, new answers to one question can be expected to change

previous answers to another question. This is part of the natural course

of planning.

There are ten basic steps to creating and implementing a strategic plan:

1. Initiate and agree on an inclusive, open and recurring strategic

planning process.

2. Clarify the organizational mandates.

3. Identify and understand the organization’s stakeholders; and develop

and refine the vision and values of the organization. Successful

nonprofits satisfy important stakeholders according to each

stakeholder’s criteria for satisfaction. Therefore, the vision and values

of the nonprofit should be thought about in relation to those

stakeholders.

4. Establish an effective organizational vision for the future.

5. Assess the environment to identify strengths, weaknesses,

opportunities, and threats. Identify the entity’s internal strengths and

weaknesses and external opportunities and threats. This kind of

analysis is known by the acronym SWOT, and is very useful in

clarifying the conditions within which the organization operates. See

Exhibit 5.2 for an example of a SWOT analysis.

6. Identify and frame the strategic issues. Strategic issues are

fundamental challenges that affect an entity’s mandates, vision,

product, or service level and mix, clients or users, costs, financing,

organization, or management.

7. Formulate strategies to manage the issues according to resource

availability.

8. Review and adopt the strategic plan.

9. Develop an effective implementation process.
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10. Establish and evaluate performance measures to document strengths

and weaknesses.

11. Reassess strategies and the strategic planning process.

In managing the strategic planning process it is important to begin only

when the organization is ready, has strong leadership and support from

stakeholders, and has the resources necessary for a successful planning

effort.

Exhibit 5.2

SWOT Analysis

MAXIMIZE OVERCOME

Strengths

Internal strengths are resources or

capabilities that help an organization

accomplish its mandates or vision.

Weaknesses

Internal weaknesses are deficiencies in

resources and capabilities that hinder an

organization’s ability to accomplish its

mandates or vision.

Opportunities

External opportunities are outside factors

that can affect the organization in

favorable ways.

Threats

External threats are outside factors that can

affect the organization in a negative way.

The strategic planning process first should focus on internal issues that

can be controlled and second it should develop a course of action to

influence and mitigate external threats.

5.3 Business Plan8

The business plan is a written summary of what the organization hopes

to accomplish and how it intends to organize its resources to meet its

goals. It is the road map for operations and for measuring progress along

the way. The business plan identifies the funding or financing required

and when it is needed. The business plan is often the first impression a

donor, sponsor, or lender has of an organization. A well-organized plan

is essential for donors, sponsors, or lenders to assess the organization.

The business plan encourages realism and improves the Executive

Director’s ability to manage the organization.

A business plan should include several key components, including an

executive summary, business concept, description of the industry and

business venture, business goals, marketing plan, production plan,

organization structure, and more. Each element is detailed below.

Structure of the Plan
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Executive Summary. The format should begin with an executive

summary describing the highlights of the business plan. Although the

organization is described in detail later in the report, a crisp, one or two

page introduction helps to capture the immediate attention of the

potential donor, sponsor, or lender. The introduction should include:

• Name of the organization (include address and phone number)

• Contact person (presenter’s name and phone number)

• Paragraph about organization (nature of business and market area)

• Business loans sought (term loan, operating line of credit)

• Highlights of business plan (the project)

Table of Contents. A standard table of contents section titles and page

numbers.

Business Concept. The business concept identifies the organization’s

market and the market need for the organization, and outlines the

organization’s action plan for the coming year.

Elements of the organization’s strategic plan can be contained in this

section, particularly the planned activities and funding sources and

needs of the organization to complete the activities. This section also

contains an assessment of business risks and a contingency plan.

Description of the Industry. This section will contain:

• Industry outlook and growth potential

• Markets and customers

• Similar organizations (serving the same purpose and market)

• Regional and economic trends (population shifts, relevant economic

indicators)

Description of Business Venture. This section will contain:

• Products or services (pictures, drawings, characteristics, quality)

• Target market

• Business location and size

• Staff and equipment needed (overall requirement, capacity)

• Brief history (principals involved, development work done)

Business Goals. This section will contain specific goals for the current

year and over the longer term.
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Marketing Plan. This section will contain the fundraising strategy.

Production Plan. Depending on the kind of housing development the

organization intends, this section may contain:

• Brief description of production process

• Suppliers (volume discounts, multiple sources)

• Raw materials (readily available, quality, sources)

• Personnel required (full-time, part-time, skill level, availability,

training required)

• Costs (facilities, equipment, and materials, estimates and quotations)

• Capital estimates (one time start-up or expansion capital required)

Production Plan. Depending on the services to be provided by the

organization, this section may contain:

• Purchasing plans (volume discounts, multiple sources, quality, price)

• Space requirements (office space, improvement required, expansion

capability)

• Staff and equipment required (personnel by skill level, fixtures, office

equipment)

Organization Structure. This section will contain:

• Legal form (proprietorship, partnership, corporation, nonprofit)

• List of contracts and agreements in force

• Directors and officers (names and addresses and role in company)

• Background of key management personnel (brief resumes of active

owners and key employees)

• Contract professionals/consultants (possible outside assistance in

specialized or deficient areas)

• Organization chart (identify reporting relationships)

• Duties and responsibilities of key personnel (brief job descriptions –

who is responsible for what)
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Risk Assessment. This section will contain:

• Competitors’ reaction

• What if... list of critical external factors

• What if... list of critical internal factors

• Dealing with risks (contingency plan to handle the most significant

risks)

Action Plan. This section will contain:

• Steps to accomplish this year’s goals (flow chart by month or by

quarter of specific action to be taken and by whom)

• Checkpoints for measuring results (identify significant dates and

decision points)

Financial Plan. The financial plan outlines the level of present financing

and identifies the financing sought. It contains pro-forma financial

forecasts. In carrying out the action plan of the organization, the

operating forecasts are the organization’s guide to business survival.

Financial Statements. This section will contain previous years’ balance

sheets and income statements (past two to three years if applicable).

Financial Forecasts. This section will contain:

• Opening balance sheet (for a new business only)

• Projected income statements (detailed operating forecast for next

year of operation and less detailed forecast for following two years)

• Cash flow forecast (budget of cash inflow and outflow on a monthly

basis for next year of operation)

References. This section will contain:

• Partnering organizations (contact name and phone number)

• Name of present lending institution (branch, type of accounts)

• Lawyer’s name (include address and phone number)

• Accountant’s name (include address and phone number)

Appendices. This section will contain:

• Letters of intent (potential home buyers)

• List of inventory (type, age, value)
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• List of fixed assets (description, age, serial numbers)

• Description of insurance coverage (insurance policies, amount of

coverage)

• Accounts receivable summary (include aging schedule)

• Accounts payable summary (include schedule of payments)

• Copies of legal agreements (contracts, leases, mortgage)

• Appraisals (property, equipment)

5.4 Organization Structure9

Nonprofit organizations are governed by a Board of Directors that

represents the community served by the organization. Some Boards

consist exclusively of community representatives while other Boards

achieve a mix of community representatives and non-residents who

bring valuable skills to the Board. Board members should be selected

based on the reputation, expertise and experience they’ve gained in life.

The members should share the organization’s vision and be prepared to

contribute their time, advice and skills to the organization.

Some nonprofit organizations augment their Board with an Advisory

Committee which provides periodic expert advice on issues such as

fund-raising and community-building. In these structures, the Board

remains ultimately accountable for the performance of the organization.

The Board of Directors recruits and hires the chief executive who is

responsible for hiring and firing the organization’s staff and any

consultants. The Board has direct control over the chief executive only

and should have no authority to manage or direct the organization’s

staff.

5.5 Budget and Financial Procedures

Budget Procedures10

At least two or three months before the beginning of the organization’s

fiscal year, attention should focus on developing a budget for the next

year. Staff and Board members should participate in each phase of the

budgeting process so that the final product reflects the organization’s

priorities, capabilities and capacities.

The first phase in the budget process is a review of program and

management achievements and fiscal performance for the year just

ending. This includes, but is not limited to, reviewing objectives
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achieved, comparing budget to actual figures, and examining the

number of people served.

Estimate the costs required to achieve the organization’s objectives,

including staff, supplies, and other resources. Make sure to take into

account upcoming changes, especially in areas such as insurance, which

are subject to significant fluctuations.

Estimate all possible sources of income, financing and funding which

would advance the organization’s objectives. Base these estimates on

past experience or that of comparable organizations. Grants from

governments, foundations and corporations can be difficult to predict;

however, staff and Board members should be able to make a reasonable

assessment of funding likelihood.

Compare revenue and expense projections. If revenues and expenses are

not balanced, programs and management activities must be re-evaluated

and adjusted. If expenses need to be reduced, determine which funding

priorities are highest and make reductions in areas of lower priority or

lower productivity. Once the revenues and expenses are in proper

balance, the Board must approve the budget.

The chief executive and staff use the budget as a guide and submit

monthly financial reports to the Board comparing actual revenues and

expenses to the budget. Budgets and the budgeting process can be an

important vehicle for better programmatic and financial management

and can help the organization better achieve its vision and goals.

Financial Procedures11

Financial procedures designed to promote and protect sound

management practices, both general and financial. Adherence to

financial procedures will significantly increase the likelihood that:

• Financial information is reliable, so that managers and the board can

depend on accurate information to make programmatic and other

decisions

• Assets and records of the organization are not stolen, misused, or

accidentally destroyed

• The organization’s policies are followed

• Government regulations are met

Developing an Internal Accounting Control System The first step in

developing and effective internal accounting control system is to identify

those areas where abuses or errors are likely to occur. Many accountants
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can provide a checklist of areas and questions to consider when

planning financial procedures. At a minimum, the following areas and

objectives in developing an effective internal accounting control system

should be addressed:

• Cash receipts: To ensure that all cash intended for the organization

is received, promptly deposited, properly recorded, reconciled, and

kept under adequate security.

• Cash disbursements: To ensure that cash is disbursed only upon

proper authorization of management, for valid business purposes,

and that all disbursements are recorded properly.

• Petty cash: To ensure that petty cash and other working funds are

disbursed only for proper purposes, are adequately safeguarded, and

recorded properly.

• Payroll: To ensure that payroll disbursements are made only upon

proper authorization to bona fide employees, that payroll

disbFinancial are properly recorded and that related legal

requirements (such as payroll tax deposits) are complied with.

• Grants, gifts, and bequests: To ensure that all grants, gifts, and

bequests are received and properly recorded, and that compliance

with the terms of any related restrictions is monitored adequately.

• Fixed assets: To ensure that fixed assets are acquired and disposed of

only upon proper authorization, are adequately safeguarded, and

recorded properly.

Additional internal controls are required to ensure proper recording of

donated materials, pledges and other revenues, accurate, timely

financial reports and information returns, and compliance with other

government regulations.

Achieving theses objectives requires the organization to clearly state

procedures for handling each area, including a system of checks and

balances in which no financial transaction is handled by one person

from beginning to end. This principle, called segregation of duties, is

central to an effective internal controls system. Even in a small nonprofit,

duties can be divided up between paid staff and volunteers to reduce the

opportunity for error and wrongdoing. For example, in small

organization, the chief executive might approve payment and sign

checks prepared by the bookkeeper or office manager. The Board

treasurer might then review disbursements with accompanying
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documentation each month, prepare the bank reconciliation, and review

canceled checks.

The Board and chief executive share the responsibility for setting a tone

and standard of accountability and conscientiousness regarding the

organization’s assets and responsibilities. The Board fulfills that

responsibility in part by approving many aspects of the internal control

accounting system. Common area requiring Board attention include:

• Check issuance: The number of signatures on checks, dollar amounts

which require Board approval or Board signature on the check, who

authorizes payments and financial commitments, etc.

• Deposits: How many payments made in cash (for admissions, raffles,

etc.) will be handled, etc.

• Transfers: If and when the general fund can borrow from restricted

funds, etc.

• Approval of plans and commitments before they are implemented:

These include the annual budget and periodic comparisons of

financial statements with budgeted amounts, contracts, leases, loans

and other major commitments.

• Personnel policies: These include salary levels, vacation, overtime,

compensatory time, benefits, grievance procedures, severance pay,

evaluation, and other personnel matters.

The Accounting Procedures Manual: The policies and procedures for

handling financial transactions are best recorded in an Accounting

Procedures Manual, describing the administrative task and who is

responsible for each. The manual does not have to be a formal

document, but rather a simple description of how functions such as

paying bills, deposit cash, and transferring money between funds are

handled. As you start to document theses procedures, even in simple

memo form, the memos themselves can be kept together to form a very

basic Accounting Procedures Manual is a good opportunity it see

whether adequate controls are in place. In addition, such a manual

facilitates smooth turnover in financial staff.

Maintaining Effective Controls: The chief executive is commonly

responsible for overseeing the day-to day implementation of these

polices and procedures. Due to the number to detailed requirements

involved if the organization receives government funding, there should

be one person in the organization (possibly the grant administrator) with
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the responsibility of understanding and monitoring those specific

regulations and compliance factors.

The auditor’s management’s letter is an important indicator of the

adequacy of the organization’s internal accounting control structure, and

the degree to which it is maintained. The management letter, which

accompanies the audit and is addressed typically to the Board for the

organization, cities significant weaknesses in the system or its execution.

By reviewing the management letter with the chief executive, asking for

responses to each internal control lapse or recommendation, and

comparing management letters from year to year, the Board has a useful

mechanism for monitoring its financial safeguards and adherence to

financial policies.

As the organization changes and matures, and funding and programs

change, the organization will need to periodically review the internal

accounting control system and modify it to include new circumstances

(bigger staff, more restricted funding, etc.) and regulations such as

receiving federal awards with increased compliance demands.)

A-133 Audit: In 1990, the Office of Management and Budget (OMB)

issued Circular A133, Audits of Institutions of Higher Education and

Other Nonprofit Institutions, which defines audit requirements even if

the federal money the organization receives is passed through another

agency. For example, a housing authority may make a grant to a local

nonprofit housing developer which contains HUD funding. The local

housing developer is subject to A-133 audit requirements event though

the grant was not directly from HUD.

Fortunately for smaller nonprofits, the federal guidelines permit to the

agency to combine a regular audit of the whole agency with a programspecific A-133 audit of the program receiving federal funding. The

amount of the combined federal funding will determine the type of audit

the organization is required to have under A-133. Exhibit 5. 3 shows

when an A-133 is not required, when a program-specific A-133 audit

may be elected, and when an organization must have an agency-wide

federal audit.
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Exhibit 5.3

Federal Audit Requirements

Total Amount of

Federal Awards One Program More than One Program

$0--

$24,999

No Audit No Audit

$25,000--

$299,999

Program

Specific or

A-133 Single

Audit

Program

Specific or

A-133 Single Audit

$300,000 or More Program

Specific or

A-1333 Single

Audit

A-133 Single

Audit

A-133 audits like non-federal audits, they test financial statement

information. However, the A-133 audit looks more closely at tracking

and classifying revenue from federal sources. In addition, the auditor

looks for compliance with general and specific government audit

requirements, which cover both financial and non-financial factors such

as program effectiveness, client eligibility, efficiency with which

resources are used, etc.

The auditor must also test internal control procedures more rigorously

than in a standard audit, making sure that adequate systems are in place

for complying with the requirements noted above. Because of the

expanded procedure involved and increased reporting requirements for

the auditor, the audit may cost substantially more than a traditional audit

and involve more staff time. The organization should be allowed to build

these additional audit costs into the grant.

5.6 Personnel Policies and Procedures

Whether the nonprofit organization has five or five hundred employees,

properly written personnel policies and procedures can save

considerable time and money. The primary goals of a personnel policy

are to reduce litigation and promote good communication among staff. It

provides both a means for new employees to orient the themselves with

their new working environment, and a policies and procedures refresher

for others.
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The essentials of a personnel policy include:

• A disclaimer, at the beginning and the end of the document, to

ensure that it does not create nor imply a contract.

• An Equal Employer Opportunity statement.

• Employer rules, regulations, and procedures.

• Employer policies that are designed to help employees.

• Employee benefits.

• Guidelines for termination of employment and disciplinary actions.

• State, local and tribal requirements. (Family Medical Leave Act,

workers compensation, harassment, etc.)

• An acknowledgement of receipt by the employee.

Keep it short and simple. A personnel policy should be easy to read and

only as long as necessary to get the job done. Common pitfalls include:

• Overpromising

• Inconsistency

• Poor organization

• Inadequate disclaimers

If a personnel policy is not going to be followed or utilized, it might be

better not to have one at all. However, there is even greater danger of

lawsuits with government agencies when there is no written policy.

5.7 Staffing

Appropriate staffing is a key determinate of the success or failure of a

nonprofit organization. Having the right number of staff who have the

required skills and competencies and who can work collaboratively in a

team environment is central to an organization’s productivity,

accountability and cost structure.

Organizations located in remote, sparsely populated areas may find that

recruiting and hiring qualified staff can be a difficult process. These

organizations have options including hiring highly motivated staff and

providing them with the training and technical assistance they require to

gain the competencies needed for the position. Another alternative is to

rely on contracted consultants who work as temporary staff until the

organization can hire and train permanent staff. In other instances, the

organization may negotiate to borrow staff from another organization

until permanent staff is hired and trained.
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Newly formed nonprofit organizations may not have the funds to hire

many, if any, staff and could rely on a core of dedicated volunteers until

funding is secured. Other organizations may elect to use volunteer staff

as a way to minimize personnel expenses.

It is critical for an organization to use a staffing process that mirrors the

organization’s vision, programs and budget. A staffing process includes:

• Conduct a job analysis to define its purpose and requirements.

3⁄4 Evaluate the organization’s need for the position.

3⁄4 Define the position’s specific functions, duties, responsibilities,

compensation and benefit package.

3⁄4 Define the characteristics a person needs to succeed.

• Create a list of applicant requirements.

3⁄4 Education

3⁄4 Experience

3⁄4 Skill sets

3⁄4 Knowledge and expertise

3⁄4 Personal behavior

• Recruit qualified applicants.

3⁄4 Word of mouth

3⁄4 Direct contact

3⁄4 Advertising

3⁄4 Employment agencies

3⁄4 Job fairs

3⁄4 Professional associations

3⁄4 Community organizations

• Screen and interview applicants.

3⁄4 Time-saver questions: Determine at the outset if an applicant

meets

very basic job requirements.

3⁄4 Behavior-based questions: Applicant describes past behavior in

circumstances similar to the job.

3⁄4 Skill-based questions: Applicant demonstrates the basic skills

needed for the job.

• Hire most qualified applicant(s)

3⁄4 Be objective and impartial.

3⁄4 Evaluate all applicants and select the most qualified based on

demonstrated competencies, commitment and willingness to

learn.

3⁄4 Negotiate the employment offer until both parties are satisfied.

The new hire should sign a letter of hire as prepared by the chief

executive.

3⁄4 Each new hire should receive and sign a copy of the

organization’s personnel policy.
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The organization should provide each staff person with opportunities for

receiving training and technical assistance to improve performance and

develop new skills. The organization should foster a constructive and

supportive working environment that encourages staff to “do their best”

and promotes effective teamwork.

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6.0 Program and Organizational Operations

6.1 Introduction

This section discusses the concepts and issues involved in housing

development from the site selection to the actual closing on a new

home. This section also provides a brief overview of the process

involved in working with interested families and providing pre- and posthomeownership counseling. A third key function of the nonprofit,

serving as a resource referral center, is briefly summarized as well. This

section includes discussions on marketing and fundraising strategies and

the monitoring and evaluation of the organization’s performance.

Many factors are involved in the process of creating affordable housing

and homeownership opportunities. In some instances, many of these

factors must happen concurrently in the overall process to make for a

successful program. For instance, as the nonprofit decides on the kind of

housing approach to adopt and begins to move forward in the

development of housing, it must also market and work with interested

families to bring them through the mortgage application process

successfully and in a timely fashion.

Exhibit 6.1 provides a simplified overview of the process and concurrent

activities in the case of a nonprofit working with a manufactured home

builder while simultaneously identifying and preparing qualified families

to purchase the manufactured homes. The process in the diagram

assumes that the nonprofit entity has already worked through most of the

legal, land, and financial packaging issues required before embarking on

a housing delivery program. All of these issues are detailed in earlier

chapters.

6.2 Housing Development

It is important to begin the process of site selection early because

obtaining the proper reviews and title clearance can be time-consuming.

The process for environmental reviews and title searches will vary

depending on the type of land, the kind of funding or financing used for

construction, and form of tribal governing body involved. Generally, the

tribe or HUD performs environmental reviews if NAHASDA or Section

184 funding is involved. Title searches are handled by either BIA for

tribal trust or individual allotted lands for non-self-governing tribal

bodies, by title companies that utilize records in the county court house

for fee simple lands, or by self-governing tribal bodies.

Site Selection
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Figure 6.1.A

Housing Delivery System: Liaison with

Manufactured Home Builder
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A variety of housing delivery systems are available to a nonprofit

organization with the vision of expanding homeownership opportunities.

The approaches vary from the tangible – actually building the housing,

to the intangible – developing relationships with financial intermediaries.

The examples highlighted below include coordinating a “Building Blitz,"

facilitating a self-help housing construction model, serving as a

developer, functioning as a liaison for the purchase and installation of

manufactured homes, facilitating private mortgage networks, launching a

lease-to-purchase program, and using tax credits.

The most appropriate approach for each entity will vary depending on

the resources available to that organization as defined in the strategic

plan and the business plan. Resources include not only financial

streams, but also personnel with the applicable experience, available

land, a supportive community, and committed government and private

partners.

Facilitating Self-help Housing. Self-help housing is a term for new

housing construction in which the future homeowners contribute a

percentage of the labor costs through “sweat-equity.” The level of

“sweat-equity” will depend on the health and skill of the families

involved. When families assist in the construction of their homes labor

costs are reduced and the home becomes more affordable. In addition, it

provides an opportunity for participants to develop new skills in the

construction industry.

Coordinating a “Building Blitz”. A Building Blitz, a term used by Habitat

for Humanity, is an approach to housing development that depends on

the efforts of volunteers and the homebuyers, through “sweat-equity,” for

the construction of the homes. The coordination of the volunteer effort

may be handled by the nonprofit or volunteers. Volunteers perform the

bulk of the actual construction labor. Construction materials are funded

through whatever means possible, with an emphasis on charitable inkind donations or monetary contributions. Volunteer efforts can be an

effective means to build new relationships and draw new resources into

the community.

A number of logistical factors need to be considered when planning a

volunteer effort, particularly if the volunteer effort is in a rural area

requiring volunteers to camp for the duration of the Building Blitz. The

logistical concerns vary according to the size of the effort. For a large

effort, the logistical concerns may include:

• Identifying what tasks can be performed by volunteers of varying

skill levels

Housing Delivery

Systems
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• Legal waivers that release the organizing parties from any liability

• Medical preparedness at camping and work sites

• Locating camping and sleeping arrangements for volunteers

• Locating dining areas and food service

• Establishing a protocol for observers

• Orchestrating vendors and in-kind contributions that relate to the

logistical aspects of the volunteer effort (not construction in-kind

contributions)

• Location of portable toilets

• Locating volunteer car parking areas

• Transportation for volunteers to and from work site and camp site

• Garbage collection and removal

• Security

Serving as a Developer. If the demand for housing is strong enough,

the nonprofit organization may choose to become a developer. In

this case the organization acquires property or leases land from the

tribe, builds homes, and sells them after completion. This model

likely requires a large cash flow and certainty that the homes

could be sold soon after completion.

Functioning as a Liaison for Manufactured Homes. As a liaison for

manufactured homes, the nonprofit organization facilitates the process of

purchasing manufactured homes for a group of mortgage approved

families. As creditworthy families become approved for mortgages, the

nonprofit entity negotiates with the most qualified manufactured home

builder for the construction and installation of quality homes. The

nonprofit also coordinates the construction of necessary infrastructure,

foundations, septic, and utilities.

Facilitating a Private Mortgage Network. In facilitating a private

mortgage network the nonprofit would reach out to and develop

relationships with financial institutions. The nonprofit would work with

the lending institutions to overcome barriers that prevent lending in

Indian Country.
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Launching a Lease-to-Purchase Program. In launching a lease-topurchase program, the nonprofit organization enables a family to live in

their new home while they work to clear up their credit. The

homeowner gains full title to their home after their credit has met the

standards required by the bank. The nonprofit is required to develop the

home and package the financing, own the home and lease the land

during the lease period with the family, and enter into and enforce a

lease and home purchase agreement with the participating family. The

nonprofit Board should discuss the type of lease-to-purchase program

that works for the tribe/nonprofit. Items to consider include the term of

the lease and maintenance on the home.

Using Tax Credits. Low Income Housing Tax Credits are designed to

stimulate private sector investment in the development of affordable

rental housing. The nonprofit entity would partner with a developer

interested in obtaining tax credits through the development of lowincome rental housing. The units must be new construction or

substantially rehabilitated and restrictions of income limits vary by state

and the location of the development.

In selection of the types of homes to build, the nonprofit must take into

consideration the affordability of the target population, product quality,

energy efficiency, durability, climate needs, and local expectations and

desires. In addition, the nonprofit needs to consider the financial

resources that it plans to utilize, as certain loan products may not be

available for certain types of housing. All of these variables should be

addressed in the organization’s strategic plan. Three possible housing

types that can meet the needs of most locations through specific

customization are manufactured homes, modular homes, and stick-built

homes.

Manufactured homes are produced in manufactured home builder

plants to specifications agreed upon in a contract between the nonprofit

and the builder. Homebuyers can usually select from a variety of color

schemes for the interior and exterior of the home and select cabinetry for

the kitchen and bath(s) to customize their homes. When the home is

completed, it is delivered to the location site and installed on a preconstructed foundation or crawl space, or it is anchored and skirted if

there is no foundation.

Contractors build modular homes at modular home plants to

specifications agreed upon prior to construction. When the home is

complete it is delivered to the location site and installed on a preconstructed foundation or crawl space, or it is anchored and skirted if

Housing Selection
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there is no foundation. These houses differ from manufactured homes in

the construction process. As with manufactured homes, homebuyers can

customize their homes through the selection of color schemes and

cabinetry from a variety of options.

Stick-built homes are built on location usually with a combination of

contractors and volunteers. When volunteers provide labor, the cost of

the homes can be greatly reduced. Contractors supervise the work to

ensure quality is maintained. In the case of the Self-help Program, some

of the volunteers will be family members. The opportunity to customize

a stick-build home during its construction will depend on the particular

project. In some cases, paint, carpet, siding, cabinetry, and appliances

may be in-kind contributions, which may preclude color selection.

There are a number of significant barriers that hinder lending on

reservations. One barrier stems from lenders’ reluctance to lend in

situations where collateral for the mortgage is not a home and property,

as in conventional lending. On reservations, tribal trust lands and

allotted lands cannot be used as collateral on a mortgage. A number of

government products have been designed to overcome this barrier. They

include HUD Section 184, HUD Section 248, the U.S. Department of

Agriculture’s (USDA) Rural Housing Native American Pilot (RHNAP)

Loan Program, and the U.S. Veteran’s Affairs Direct Home Loans for

Native American Veterans Living on Trust Lands. Each of these is

described in detail below.

The Section 184 Loan Guarantee Program addresses the issue of

collateral on trust lands. Section 184 loans are underwritten by HUD

and provide lenders with a government guarantee on the mortgage. The

lenders receive a leasehold interest as collateral. ONAP will work with

nonprofit homeownership entities to identify lenders with an interest in

the Section 184 program.

Like the Section 184 program, Section 248 is under written by HUD and

provides lenders with a government guarantee on the mortgage. Section

248 differs from Section 184 in that it can only be used on tribal trust

land with a leasehold mortgage. Section 248 is eligible to individuals,

families, and the tribe, but not the TDHE. Section 248 can also be used

for refinancing.

The U.S. Department of Agriculture’s Rural Housing Service (RHS) offers

the Rural Housing Native American Pilot (RHNAP) Loan Program,

which guarantees loans made on tribal land. The loans are 30-year fixed

rate loans and can be for the purchase of existing homes or for new

construction. The loan can be for 100 percent of the value of the

Mortgages
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property. Lenders who have been approved by both RHS and Fannie

Mae can originate RHSAP loans. Eligible borrowers include individual

members of federally recognized tribes that have been approved by RHS

to participate in the pilot program.

The U.S. Department of Veteran Affairs offers the VA Direct Home

Loans for Native American Veterans Living on Trust Lands. This direct

loan can be used to purchase, construct, or improve a home on Native

American trust land. These loans generally are limited to the cost of the

home or $80,000, whichever is less. VA direct loans are available to all

eligible Native American veterans who meet credit and income

qualifications.

In addition, eligible veterans may apply for loans guaranteed by the VA.

The guarantee program is intended to encourage lenders to offer all

veterans loans with more favorable terms. VA-guaranteed loans are

made by private lenders such as banks, savings and loans associations,

or mortgage companies.

Funding Resources in the Stages of Development1

Predevelopment Financing. As noted in Section 2.0, planning is

critical to a successful project. During the predevelopment stage or

conceptual stage of development, developers must put their “dream”

project to paper. The determination of funds needed during the

predevelopment stage requires the organization to identify specific tasks

and the associated costs that need to be completed to move the project

forward. Pre-development funds then become the resources that cover

such activities and include, but are not limited to:

• Option payments

• Architectural expenses

• Engineering

• Legal services

• Environmental and soil studies

• Application and origination fees

• Consultant fees

• Title search

• Market studies

• Appraisal preparation

Predevelopment activities can be funded by a variety of sources in the

form of grant, equity and/or loans to finance the project’s up-front costs.
Guide to Creating a Nonprofit

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72

The organization should research the costs associated with each of these

activities and plan the timing for accomplishment of these tasks to

ensure that the project moves smoothly to the next stage of

development.

Given the early stage in the development process, predevelopment funds

and or predevelopment lending are considered a high risk by potential

funders. As a result, predevelopment loans are typically a non-traditional

loan product, not offered by most traditional lenders.

Acquisition Financing. Once the entity has determined that the project is

feasible, and has completed a majority of the predevelopment activities,

additional resources may be necessary to address the acquisition of the

property, particularly if the land is not currently on trust land.

Acquisition funds are used to acquire the site. These costs include the

contractual purchase price of the property, any applicable fees

associated with the property specific to the project, and any associated

closing costs.

Acquisition funds are resources that usually come in the form of loans

ranging from non-conventional lending sources to private financing.

Lenders usually require that the loan be secured by the property as

collateral for the loan. Depending upon the condition of the property,

these funds have a more moderate risk than the predevelopment loan

because the lender will have some form of collateral.

However, if it is trust land, alternative sources of collateral will be

required. Some states have programs that will provide guarantees, or the

reserve accounts of the TDHE can be used. Traditional lenders will often

require borrowers to provide some equity into the transaction (10

percent) and will not finance 100 percent of the acquisition cost of a

property.

Through the appraisal process, the value of the collateral is established

and the loan amount can be projected. For instance: If an organization

wanted to acquire a property and the appraised value was $100,000, a

lender may be willing to lend up to $90,000 on the property. An

appraisal is almost always required by a lender to obtain the value of the

property.

On tribal trust land, or land near trust land appraisals can be more

difficult, since market comparables are hard to find. In the example

listed above, the organization, through its own capital, would be
Guide to Creating a Nonprofit

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required to provide the remaining resources necessary to acquire the

site.

Construction Financing. Once a project has reached the stage where

construction is ready to start, the entity should have identified all of the

funding resources. Construction lenders generally will not issue a

financing commitment until all permanent financing sources have been

identified. (Single family home construction or rehab would be the

exception.) Depending upon the resources within a community, some

lenders provide both the construction and the permanent loan.

Generally, the phases are separately outlined in lending documents. In

addition, settlement on the construction loan may take place

simultaneously with the acquisition of the property if all construction

related tasks have been completed by the organization.

Construction funds provide the financial resources to fund costs

associated with the construction process. These costs can include the

physical development of the building “hard construction costs” and

other costs necessary to engage the construction process, or “soft costs.”

Soft construction costs can include all predevelopment-related expenses,

such as appraisal costs, environmental expenses, legal costs, consultants’

fees, and other fees or costs associated with the development of the

property, such as interest expense, which are not related to the project’s

physical development.

Construction funds can be provided from a variety of sources but are

usually in the form of loan funds from both non-conventional lenders

and private banks. Equity providers, construction loan funds, trust funds,

and the developer/organization can also fund construction-related

activities. The risk of these types of loans center on the ability of the

developer to complete the project on time and at the projected cost.

Unlike other resources provided to the developer, construction funds are

provided in “draws” submitted to the developer on a regular basis. The

lender will often limit the draws based on the percentage of completion,

in order to mitigate their risk and to closely monitor the construction

process.

Construction loans on trust land present additional obstacles, since the

lender cannot take a lien on the land – or use the value of the land to

reduce their risk to the loan. To overcome this obstacle, the entity may

need to identify other sources of collateral or receive a guarantee from

another source. One option is HUD’s Section 184 mortgage loan which

provides for a permanent mortgage loan that can be used for

construction financing as well. Since there is only one loan closing,

certain costs noted above are substantially reduced.
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Permanent Financing. Upon completion of the construction phase, the

project requires permanent financing on the property. This type of

financing will typically stay in the project until all of the debt or

principal on the primary loan is repaid. In most circumstances, the loan

will be amortized over a long period of time, and extends for a time

period ranging from five to fifty years. Permanent loans will generally

“take-out” or replace the other financing that has been placed on the

property. As such, the permanent financing source is commonly referred

to as the “take-out” lender.

The term of the permanent loan usually commences at the completion of

construction and upon compliance with other requirements of the

permanent lender, such as debt-service coverage ratios, lease-up

requirements and stabilized occupancy. Permanent loans can come from

either private or public sources, including commercial banks and thrifts,

insurance companies, and federal, state and local governments. It is

important to emphasize that resources for permanent financing will

generally be defined at the community level. The entity is encouraged to

investigate as many options for permanent financing as possible.

For homeownership projects the ability to identify permanent financing

is defined by the homebuyer—their income and their credit—and the

perceived value of the structure. Again, the value of the structure can be

difficult to define on trust land, since there is a lack of comparables and

the extra “market” restrictions related to resale. For the Section 184

program, lenders will typically accept the “cost” method for the

appraisal. The homebuyer’s income and creditworthiness determines the

mortgage amount. Subsidy financing depends on the homebuyer’s

income.

For rental projects the permanent financing available is defined by the

income of the renters, by the “cash flow” the project provides and the

value of the property.

Working Capital and Gap Financing. During the course of the

development of the property, it is not unlikely that the entity will have

cash flow challenges. If the developer or sponsor miscalculates the flow

of any financing source into the project, a “gap” in the financing can

occur. In these circumstances, an organization may draw upon its own

internal resources to bridge this gap.

Many nonprofit organizations and housing authorities/TDHEs sustain

themselves through the fees that they earn in the development process,

in managing properties or in consulting for other organizations. The
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income generated through these activities provides the necessary capital

for the organization to operate. The utilization of these resources to fund

gaps in the project financing structure is commonly referred to as

working capital.

An infusion of working capital into a project during any of these time

periods allows the project to continue to move forward until the

identified source flows into the project. If the requirements for funds are

permanent, i.e., cost overruns, the organization may need to find

additional equity to infuse into the project to cover the increase in the

total development cost of the project.

An effective tool for monitoring the financial status of a project is a Pro

Forma. (See sample in Exhibit 6.2). This is a template that brings all of

the costs together and offsets them against known financing sources

(grants, donations, and loans). When project data is entered into an

electronic version of the sample in Exhibit 6.2, it becomes clear whether

the project is affordable to the applicants and whether the current level

of financing is sufficient.

Grants and Subsidy. As mentioned earlier, the nonprofit organization

has access to additional resources that a typical real estate developer

may not have. These resources are made available through a number of

different sources to allow the developer to keep the project targeted for a

certain income level resident. Grants infuse capital into a project and

lower the amount of debt the project will need to carry, ultimately

lowering the total development cost of the property. Grants typically

specify how the sponsor can use the proceeds.

Federal grant programs have been created to stimulate very specific

types of housing development, including single family homeownership,

housing people with special needs or Native American initiatives. In

addition, grants can be related to the development process, targeting

specific costs such as feasibility expenses. It is very important that the

nonprofit entity understand what granting organizations (private, state

and local) exist in their specific community.
Guide to Creating a Nonprofit

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Figure 6.2. Project Information for Pro Forma

Answers?

What is the name of your project?

Developer Name?

Home many units will your project have?

What is the average income you expect resident to have?

Area Median Income

Source of Home Buyer First Mortgage

Interest Rate

Term

Percent of Income to housing expenses

Percent of Income to Total Debt

Is the Down Payment a set cash amount? If so amount. 

Is the Down Payment a percent of first mortgage amount? If so %. 

Is the Down Payment a percent of total purchase price? If so %

Will the home buyer have any monthly taxes or fees? If so, amount

Will the home buyer have monthly required reserve payments? Amount?

Financing Sources Total Acq./Pre- When Available

Source Amount/Unit Amount development Construction Permanent

What are the subsidy 1 $ -

sources? 2 $ -

Please place in order 3 $ -

the funds are available 4 $ -

5 $ -

6 $ -

7 $ -

8 $ - 

I=Interest Only

N=Nonamortizing

Do any of the financing sources require homebuyer Interest Rate Term A="Amortizing

repayments or liens? Yes

If "Yes" which ones? (in order or lien priority) 0.0% N

0.0% N

 0.0% N

What are construction $ -

 financing sources? $ -

 $ -
Guide to Creating a Nonprofit

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Figure 6.2 Pro Forma

# of units* fill in shaded areas only

Project Name

DEVELOPMENT COSTS FINANCING

ACQUI SI TI ON t ot al per uni t ACQUSITION/PRE-DEVELOPMENT

Land $ - - $ 0 term mnths $ - int. rate 0.0%

Title and Recording $ - - $ - term 0 mnths $ - int. rate 0.0%

term 0 mnths $ - int. rate 0.0%

TOTAL - $ 

 TOTAL

PRE- DEVELOPMENT

Appraisal $ - - $ CONSTRUCTION FINANCING*

Soil tests $ - - $ 0 term 0 months $ - int. rate 0.0%

Filing Fees $ - - $ 0 term 0 months $ - int. rate 0.0%

Architect $ - - $ 0 term 0 months $ - int. rate 0.0%

Survey $ - - $ 0 term 0 months $ - int. rate 0.0%

Phase I/Phase II Environmental $ - - $ 0 term 0 months $ - int. rate 0.0%

Pre-development interest $ - 0 term 0 months $ - int. rate 0.0%

Pre-development legal $ - - $ 0 term 0 months $ - int. rate 0.0%

Other $ - - $ 0 term 0 months $ - int. rate 0.0%

0 term 0 months $ - int. rate 0.0%

0 term 0 months $ - int. rate 0.0%

TOTAL - $ term 0 months $ - int. rate 0.0%

TOTAL - $ 

OTHER SOFT COSTS

Architect/Engineer $ - PERMANENT FINANCING/TOTAL

Construction Supervision $ First Mortgage (40 houses) $0 -

Water and Sewer Design Lease/Purchase OSHA Mortgage (10 houses) $0

Construction Interest $ 0 - - $ 

Civil Engineering $ 0 - - $ 

Insurance $ 0 - - $ 

Market Study $ - - $ 0 - $ 

Legal and Accounting $ - - $ 0 - $ 

Marketing $ - - $ 0 - $ 

Home Buyer Preparation $ 0 - - $ 

Other $ - - $ Home Buyer DP

Development Fee 0.0% $ Closing Csts frm hme byr $0 -

 

TOTAL - $ TOTAL

Ne w Cons t r uc t i on/ Re habi l i t at i on PERMANENT FINANCING/PER UNIT AVRGE

Landscaping & Site Work $ - - $ 0 $0

Water and Sewer/Roads $ 0 -

Basements/Crawl Space $ 0 -

Construction $ 0 -

Contigency 0.0% $ 0 $0 -

 0 $0

TOTAL - $ 0 $0

0 $0

TOTAL Costs - $ Home Buyer paid dp & cc

If purchase price is different from TOTAL COSTS then enter amount No 

TOTAL $0

BUYER'S CLSING CSTS 0.0% $ -

AFFORDABILITY ANALYSIS Payment

TOTAL - $ First Mortgage $0

Second Mortgage $ -

Are buyer's closing costs in financing? Third Mortgage $ -

 OR paid by the home buyer? Fourth Mortgage $ -

Monthly Fees/Taxes - $ 

Construction Loan Assumptions Reserve Fund - $ 

Percent of Developer's fee paid after construction? Total Housing Costs $0.00

Percent of Attorney's fees paid after construction? MP/Income 0.00%

Percent of Home Buyer Prep. paid after construction? INCOME REQUIRED

Other Costs not needed for Construction Loan? Median Income - $ 

Average percent of Construction loan(s) oustanding % Median 
Guide to Creating a Nonprofit

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A subsidy acts much like a grant in that it allows the nonprofit to provide

additional resources to a particular project. The primary difference is that

a subsidy typically is funding over time and works to lower the ongoing

expenses of a project or increase its revenues, as opposed to a direct

infusion of capital into the property. Subsidies are very effective in

making the project available to a wider range of residents.

Subsidies can be a challenge for the nonprofit to plan around if the

subsidy is short term. For instance, if there are annual renewal features

within the subsidy or the subsidy travels with the recipient (as opposed

to being project based), the developer cannot be assured the operating

subsidy will be continuous. In these cases, a prospective lender will

adjust their underwriting accordingly.

Irrespective of the housing delivery system, at some point in the process

the nonprofit will have to procure the services of some vendor or

contractor. It is likely that the nonprofit will use the Request for Proposal

(RFP) process. The first step in the RFP process is for the nonprofit to

draft an RFP, which is a document that details the services sought, any

necessary specifications, and how and when the bidder should respond.

(See sample in Appendix 6.0).

When the nonprofit has completed the RFP, it can advertise a notice in

local papers to alert prospective bidders of the opportunity to bid. The

notice identifies the nonprofit entity, the services it seeks, and

where/how prospective bidders can obtain the RFP. A notice generally

runs for a period of two to four weeks. The nonprofit should have a

protocol established for receiving, tracking, and responding to the

requests for the RFP.

A protocol for receiving, reviewing, and scoring bids or responses to the

RFPs must also be established. Bids will likely be received before the

actual close date. After the close date and time has arrived, the bids can

be reviewed and scored. The ranking criteria should include a category

that rates the completeness or responsiveness of the bid as well as other

specific characteristics relevant to the needs of the project. Exhibit 6.3

depicts a sample proposal rating for construction services.

Procurement
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Figure 6.3

Sample Proposal Rating

Proposal A Proposal B Proposal C

Criteria

Percent of

Total

Rating Scale

(1 to 5)

|Final

Score

Responsiveness to RFP 25% 4 1.0

Cost 20% 3 .6

General Performance 15% 4 .6

Plans 10% 2 .2

Technical Specifications 10% 2 .2

Warranty 10% 3 .3

Delivery/Sale 10% 5 .5

Totals 100% 23 4.0

When all of the proposals have been reviewed and ranked, the

information will be presented to the nonprofit’s Board of Directors and

the Board will make a decision on vendor selection. If no suitable bids

are received, the Board can reject all proposals and opt to negotiate a

sole source contract.

When a vendor is selected, the nonprofit negotiates final details on the

services to be rendered and a legal contract is forwarded to the vendor.

The details of the contract may require further negotiations until both

parties are satisfied. Once negotiations are complete, letters are sent to

the unselected bidders to notify them of the nonprofit's decision.

In some instances, the nonprofit may not conduct negotiations with

vendors. Rather, the organization accepts the lowest, most responsive

bid and enters into a fixed price contract with the vendor.

6.3 Housing Counseling

Housing counseling is a critical piece of a homeownership initiative.

Tribal families often know little about homeownership, its benefits, and

requirements. Further, they may have poor or no credit histories, may

not be familiar with the mortgage lending process and terminology, nor

required home maintenance activities. Education and counseling can be

crucial in demystifying the process and helping an individual or family

to become and remain a homeowner.
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An important initial step for the nonprofit is to determine homebuyer

readiness and tailor counseling to the individual needs of households. It

is recommended that the nonprofit provide housing counseling to all

households receiving services from the entity.

An on-site counselor should be available to provide extensive prepurchase and post-purchase counseling, in-group and one-on-one

settings. The counseling can cover such topics as:

• Budgeting for mortgage payments

• Money management

• Home selection

• Housing care and maintenance

• Referral to community resources

• How to apply for and complete the mortgage loan process

• Alternatives for financing the purchase

• Real estate and mortgage lending terms

• How to develop a plan to accumulate down payment and closing

costs

• If appropriate, credit counseling which may include assistance in

improving credit-worthiness and consolidating debt

• Avoiding mortgage default and foreclosure

• Importance of routine and preventive maintenance to preserve house

value

• Role of the homeowners’ association

Default and foreclosure counseling are important parts of the services

offered. Due to the unique status of tribal land and the use of tribal

courts, there are particular procedures and processes on reservations for

default and foreclosure, making counseling of this type very important. It

may include such activities as:

• Determination of whether the mortgagor, with assistance from the

nonprofit, might bring the account current within a time period and

payment plan acceptable to the lender

• Working out repayment plans with the homebuyer’s other creditors

• Follow-up counseling if the loan is brought current or the lender

proceeds with foreclosure

• Alternatives to foreclosure
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Another way the nonprofit can assist, train, and educate homebuyers is

by establishing a Homebuyer’s Club designed to develop an open forum

group of all interested homebuyers. The club can be open to those

residents who are interested in homeownership in the future, as well as

those residents who are currently involved in the mortgage process. If

this club includes an opportunity for the participants to have open

discussions regarding their questions, fears, and hesitations, the club can

assist those participants in overcoming some of their personal concerns.

The Club can sponsor various speakers on topics of interest to the

individual homebuyers. These speakers may discuss topics regarding the

legal closing process, insurance issues, tax issues, landscaping programs,

and other issues that will assist participants understand the

homeownership process. The club may also provide the opportunity for

individual work sessions on topics such as budgeting, credit counseling,

and financial planning.

6.4 Resource Referral Services

A critical role for a nonprofit organization promoting homeownership

opportunities is to function as a resource referral center – a single

location where interested parties can obtain information on the process

of buying a home, financial intermediaries, real estate brokers, builders

and contractors, and local housing options and programs. The path to

homeownership can seem daunting because of the paperwork, the

involvement of multiple government agencies, and the need to obtain

large amounts of financing.

The organization’s goal is to address each family’s concerns and

questions about homeownership and assist the family through the

process if it decides to pursue homeownership. The entity will provide

families with housing counseling, serve as a liaison between families and

lending institutions, assist in finding the best lending package, and assist

applicants in finding an affordable home for purchase or construction.

Assistance also should be offered to homeowners seeking home

improvement loans or grants or mortgage refinancing.

The kinds of information the nonprofit entity will have available

includes:

• HUD ONAP “Our Home” brochures

• Housing Counseling process

• Standard mortgage loan applications

• Financing options

• Real estate options

Homebuyer’s Club
Guide to Creating a Nonprofit

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• Listing and brokerage services

• Contractors and builders

• Manufactured home builders

• Modular homes

• How to resolve land title questions

6.5 Marketing2

Marketing is an essential part of nonprofit business operations. It

oftentimes determines how successful the nonprofit organization will be.

The organization’s aim is not only to attract and keep a steady group of

loyal customers, but also to expand the customer base by identifying and

attracting new customers and to reduce risks by anticipating market

shifts that can affect the organization’s bottom line.

An organization’s marketing plan should include strategies typical of any

marketing plan. The plan should especially include what marketers dub

as the 4 P's of Marketing (Product, Price, Place and Promotion) Include a

brief explanation for each strategy.

• Describe the target market by

3⁄4 Age

3⁄4 Sex

3⁄4 Profession/career

3⁄4 Income level

3⁄4 Educational level

3⁄4 Residence

Since the organization will have limited resources target only those

customers who are more likely to purchase the organization’s product or

service. As the organization grows and its customer base expands, then,

it may need to consider modifying this section of the marketing plan to

include other customers.

• Identify competition

3⁄4 Market research data

3⁄4 Demand for product or service

3⁄4 Nearest direct and indirect competitors

3⁄4 Strengths and weaknesses of competitors

3⁄4 Assessment of how competitors are doing

3⁄4 Description of the unique features of the organization’s product

or service

3⁄4 Similarities and dissimilarities between the organization’s

product or service and competitor's
Guide to Creating a Nonprofit

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3⁄4 Pricing strategy for and comparison of the organization’s and the

competition's

• Describe product/service

3⁄4 Describe the organization’s product or service

Try to describe the benefits of the organization’s goods or services from

the customer's perspective. Emphasize its special features -- i.e., the

selling points. Successful business owners know or at least have an idea

of what their customers want or expect from them. This type of

anticipation can be helpful in building customer satisfaction and loyalty.

• Develop marketing budget

3⁄4 Advertising and promotional plan

3⁄4 Costs allocated for advertising and promotions

3⁄4 Advertising and promotional materials

3⁄4 List of advertising media to be used

Operating an effective marketing plan requires money, so the

organization will have to allocate funds from its operating budget to

cover advertising, promotional and all other costs associated with

marketing. Develop a marketing budget based on the cost for the media

to be used, and the cost for collecting research data and monitoring

shifts in the marketplace.

• Describe location (Place)

3⁄4 Description of the location

3⁄4 Advantages and disadvantages of location

• Develop pricing strategy

3⁄4 Pricing techniques and brief description of these techniques

3⁄4 Retail costing and pricing

3⁄4 Competitive position

3⁄4 Pricing below competition

3⁄4 Pricing above competition

3⁄4 Price lining

3⁄4 Multiple pricing

3⁄4 Service costs and pricing

3⁄4 Service components

3⁄4 Material costs

3⁄4 Labor costs

3⁄4 Overhead costs

The key to success is to have a well-planned strategy, to establish the

organization’s policies and to constantly monitor prices and operating
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costs to ensure profits. Keep abreast of changes in the marketplace

because these changes can affect the organization’s bottom line.

• Develop an effective promotional strategy

3⁄4 Advertising media

3⁄4 Print media (newspaper, magazine, classified ads, Yellow Pages

advertising, brochure)

3⁄4 Radio

3⁄4 Television

3⁄4 Networking

3⁄4 Business cards

3⁄4 Tee shirts, hats, buttons, pens

Develop a promotional strategy that uses various media for promoting

the organization and its products. Monitor the different media identifying

those that most effectively promote the organization.

Financial institutions weigh the soundness of an organization’s

marketing plan when deciding whether the organization is a good risk

for their money. It is important that the organization prepare and present

credible market data that shows there is a need in the community for the

organization and its products and that demonstrates the organization’s

ability to compete successfully.

6.6 Fund-raising3

Fund-raising and grantsmanship are skills crucial to the nonprofit

organization. Generally, the Board and chief executive are active in

fund-raising activities. It is not necessary for a small organization to seek

out the expertise of a professional fund-raiser. Many of the most

successful fund-raisers learned the fine art of grantsmanship as they

struggled to find funds for their fledgling programs.

Fund-raising can take many forms ranging from bake sales and

telemarketing to requests for sizeable grants from foundations,

corporations or government entities. Fund-raising activities should be

guided by the organization’s strategic plan and business plan. A growing

number of organizations receive some or all of their funds from one or

more government agencies. Public funding differs from private funding

in the proposal process, accountability requirements, and guideline

compliance in such areas as hiring practices and client targeting.

The first step in securing a large grant from a foundation, corporation or

government entity is a simple one: make sure the proposed program is

worthy of funding and that the appeal is directed to the appropriate
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funder. Proposals should be written only after the purpose and scope of

the program have been delineated in detail, its relationship to existing

community services outlined, and the methods and target population

defined.

While most funders have explicit proposal requirements, most proposals

contain the following basic components:

• Cover Letter

• Proposal Summary

• Organization Qualifications

• Statement of Need

• Goals and Objectives

• Approach to Addressing Need

• Staffing

• Evaluation

• Future Funding

• Budget

• Appendix (Supporting Documentation)

The proposal review process can be a lengthy one, especially for

government agencies. Be patient. If funds are not awarded, the funder

should provide a technical debriefing to identify where the proposal was

deficient. This information will help create a stronger proposal for the

next funding cycle or for another funder. If funds are awarded, the

organization and funder will sign a contract, sometimes after

negotiation, which stipulates the terms and conditions associated with

the award.

Many successful organizations generate numerous funding appeals and

proposals in a year. The rationale is simple: the larger the number of

appeals, the greater the chances for success.

6.7 Monitoring and Evaluation

Program and staff monitoring is critical for ensuring that the organization

and its programs are operating according to approved policies, contracts

and legal requirements. Each staff person is responsible for monitoring

their own performance, the chief executive is responsible for monitoring

staff performance and program operations and the Board of Directors is

responsible for monitoring the overall organization to ensure goal

attainment, budget adherence, quality control and compliance with legal

and regulatory requirements.

Monitoring
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On the staff level, the chief executive monitors staff performance through

regular staff meetings, document review and annual staff evaluations.

The Board monitors the organization’s operations by reviewing

documents provided by the chief executive at each Board meeting and

through informal discussions with the chief executive at any time.

Monitoring results should be documented, kept on file, and include

specific recommendations and timeframes for improving staff

performance and/or program operations. These results should be linked

to program evaluation, budgeting, and planning activities.

Evaluation5

Program evaluation is a careful collection of information about a

program or some aspect of a program in order to make necessary

decisions about the program. The type of evaluation used to improve the

organization’s programs depends on what the organization wants to

learn about the decisions that need to be made. There are three types of

program evaluation:

• Goals-based Evaluation: Are the programs achieving their overall

and measurable goals?

• Process-based Evaluation: How do the programs really work and

what are their strengths and weaknesses?

• Outcomes-based Evaluation: To what extent did the programs

actually provide benefits to the clients?

Outcomes-based evaluation increasingly is important to nonprofits and

their funders because of the need to know the actual impact of a

program or a grant. Exhibit 6.4 provides an overview of the major

methods used to collect data during evaluations.
Guide to Creating a Nonprofit

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Exhibit 6.4

Program Evaluation Methods

Method Overall Purpose Advantages Challenges

Questionnaires

Surveys

Checklists

When need to

quickly and easily

get lots of

information from

people in a nonthreatening way.

• Can complete

anonymously

• Inexpensive to

administer

• Easy to compare and

analyze

• Can get lots of data

• Many sample

questionnaires exist

already

• Might not get careful

feedback

• Wording can bias

client responses

• Are impersonal

• May need sampling

expert

• Doesn’t capture full

story

Interviews

When want to fully

understand client

impressions or

experiences, or

learn more about

their questionnaire

responses

• Get full range and

depth of information

• Develops relationship

with the client

• Can be flexible with

the client

• Can be timeconsuming

• Can be difficult to

analyze and compare

• Can be costly

• Interviewer can bias

client responses

Document review

When want

impression of how

program operates

without

interrupting the

program; includes

review of

applications,

finances, memos,

minutes, etc.

• Get comprehensive

and historical

information

• Doesn’t interrupt

program or client’s

routine in the program

• Information already

exists

• Few biases about the

information

• Often takes much

time

• Information may be

incomplete

• Need to be clear

about what looking

for

• Not a flexible means

for getting data

• Restricted to

document

availability

Observation

When need to

gather accurate

information on

actual program

operations.

• View program

operations in action

• Adaptable to

changing events

• Can be difficult to

interpret actions

• Can be complex to

categorize

observations

• Can influence

behaviors of program

participants

• Can be expensive

Focus groups

When need to

explore a program

in depth through

group discussions

and can be useful

in marketing.

• Quickly and reliably

get common

impressions

• Can be efficient way

to get a range and

depth of information

quickly

• Can convey key

information about the

program

• Can be hard to

analyze responses

• Need good facilitator

for safety and closure

• Difficult to schedule

6-8 people together

Case studies

When need to fully

understand a

client’s experiences

in the program and

to conduct

comparison with

similar programs.

• Fully depicts client

experiences

• Powerful means to

portray program to

outsiders

• Usually quite time

consuming to collect

and describe

• Represents depths of

information rather

than breadth
Guide to Creating a Nonprofit

Homeownership Entity

88

A nonprofit may elect to conduct informal evaluations at any time and

some form of evaluation should be conducted annually. Formal

evaluations should be conducted by an contracted independent entity to

assure the integrity of the results. Further, formal evaluations require

advanced skills that may be beyond the organization’s capabilities.
Guide to Creating a Nonprofit

Homeownership Entity

89

7.0 Pine Ridge Case Study

During the summer of 1998, Secretary Andrew Cuomo of the United

States Department of Housing and Urban Development (HUD) visited

the Pine Ridge reservation. Secretary Cuomo examined first-hand the

severe housing and economic development challenges facing the Oglala

Sioux Tribe and met with tribal leaders to listen to their concerns.

Tribal leaders discussed their interest in promoting homeownership,

articulated in the Tribe’s Indian Housing Plan. They pointed out the need

for a philosophical change in the delivery of housing services. Since the

1960s, the Tribe’s Housing Authority has provided rental and other

federally assisted housing options, but it has not had the capacity to

provide extensive homeownership services.

In response to these discussions and the poor housing conditions he

witnessed, the Secretary sought to partner with the Tribe to bring more

homeownership opportunities to the families living on reservations

through the Shared Visions Initiative.

Shared Visions seeks to create comprehensive approaches to developing

affordable low- and moderate-income homeownership housing and to

increase the investment of both private and nonprofit capital. The

Initiative will build a framework for future homeownership, legal and

economic development efforts throughout Indian country. To serve as a

national catalyst, HUD designated the Pine Ridge reservation as a pilot

project centered on public and private partnerships to make

homeownership a reality for Native Americans nationwide.

Since the Secretary’s visit last summer, the partners involved in the Pine

Ridge pilot of Shared Visions have made enormous strides. They have

established a nonprofit entity, identified and counseled homebuyers who

have since qualified for mortgages, and have been intimately involved in

the development of new housing units on the reservation. This section

details these exciting developments.

The Pine Ridge reservation, located in southwestern South Dakota, is the

home of the Oglala Sioux Lakota Tribe. The reservation spans an area

that roughly equals the size of the state of Connecticut. The reservation

population is estimated to be 38,000.

Pine Ridge is located in Shannon County which has been the poorest

county in the United States for the past 30 years. According to the 1990

Census, the per capita income in Shannon County is approximately

Introduction

Pine Ridge, South

Dakota
Guide to Creating a Nonprofit

Homeownership Entity

90

$11,000 per year. The reservation faces severe housing and economic

development needs. The unemployment rate reaches 85 percent at

certain times of the year. Little infrastructure exists and commerce is

minimal. An estimated 4,000 families need homes. In many cases, three

or four families share a single house and many houses are in substandard

condition and lack complete plumbing.

The Oglala Sioux Lakota Housing (OSLH) has been identified by the

Oglala Sioux Tribal Council as the Tribally-Designated Housing Entity

(TDHE). The OSLH was established in 1961 and was the first Indian

Housing Authority in the nation. The OSLH currently manages a total of

approximately 1,700 reservation housing units, consisting of 1,200 lowincome rental units and roughly 500 homeownership units. In its most

recent Indian Housing Plan, the OSLH identified a need for 4,000

additional units on the reservation. The waiting list for housing includes

more than 1,200 families.

In testing innovative and comprehensive approaches to addressing the

housing challenges that face Pine Ridge, HUD’s Office of Native

American Programs (ONAP) partnered with Oglala Sioux Tribe to

develop a national pilot project in designing homeownership

opportunities. In consultation with the Tribal Council, OSLH, and other

reservation partners, ONAP awarded the tribe a grant to create a nonprofit entity that would be separate and independent from the tribal

governance structure. Its functions include:

• Assess homebuyer readiness and provide pre- and posthomeownership counseling

• Develop personal financial management and housing counseling

services

• Serve as a conduit between lending institutions and tribal members

• Market-shop and negotiate for the best lending packages for tribal

members

• Develop housing that is desired and affordable by homebuyers

• Maintain funding sources to close the gap on down payment and

monthly mortgage costs

• Seek out and secure other sources of gap financing

• Develop sources of housing and housing-related products

Organizational

Development of

OSTPH
Guide to Creating a Nonprofit

Homeownership Entity

91

• Serve as a resource and referral center for tribal members interested

in homeownership

In essence, the nonprofit homeownership entity will bridge the gap

between Native American borrowers and the private market that

provides the services needed to facilitate on-reservation homeownership.

The Oglala Sioux Tribal Council unanimously enacted Ordinance No.

99-04 on January 28, 1999 (see Exhibit 7.1), adopting a charter for

Oglala Sioux Tribe Partnership for Housing, Inc., a nonprofit corporation

chartered under the laws of the Oglala Sioux Tribe.

Exhibit 7.1

Tribal Ordinance

Ordinance of the Oglala Sioux Tribal Council Approving the

 Oglala Sioux Tribe Partnership for Housing, Inc.

WHEREAS, there continues to be housing crisis on the Pine Ridge reservation

for its residents, and

WHEREAS, a part of the efforts to address the housing shortage is to develop

new models and new methods to provide housing to the residents of the Pine

Ridge reservation, and

WHEREAS, the Oglala Sioux Tribe Partnership for Housing, Inc. will have the

capacity to assist tribal members to find affordable, decent and safe housing

by improving access to the lending market, and

WHEREAS, the Oglala Sioux Tribe Partnership for Housing, Inc. will have the

ability to work with private and public agencies to develop affordable,

decent, and safe housing through cooperative efforts of tribal, federal, private

and public agencies, foundations, associations and groups, and

WHEREAS, the establishment of the nonprofit entity is in the long-term best

interest of the Oglala Sioux Tribe, and its families, and members, now

THEREFORE BE IT ORDAINED, that the Oglala Sioux Tribe does hereby

adopt the attached Not-For-Profit Charter of the Oglala Sioux Tribe for

Partnership for Housing, Inc. and its by-laws.

OSTPH formally adopted its interim Articles of Incorporation and Bylaws on February 17, 1999. Recently, the OSTPH Board of Directors

adopted a revised and amended Charter and Articles of Incorporation to

clarify its purpose and authority. (See Appendices 3.1 and 3.2)

Creation of a

Nonprofit

Corporation
Guide to Creating a Nonprofit

Homeownership Entity

92

After the tribal ordinance was enacted, an interim Board of Directors

was established. Currently, eight members of the tribe comprise the

OSTPH Board of Directors: President Paul Iron Cloud, Vice President

Wilbur Between Lodges, Vice President Melvin Cummings, Treasurer

Mike Graham, Secretary Bim Pourier, Harold Dean Salway, Elsie Meeks,

and Gerald One Feather. The Board meets at least once a month and a

held a strategic planning retreat in late May.

During February and March 1999, office space was obtained and a

temporary Administrative Assistant was hired. In May 1999, the Board of

Directors hired Roger Campbell as the Executive Director. As envisioned

by the Board, OSTPH would maintain a staff comprised of a housing

counselor, a specialist in tribal land assembly issues, and a construction

manager to coordinate development activities.

A two-year operational budget has been developed by OSTPH. The

budget identifies sources and uses of funds for the organization’s

administrative functions and programmatic initiatives related to

homeownership counseling, leveraging financial capital, and developing

new housing stock for ownership.

To further its mission and obtain additional sources of support, OSTPH

secured official recognition from the Internal Revenue Service as taxexempt under Section 501(c)(3) of the Internal Revenue Code of 1986.

Recognition under Section 501(c)(3) allows contributions made to

OSTPH to qualify for charitable deductions under the rules set forth in

Section 170 of the Internal Revenue Code. OSTPH operates exclusively

for charitable and educational purposes, by providing homeownership to

low and moderate income tribal members. This promotes the general

welfare of the tribe and combats community deterioration while

lessening the burdens of government.

In early fall 1998, discussions began on the preliminary plans for the

construction of new homes by early August 1999. It was determined that

OSTPH would work to identify interested families and provide

counseling and training to help them become homebuyers. Families

would have the option of a manufactured or a stick-built home. The

organization would serve as a liaison with the mortgage bank and

manufactured home dealers.

OSTPH decided to hire local contractors to lay foundations and build

the modular homes. This creates employment opportunities on the

reservation, and helps build local skills and capacity for future

construction-related jobs. In fact, use of local labor is one of the key

principles underlying the construction planning for the Building Summit.

Board of Directors

Executive Director

and Staff

Filing for IRS

Designation as a

501(c)(3) Tax-exempt

Organization

The Pine Ridge

Building Summit
Guide to Creating a Nonprofit

Homeownership Entity

93

Two principles underlie the construction planning for the Building

Summit:

• As a corporate citizen of the Pine Ridge reservation, OSTPH seeks to

use its building project to stimulate the local economy and to use

local service and materials providers to the greatest extent possible.

• As a nonprofit organization with limited funds working in an area

with great need, OSTPH seeks to keep all costs as low as possible in

order to provide greater housing options to the largest number of

families.

Collaboration by many public, private and nonprofit partners is making

the Building Summit a reality. All have committed to work together to

make OSTPH a successful model for replication throughout Indian

Country. Developing the Shared Visions model and preparing for the

Building Summit have been an excellent example of interagency

coordination on the ground at Pine Ridge. OSTPH has coordinated

closely with BIA on construction preparation for homes to be built,

including streamlined approval of sites for preparation. Indian Health

Services conducted the design and infrastructure development oversight

at no cost. In addition, the U.S. Navy Seabees have donated the labor to

construct and pave the roads. Recent designation of Pine Ridge as an

Empowerment Zone also complements the efforts through coordination

with Rural Development at the U.S. Department of Agriculture. HUD

and the Tribe have worked to incorporate private interests into the

initiative, including Norwest Mortgage, Inc., the First National Bank of

Gordon, and Amerind Risk Management Corporation. Ginnie Mae is

participating by guaranteeing the security that Norwest Mortgage, Inc. is

creating.

Exhibit 7.2 lists the key partners that have contributed funds, resources,

and people to the first phase of the Building Summit.

Construction

Philosophy

The Building Summit

Partners
Guide to Creating a Nonprofit

Homeownership Entity

94

Exhibit 7.2

Pine Ridge Building Summit Partners

Public Private Nonprofit Tribal

U.S. Dept. of

Housing & Urban

Development and

Ginnie Mae

Norwest

Mortgage, Inc.

Oglala Sioux Tribe

Partnership for

Housing, Inc.

Oglala Sioux Tribal

Council & President

U.S. Dept. of

Agriculture

First National

Bank of Gordon

The Enterprise

Foundation

Ogala Sioux Lakota

Housing (TDHE)

Indian Health

Service

Amerind Risk

Management

Corporation

The Communities

Group

The Lakota Fund

Bureau of Indian

Affairs

Oglala Lakota

College

Federal Home Loan

Bank Board of Des

Moines

Department of

Defense (U.S. Navy

Seabees)

OSTPH worked to identify potential homebuyers through community

education and outreach including hosting homebuyer fairs, sending

mailings, holding informational meetings, and collecting preapplications. This activity started soon after Secretary Cuomo’s visit,

when tribal leaders began working with ONAP to plan and sponsor a

homebuyer fair to begin to determine the level of interest in

homeownership on the reservation.

A couple of months later, the newly-created OSTPH partnered with the

ONAP Denver office to sponsor a second homebuyer fair and follow-up

meeting to discuss homeownership opportunities on the reservation with

interested parties.

Over 300 people attended both homebuyer fairs held on the reservation.

These were attended not only by prospective homebuyers, but also by

parties interested in becoming partners in the initiative. These included

financial institutions, builders, and manufactured home providers such

as Norwest Mortgage, Inc., FHA, USDA Rural Housing Service, Habitat

for Humanity, Rapid City Housing Coalition, Centennial Homes, Legend

Homes, I-Deal Homes, Omaha Steelheart, Stockmens National Bank,

KILI Radio, and the Manufactured Housing Institute.

In January 1999, a mailing was sent to nearly 3,000 tribal families,

which included attendees of the homebuyer fairs, homebuyer meeting,

Establishig a Pool of

Applicants
Guide to Creating a Nonprofit

Homeownership Entity

95

and families with postal addresses in the three targeted districts of the

reservation.

OSTPH and ONAP reviewed the responses to the mailing in which

families answered basic questions on debt and income. Based on the

survey information provided, OSTPH and ONAP invited those families

thought likely to apply for a mortgage to a homebuyer meeting. At this

meeting, families had the opportunity to complete a mortgage

application with Norwest Mortgage, Inc. and select a preference for a

site option and home construction type.

Housing counseling was made available to those families that were

determined not to be “homebuyer ready,” to help them take steps to

prepare for homeownership. Families that completed a mortgage

application but did not qualify were referred to Norwest Mortgage’s

Homebuyers Club for housing counseling. In addition, these families

were offered housing counseling from OSTPH. The families that were

pre-qualified for a mortgage and targeted for underwriting were required

to attend a series of housing counseling workshops.

These housing counseling workshops covered a variety of topics, and

were offered multiple times, during the week and on weekends.

Different partners offered these sessions free of charge.

• Norwest Mortgage, Inc. offered a session covering “Understanding

Mortgages and Land Status” and “Waiting for Loan Approval,” as

well as another session on “What Happens at Loan Closing?,”

“Documents You Will be Signing,” and “What is Hazard Insurance?”

• The Rapid City Housing Coalition offered a session on “Why Own a

Home?,” “Budgeting – A Plan for Spending,” and “Importance of

Good Credit.”

• Legend Homes and the Regional Vice President for the National

Association of Realtors presented on “Caring for Your Home,”

“Good Neighbor Policy,” “Importance of Making Your Payments on

Time, “ and “What to Do if You Can’t Make Your Payment?”

In September 1999, OSTPH engaged an experienced homeownership

counselor to deliver individual and customized counseling to interested

homebuyers who need to resolve specific debt, income and mortgage

application issues. This one-on-one counseling has proven highly

effective in reassuring the homebuyers during the mortgage application

and closing phases and in resolving specific problems that require strict

confidentiality.
Guide to Creating a Nonprofit

Homeownership Entity

96

A commitment from the United States Department of Agriculture (USDA)

to fund 75 percent of the infrastructure costs for 50 homes was obtained.

OSLH committed to fund the remaining 25 percent of infrastructure costs

and to provide up to $100,000 in NAHASDA funds for down payment

and closing cost assistance ($2,000 per family).

For the currently qualified mortgage applicants, Norwest Mortgage, Inc.

is offering 30-year fixed rate mortgages underwritten by HUD Section

184 loan guarantees. OSTPH has budgeted grant funds to assist further

with principal and closing cost buy-downs as necessary.

To help offset the cost of the homes, OSTPH received a grant under the

Affordable Housing Program offered by the Federal Home Loan Bank of

Des Moines to assist in the buy-down of housing construction costs.

Through the combined efforts of the Tribal government, BIA, and the

Enviro-Tech Team, fifty-seven sites in seven locations were identified for

the construction of these units. Three districts on the reservation are

targeted for the new homes: the Wakpamni District, Oglala in White

Clay, and Pine Ridge Village. Sites for this project were chosen from setaside lands and were limited to a 35-mile radius of Pine Ridge. In the

future, OSTPH plans to undertake building efforts in all districts.

In May 1998, President Clinton launched the Partnership for Advancing

Technologies in Housing (PATH), an initiative designed to dramatically

reduce carbon emissions from houses. Under PATH, the federal

government is working with the private sector and state and local

governments to deploy technologies that curb greenhouse gas emissions.

Technologies that promote energy efficiency, such as better insulation

and building materials, benefit the homeowner and the environment.

The houses built during the Pine Ridge Building Summit incorporate

PATH components to maximize efficiency and minimize homeowner

utility costs.

Homebuyers had two basic options from which to choose: modular

homes assembled at a facility located in Kyle, on the Pine Ridge

reservation, or manufactured homes assembled off the reservation but

delivered directly to the building sites. Homebuyers selected three and

four bedroom models.

To proceed with the first phase of the development of the new homes,

OSTPH procured manufactured homes from dealers in Rapid City and

Leveraging Financial

Resources to Make

Homeownership

Affordable

Site Selection

Partnership for

Advancing

Technologies in

Housing

Housing Options
Guide to Creating a Nonprofit

Homeownership Entity

97

contracting with local labor to assemble modular homes at a facility

located in Kyle, on the reservation.

The Building Summit project is owned by OSTPH which has general

oversight responsibility for all aspects of the project. To facilitate the

day-to-day management of construction activities, OSTPH entered into a

memorandum of understanding with OSLH to provide construction

supervision and inspection of the installation of foundations, utilities,

construction of modular homes, pre-closing inspection and project

budgeting and accounting. OSTPH reimburses OSLH for actual services

performed by its employees on an hourly rate.

For the manufactured homes, OSLH managed the site preparation and

infrastructure development. In May 1999, OSTPH issued Requests for

Qualifications/Proposals with PATH compliant specifications, selected

the two best-qualified manufactured home builders, and entered into

negotiations regarding price, quality, performance, and delivery

schedule. Contracts were signed in June 1999 with Iseman Corp. and

Foothills Homes Inc. During June the manufactured home builders met

with the homebuyers, who made their final determination on options

related to floor plans, house color, and finishes. The homes were

delivered and completed during the summer and fall of 1999.

For the modular homes, OSLH managed all aspects of the construction

of the homes at the Kyle modular home facility, including the selection

of labor contractors, mechanical and electrical contractors, and

materials procurement policies and procedures. This delivery

mechanism was identical to that employed by OSLH in constructing 18

modular homes for housing authority inventory and relies primarily on

tribally-based contractors. The OSTPH held a contractors’ pre-bid

meeting to describe the construction plan. OSTPH then issued a Request

for Proposals for subcontractors for the modular units and construction

of foundations. OSTPH entered into multiple contracts with local

contractors for the construction of foundations for all homes.

Many financial resources needed to be leveraged to enable tribal

families to purchase their first homes. Building homes or transporting

manufactured homes is more expensive because of the remote location

of the Pine Ridge Reservation. For example, infrastructure costs – paving

new roads, creating access to water and sewer– are high at over $17,000

per home. Total development costs are over $100,000 per home.

Financing has been obtained to address two issues: lower interest rates

on the mortgages and gap financing for construction.

Construction

Management

Manufactured

Homes

Modular Homes

Financing
Guide to Creating a Nonprofit

Homeownership Entity

98

To keep homeownership affordable, it is important to obtain lower

interest rates on the mortgages. The lower the interest rate, the higher

mortgage amount each homebuyer can receive. Two techniques were

used to reduce interest rates – guarantees and mortgage revenue bonds.

Norwest Mortgage, Inc. originates the mortgages and packages them into

a “security.” The mortgages are then underwritten by the HUD Section

184 loan guarantee program and the “security” was then guaranteed by

Ginnie Mae. The State of South Dakota Housing Development Agency

plans to purchase the mortgage-backed security with proceeds from the

Mortgage Revenue Bond program. The result – 30-year mortgages with

only 5.95 percent interest rate.

Even with the lower interest rates, the low incomes of tribal members

means the average mortgage a buyer can afford is less than $65,000 –

nearly $40,000 short of total development costs. This gap is similar to

other rural and inner city regions. Several financing sources were tapped

to “fill the gap”:

• Federal Home Loan Bank of Des Moines Affordable Housing

Program (FHLBDM): The FHLBDM awarded OSTPH a grant to

provide $10,000 per home to help “fill the gap.” While the program

is very competitive (they receive over 5 times the applications they

can fund), they have a priority for rural projects and for projects for

those with very low incomes.

• Rural Development Program of the U.S. Department of Agriculture

(RDUSDA): RDUSDA pledged almost $10,000 per home to install

water and sewer infrastructure. To save on the costs of hiring

specialists to oversee the design and installation of the water and

sewer systems, the Indian Health Service performed the design and

infrastructure development oversight at no cost. In addition, the U.S.

Navy Seabees donated the labor to construct and pave the roads.

• U.S. Department of Housing and Urban Development Rural Housing

and Economic Development Initiative Program: The Oglala Sioux

Tribe Partnership for Housing, Inc. has obligated $20,000 per home

of HUD Rural Housing and Economic Development grant funds

toward “filling the gap.” The program provides grants to innovative

projects that promote development in distressed rural communities.

• Native American Housing Assistance and Self- Determination Act

Block Grant: The Tribe’s TDHE, Oglala Sioux Lakota Housing, has

committed $2,000 in NAHASDA funds to each homebuyer to cover

their down payment and closing costs.

Lower Interest Rates

Construction Gap

Financing
Guide to Creating a Nonprofit

Homeownership Entity

99

• Foundation support: OSTPH has been actively seeking Foundation

support for this project. An estimated $2,500 per home came from

Foundation support.

OSTPH and other partners are subsidizing portions of the Building

Summit – from the construction of roads and water and sewer lines to

buying mortgage principal and closing costs. In order to maintain these

subsidy amounts on the new homes, OSTPH is taking a “soft” second

mortgage against the value of the subsidy placed in the home. The

outstanding balance of the second mortgage declines over a ten-year

satisfaction period – whereby the homebuyer agrees to make first

mortgage payments in a timely manner and participates in a homeowner

association that develops rules related to homeownership maintenance

and occupancy.

After the ten-year satisfaction period, the homebuyer can sell the home

at its market value with no repayment of subsidy investments. OSTPH

also retains the first right for refusal to purchase a home if one of the

homebuyer decides to sell the structure prior to the end of the ten-year

period.

In its first year of operation (Phase 1), OSTPH constructed and sold 19

new homes to qualified buyers who had received homeownership

training and counseling. These first homes brought in financing unique

to the Tribe, including the first use of state mortgage revenue bonds. The

total development cost for these new homes was $2,346,379 of which

$671,000 was funded by a 1998 Rural Housing and Economic

Development grant which leveraged $1,675,379 in other funds.

Shared Visions Court Homeowners Association: The owners of nine

clustered houses have formed the Shared Visions Court Homeowners

Association in an effort to preserve home values, maintain safety and

security, and promote a healthy living environment. OSTPH encouraged

the formation of the association and provided training and technical

assistance so that the homeowners could develop and enforce the rules

and regulations. The association is awaiting approval from the Tribe for

its Articles of Incorporation and Bylaws. Additional homeowners

associations are planned at all other clustered housing developments to

promote neighborhood cohesion and collaboration.

OSTPH will continue to work with interested families to become eligible

for private mortgages and to purchase a home. As enough families

qualify for mortgages and additional funding is secured, OSTPH will

facilitate the construction of new homes. OSTPH plans on using a

Homeownership

Agreements

Accomplishments in

the First Year

Future Housing

Development Plans
Guide to Creating a Nonprofit

Homeownership Entity

100

variety of approaches to bring homeownership opportunities to the Pine

Ridge reservation.

In Phase 2, OSTPH plans to:

• Construct and sell 10 houses in collaboration with the Department of

Defense and the Walking Shield American Indian Society

• Construct and sell 8 houses under the Shared Visions Initiative

• Implement a Self-Help Housing Initiative to build and sell 6 homes

• Construct and sell 1 house using low-cost, advanced steel frame

technology

• Construct 20 rental units using Low Income Housing Tax Credits

• Provide homeownership training and counseling to over 50 potential

homebuyers and homeowners

In October 1999, OSTPH entered into an agreement with Global

Modular Home Builders to purchase a demonstration unit for location

on the Pine Ridge reservation. Global modular has designed a steelframed, pre-fabricated modular assembly unit with a technically

advanced Viroc board for high resistance factor sheathing. These homes

are also fire, termite and rodent-resistant. The first 1,152 square foot

three- bedroom unit will be completed by May 2000 and stored at a

warehouse (at no cost to OSTPH) by the First National Bank of Gordon.

This home will be moved in July to the Oglala development site.

Over an approximately 8-week period beginning in May 2000, the U.S.

Navy Seabeas 3rd Construction Brigade of roughly 14 people will

construct two homes. In an intensive 21-day period beginning on July 6,

2000, the U.S. Army Reserve 980th Engineer Battalion of more than 550

Army Reservists will construct 8 homes. The Department of Defense

estimates the value of donated military personnel to be $1,934,000.

Beginning in June 2000 six families will begin building their homes over

a twelve-week period. The families will assist each other in building

their homes, using volunteer-friendly design and materials brought from

self-help models completed in Texas, with modifications defined by

community design ”charrettes” held at Pine Ridge in November 1999

and March 2000. Since self-help requires specialized oversight skills,

OSTPH will hire a construction manager specifically for the self-help

initiative in May, 2000.

In September 2000 OSTPH will release an RFP for builders for 8

manufactured homes to be delivered to Pine Ridge in November 2000 (4

homes) and March 2001 (4 homes). The homes will be built to energyefficient and durability standards developed by OSTPH over the last
Guide to Creating a Nonprofit

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101

year. OSTPH will release an RFP in September 2000 for local contractors

to complete the installation and finishes for these houses, to be

completed in a two month period after homes are delivered.

OSTPH is conducting on-going marketing for Phase 2 homes. On

average, three to four applicants call or come to the OSTPH offices each

day. Thirty-seven people, who are income eligible but have credit or

other obstacles to home-ownership, are enrolled in classes designed to

improve their credit and prepare for home ownership. About half of

these families will be eligible in time to purchase one of the houses.

The OSTPH Board will consider implementing a lease-to-purchase

program on a pilot basis. The program, called Path-to-Purchase, will

enable tribal members with uneven credit to move into their new homes

while working to clear up their credit. The homebuyer would gain full

title to the home after their credit has met the standards required by

OSTPH.

The creation and mission of OSTPH represent an achievement of the

Oglala Sioux Tribe in exerting greater control and sovereignty over a

fundamental human need: the financing and development of decent and

affordable housing.

OSTPH’s success at attracting housing development funding from

numerous public, private and nonprofit sources and its ability to

implement a variety of housing initiatives help reduce tribal dependency

on unpredictable and limited HUD funding. For the first time in its

history, the Tribe is able to build new housing and provide wider

housing choice to homebuyers and renters, especially those with lower

incomes and physical disabilities.

Conclusion

Guide to Creating a Nonprofit

Homeownership Entity

103

End-Notes

Section 2.0

1. 1. Marcus, Jay. “The Development Process: Funding Sources through the Development

Process,” The Enterprise Foundation, 10227 Wincopin Circle, Suite 500, Columbia, Maryland

21044. Presented at the 10th Annual Oweesta Conference.

Section 5.0

1. "Ten Basic Responsibilities of Nonprofit Boards." Washington, DC: National Center for

Nonprofit Boards, 1988. http://www.ncnb.org/html/faq.html

2. “Right from the Start: A Handbook for Not-For-Profit Board Members,” State of New York

Attorney General, http://www.oag.state.ny.us/charities/duties.html.

3. Ibid.

4. Ibid.

5. From National Center for Nonprofit Boards (NCNB) Webpage, Frequently Asked Questions

(FAQ), http://www.ncnb.org/html/faq.html#question2. For a sample conflict of interest policy

and disclosure form, see National Center for Nonprofit Boards’ booklet, “How to Manage

Conflicts of Interest: A Guide for Nonprofit Boards.”

6. . Ibid.

7. Bryson, John M., Alston, Farnum K. Creating and Implementing Your Strategic Plan. San

Francisco, CA: Jossey-Bass Inc., 1996.

8. Canada/British Columbia Business Service Centre, Online Small Business Workshop,

http://www.sb.gov.bc.ca/smallbus/workshop/busplan.html

9. Hummel, Joan. Starting and Running a Nonprofit Organization. Minneapolis: University of

Minnesota Press, 1980.

10. “How Do We Prepare a Budget?” Alliance for Nonprofit Management Webpage.

http://www.allianceonline.org/faqs/fmfaq20.html

11. “What is an Internal Accounting Control System and How Can We Make Ours Effective?”

Alliance for Nonprofit Management Webpage.

http://www.allianceonline.org/faqs/fmfaq24.html
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Section 6.0

1. Marcus, Jay. “The Development Process: Funding Sources through the development process,”

The Enterprise Foundation, 10227 Wincopin Circle, Suite 500, Columbia, Maryland 21044.

Presented at the 10th Annual Oweesta Conference

2. “The Marketing for Success Workbook”. U.S. Small Business Administration Webpage.

http://www.sbaonline.sba.gov:70/11/Business-Development/Busines-Initiatives-EducationTraining/Marketing-Plan

3. Hummel, Joan. Starting and Running a Nonprofit Organization. Minneapolis: University of

Minnesota Press, 1980.

4. McNamara, Carter. “Basic Guide to Program Evaluation”. Management Assistance Program for

Nonprofits Webpage. http://www.mapnp.org/library/evaluatn/fnl_eval.htm#anchor1586742
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Appendix 3.2 – Sample Articles of Incorporation

AMENDED AND RESTATED

CHARTER

AND

ARTICLES OF INCORPORATION

OF

OGLALA SIOUX TRIBE PARTNERSHIP FOR HOUSING, INC.

The undersigned, who is a citizen of the United States and enrolled member of the Oglala Sioux

Tribe, acting as an incorporator of a nonprofit corporation, hereby adopts the following Articles of

Incorporation:

ARTICLE I

The name of the corporation is “Oglala Sioux Tribe Partnership For Housing, Inc.” and its period

of duration is perpetual.

ARTICLE II

The initial place on the Pine Ridge Reservation where the principal office of the Corporation is to

be located is:

The Old Ambulance Building

Pine Ridge, South Dakota

Its mailing address is:

Oglala Sioux Tribe Partnership For Housing, Inc.

PO Box 3001

Pine Ridge, SD 57770
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ARTICLE III

A. This Corporation is organized and shall be operated exclusively for charitable and

educational purposes as contemplated and permitted by Sections 170(c)(2) and 501(c)(3) of

the Internal Revenue Code of 1986, as amended (the “Code”). All references in these

Articles of Incorporation to a particular section of the Code shall include the corresponding

provisions of any future federal tax law. Within the framework and limitations of the

foregoing, the specific primary purposes of the Corporation include:

1) To improve the community physically, socially, and economically by the

coordinated efforts of the citizens of the Oglala Sioux Tribe, the business community,

and government representatives, thus promoting the general welfare and combating

community deterioration while lessening the burdens of government.

2) To promote and develop affordable, decent, safe, and sanitary housing for residents

of the Pine Ridge Reservation.

3) To enhance affordable home ownership opportunities among residents of the Pine

Ridge Reservation.

4) To establish linkages and partnerships with public and private financial

intermediaries and to provide financial services and assistance, including, but not

limited to, home ownership loans, down payment buy-downs, lease-purchase

options, revolving loan funds, and loan loss reserve services.

5) To provide information, technical assistance, and housing counseling to the residents

of the Pine Ridge Reservation concerning the methods and resources available for

construction of new housing and the rehabilitation of substandard housing. The

Corporation is also formed for the educational purposes of instructing the residents of

the Pine Ridge Reservation on how to prepare for home ownership, purchase a

home, and maintain and rehabilitate a home, which will improve or develop the

capabilities of the community.

6) To provide grants, loans, guarantees, or other arrangements to individuals or

organizations working to develop the community, and to enter into lawful

agreements to secure and enforce the performance and payment obligations of such

financial assistance.

7) To enter into contracts, partnerships, joint ventures, or other arrangements to provide

or secure services, funding, or other assistance which serve the purposes of this

Corporation.

8) To solicit, hold, use, invest, and dispose of money, personal property, or real

property and collect and use proceeds of such money or property, including interest,
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rent, sale proceeds, and other types of income, for the purposes for which this

Corporation is formed.

9) To acquire, hold, use, invest, and dispose of money, personal, and real property, and

exercise any lawful right to make use of that property, including, but not limited to,

renting, leasing, assigning, exchanging, selling, mortgaging, or otherwise

encumbering, improving, converting, or altering such property.

10) To acquire, hold, use, and dispose of through any lawful means or instrument, shares

in stock, bonds, notes, debentures, mortgages, and other securities.

11) To incur debt obligations and secure such debt or obligations through any lawful

instrument which is reasonable and appropriate to achieve the purposes of the

Corporation.

12) To sue and be sued.

13) To communicate with residents and government regarding capital improvements,

needed services, available programs, and resources that currently or potentially

impact the Oglala Sioux Tribe.

14) To work in cooperation with other organizations having aims similar to those of

Corporation.

15) To do any and all lawful things which a natural person might find necessary and

desirable for the general purposes for which the Corporation is organized, as

permitted by a nonprofit corporation organized under Oglala Sioux tribal law and

exempt from federal income tax under Section 501(a) of the Code as an organization

described in Section 501(c)(3) of the Code.

B. The Corporation (1) is a separate entity from the Oglala Sioux Tribe, (2) does not share the

sovereign immunity of the Oglala Sioux Tribe, its officers, employees, agents, or attorneys,

and (3) has no power to waive the sovereign immunity of the Oglala Sioux Tribe, its

officers, employees, agents, or attorneys.

ARTICLE IV

A. The Corporation is organized exclusively for charitable and educational purposes within

the meaning of Section 501(c)(3) of the Code. Notwithstanding any other provision of these

Articles of Incorporation, the Corporation will not carry on any other activities not

permitted to be carried on (1) by a corporation exempt from federal income tax under

Section 501(a) of the Code as an organization described in Section 501(c)(3) of the Code,

or (2) by a corporation contributions to which are deductible under Section 170(c)(2) of the

Code.
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B. This Corporation is not organized nor will it be operated for pecuniary profit and no part of

this Corporation’s net income, earnings, or assets shall, directly or indirectly, ever inure to

the benefit of, or be distributed to, any member or person having a personal and private

interest in the activities of the Corporation, except that the Corporation may pay

reasonable compensation for services rendered to this Corporation in furtherance of its

purposes set forth in Article III. The property of the Corporation is irrevocably dedicated to

charitable and public purposes. No substantial part of the activities of this Corporation will

be conducting propaganda or attempting to influence legislation, except pursuant to an

election under, and as permitted by, Section 501(h) of the Code, nor will this Corporation

participate in or intervene in any political campaign on behalf of or in opposition to any

candidate for political office.

ARTICLE V

The initial registered agent will be:

Paul Iron Cloud

PO Box C

Pine Ridge, SD 57770

ARTICLE VI

The name and address of the incorporator of the Corporation is:

Harold Dean Salway

PO Box H

Pine Ridge, SD 57770

ARTICLE VII

Provisions for the regulation of the internal affairs of the Corporation will be set forth in the Bylaws

of the Corporation. The Corporation shall have no members.

ARTICLE VIII

The Corporation will abide by all criminal, civil, and regulatory laws of the Oglala Sioux Tribe.
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ARTICLE IX

A. The affairs of the Corporation will be managed by its Board of Directors. The number,

qualifications, terms of office, method of selection or election, powers, authority, and

duties of the directors of this Corporation, the time and place of their meetings, and such

other provisions with respect to them as are not inconsistent with the express provisions of

these Articles of Incorporation shall be as specified in or prescribed pursuant to the Bylaws

of the Corporation.

B. The current Board of Directors will consist of :

Harold Dean Salway PO Box H Pine Ridge, SD 57770

Paul Iron Cloud PO Box C Pine Ridge, SD 57770

Michael Graham HCR 49, Box 2 Wounded Knee, SD 57794

Wilbur Between Lodges PO Box H Pine Ridge, SD 57770

Melvin Cummings P.O. Box 109 Manderson, SD 57776

Warren (Bim) Pourier Box 1987 Pine Ridge, SD 57770

Elsie Meeks PO Box 340 Kyle, SD 57752

Gerald One Feather PO Box 109 Oglala, SD 57764

They will serve until the first annual election of directors or until their successors are elected and

qualify.

ARTICLE X

A. The Corporation may be dissolved in accordance with the following:

1) Involuntary dissolution. The Oglala Sioux Tribal Council (“Tribal Council”) may

involuntarily dissolve the Corporation by a resolution, only if it is established that (a)

the Corporation procured its nonprofit corporation status under Oglala Sioux tribal

law through fraud, (b) the Corporation has continued to exceed or abuse the

authority conferred upon it by the Tribal Council, (c) the Corporation fails to submit

financial reports to the Tribal Council in the manner and at the times described in

Oglala Sioux tribal law, or (d) the Corporation fails to appear before the Tribal

Council or its committees when requested. The Tribal Council shall provide the

Corporation with written notice of its intent to dissolve the Corporation, and shall

provide the Corporation 60 days in which to cure its breach of the above

requirements. If the Tribal Council believes that such breach is not cured within such

time, the Tribal Council shall give the Corporation, acting through its Board of

Directors, an opportunity to be heard by the Tribal Council after providing the

Corporation at least ten (10) days notice of the hearing before any vote is taken by

the Tribal Council regarding whether to dissolve the Corporation pursuant to this

Article X(A).
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2) Voluntary dissolution. The Corporation may voluntarily dissolve for any reason at any

time, after providing notice to its known creditors and claimants, and posting a notice

of intent to dissolve on the Reservation for a period of one month. Upon the

expiration of 90 days after the notice was posted, if there are no known creditors or

claimants, then the Corporation may dissolve by submitting Articles of Dissolution

with the Tribal Council, which shall be subject to the Tribal Council’s approval and

acceptance.

B. Upon dissolution of the Corporation, and after the payment of all liabilities and obligations

of the Corporation and all costs and expenses incurred by the Corporation in connection

with such dissolution, any remaining assets shall be distributed to one or more nonprofit

corporations that are organized under Oglala Sioux tribal law and that are organized and

operated exclusively for charitable and/or educational purposes and that have established

their tax exempt status under Section 501(c)(3) of the Code, or shall be distributed to the

Oglala Sioux Tribe for housing and educational purposes, in the manner and in such

amounts as may be determined by the Board of Directors. The Board of Directors shall

make all reasonable efforts to distribute the Corporation’s assets to one or more nonprofit

corporations organized or operated exclusively for the purpose of promoting affordable,

decent, safe, and sanitary housing for residents of the Pine Ridge Reservation and that have

established their tax exempt status under Section 501(c)(3) of the Code. Notwithstanding

anything apparently or expressly to the contrary contained in this Article X, if any assets are

then held by the Corporation in trust or upon condition or subject to any executory or

special limitation, and if the condition or limitation occurs by reason of the dissolution of

the Corporation, such assets shall revert or be returned, transferred, or conveyed in

accordance with the terms and provisions of such trust, conditions, or limitation.

ARTICLE XI

A. The Corporation shall indemnify its directors, officers, employees, and agents, including

persons formerly occupying such positions, and the heirs, executors, and administrators of

such persons, against all expenses, judgments, fines, settlements, and other amounts

actually and reasonably incurred by them in connection with any action, suit, or

proceeding relating to the Corporation, including an action by or in the right of the

Corporation.

B. No indemnification shall be provided for any person with respect to any matters as to

which he or she shall have been adjudged in any proceeding not to have acted in good

faith or in the reasonable belief that his or her action was in the best interests of the

Corporation. If he or she has not been so adjudged, he or she shall be entitled to

indemnification unless the Board of Directors determines that he or she did not act in good

faith or in the reasonable belief that his or her action was in the best interests of the

Corporation. To the fullest extent permitted by law, and except as otherwise determined by

the Board of Directors in a specific instance, expenses incurred by a person seeking

indemnification in defending any action, suit or proceeding shall be advanced by the
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Corporation before final disposition of the proceeding and upon receipt by the Corporation

of an undertaking by that person to repay such amount unless it is ultimately determined

that the person is entitled to be indemnified by the Corporation for those expenses.

ARTICLE XII

These Articles of Incorporation and the Bylaws of the Corporation may be amended to include any

provision permitted by law, or may be restated in their entireties, at the times and in the manner

provided in the Bylaws of the Corporation; provided that the Tribal Council shall approve any

amendments, alterations, repeals, or restatements of the Articles of Incorporation.

IN WITNESS WHEREOF, I have hereunto set my hand this day of , 1999.

 INCORPORATOR

_______________________________ ___________________________________

Date Wilbur Between Lodges
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Appendix 3.3 – Sample Bylaws

OGLALA SIOUX TRIBE PARTNERSHIP FOR HOUSING, INC.

BYLAWS

Table of Contents

Title Section

Title 1 BOARD OF DIRECTORS

100 General Authority

101 Election, Term and Structure of Board

102 Powers and Duties

103 Vacancies

104 Termination of Directors

105 Meetings

106 Quorum and Voting for Meetings of Board of Directors

107 Telephonic Meetings

108 Written Consent

109 Conflict of Interest

110 Compensation

Title 2 OFFICERS

200 Officers

201 Election and Terms of Office

202 President

203 Vice President

204 Treasurer

205 Secretary

Title 3 STAFF

300 Employees

301 Executive Director

Title 4 COMMITTEES

400 Committees

401 Community Involvement

Title 5 MISCELLANEOUS

500 Amendments

501 Seal

502 Offices

503 Books and Records

504 Audit and Reporting

505 Fiscal Year
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OGLALA SIOUX TRIBE PARTNERSHIP FOR HOUSING, INC.

BYLAWS

TITLE ONE BOARD OF DIRECTORS

100 GENERAL AUTHORITY

The affairs of the Corporation shall be managed by its Board of Directors.

101 ELECTION, TERM, AND STRUCTURE OF THE BOARD

a) The Board of Directors shall consist of eight (8) directors, but from time to time the

number may be decreased to not fewer than three (3) or increased to not more than

fifteen (15) persons, by a majority vote of the Board of Directors. Directors of the

Corporation must be adult natural persons. A majority of the directors shall be

members of the Oglala Sioux Tribe who reside on the Reservation. The Board of

Directors shall strive to elect as directors representatives of the business

community, representing businesses which are supportive of the purposes of the

Corporation, representatives of Tribal and/or other governments and/or its/their

agencies which are supportive of the purposes of the Corporation, and elder

members of the Oglala Sioux Tribe.

b) Directors shall be elected by a majority vote of the directors at the Annual Meeting

of the Board of Directors, from the slate of nominees approved by the Nominating

Committee. Voting shall be conducted by secret, written ballot.

c) Directors shall serve for two years and until a successor is elected and qualified, or

until the earlier death, resignation, or removal of the director. Their terms shall be

staggered by electing a number equal to one half of the initial members plus one

for a one-year term and the balance of the initial members for a two-year term at

the first Annual Meeting or Special Meeting, whichever is first. Directors can serve

up to two (2) consecutive terms. No director shall serve more than two (2)

consecutive terms, but may serve additional non-consecutive terms.

102 POWERS AND DUTIES

a) To fulfill its responsibilities set forth in Section 100, the Board of Directors shall

have all the powers and duties necessary for the administration of the affairs of the

Corporation and may take any action not forbidden by law or these Bylaws.

Included among the duties of the Board of Directors are:
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1. To serve as the coordinating body that facilitates, networks, supports and

catalyzes resources, and to expedite activities and to facilitate the establishment

of any entities which will have a positive impact on the community;

2. To identify governmental, foundation and private funding for economic, social

and cultural development activities and to facilitate the establishment of entities

which will further the Corporation’s goals;

3. To establish committees and assign members to serve on those committees

pursuant to these Bylaws;

4. To utilize expertise and resources to accommodate the Corporation’s goals,

pursuant to all applicable laws and ordinances; and

5. To employ persons as may be necessary to carry out the Corporation’s

objectives, subject to the availability of funds.

b) The Board of Directors may authorize any officers or agents of the Corporation, in

addition to the officers authorized by these Bylaws, to enter into any contracts or

execute and deliver any instrument in the name of and on behalf of the

Corporation, and such authority may be general or specific.

c) Directors shall, in addition to their general duties, communicate with the Tribal

Council in the manner required under Oglala Sioux tribal law and distribute

periodic reports regarding the activities of the Board of Directors and the

Corporation to each District Office of the Tribe.

103 VACANCIES

The Board of Directors shall fill any Board vacancy resulting from the death, resignation or

removal of any director. Each such vacancy shall be filled by a person from the same

category as his or her predecessor, who shall serve for the remainder of his or her

predecessor’s term.

104 TERMINATION OF DIRECTORS

a) A directorship shall terminate if any of the following occurs:

1. Two thirds (2/3) of the membership of the Board of Directors affirmatively vote

to remove a director from office based on a determination that said director has

failed to fulfill his or her fiduciary obligations to the Corporation, or has

engaged in conduct seriously prejudicial to the purposes and interests of the

Corporation. Before a termination under this sub-section, the subject director

shall be given ten (10) days prior notice of the proposed termination and shall
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be given the opportunity to be heard by the Board of Directors before a vote is

taken;

2. A director resigns from the Board of Directors;

3. A director fails to attend three (3) consecutive meetings or more than four (4)

meetings in a calendar year, unless such absences are excused by a majority

vote of the other directors; or

4. A director’s term is completed and a successor is elected and qualified.

b) A director removed under the provisions of this section shall not be eligible to serve

on the Board of Directors for one year from the date of his or her removal.

c) The Board of Directors shall acknowledge in the minutes of its meeting any director

who has been removed and/or replaced.

105 MEETINGS

a) The Board shall meet annually for the purposes of organizing the Board, electing

directors and officers, and transacting such other business as may properly come

before the Board. The Annual Meeting of the Board of Directors of the Corporation

shall be held at a date, time, and place as designated by the Board of Directors. If

any necessary election of directors cannot be held at the Annual Meeting, the

Board of Directors shall cause the election to be held as soon thereafter as

convenient. Any such elections shall have the same force and effect as an election

at an Annual Meeting. The Secretary of the Corporation shall give notice stating the

place, day and hour of the Annual Meeting of the Board of Directors of the

Corporation, which shall be sent to each board member not fewer than five (5)

days nor more than thirty (30) days before the date of such meeting. The Board of

Directors shall determine the method of notice.

b) The Board of Directors shall meet monthly, or at such other interval determined by

the Board from time to time and consistent with any requirements of tribal law. The

Secretary of the Corporation shall give advance notice of a regularly scheduled

meeting of the Board of Directors not fewer than five (5) days nor more than thirty

(30) days before the date of such meeting. The Board of Directors shall determine

the method of notice.

c) The President or his or her designee may call a Special Meeting of the Board of

Directors provided he or she gives twenty-four (24) hours notice personally, by

facsimile, telephone, telegraph or electronic mail stating the time, date, place and

purpose of the meeting stating. If one-third (1/3) of the directors request in writing

that the President call a Special Meeting and state the time, date, place and
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purpose of the requested meeting, the President shall call that meeting in like

manner.

d) Attendance of a director at any meeting shall constitute a waiver of notice of such

meeting except when a director attends a meeting for the express purpose of

objecting to the transaction of any business because the meeting is not lawfully

called or convened and does not participate thereafter in the meeting.

e) Meetings shall be open to the public, but the Board of Directors shall maintain the

right to adjourn into Executive Session by majority vote. Notice of such meetings

shall be posted within the Reservation, as required by ordinance of the Tribal

Council.

f) If any meeting of the Board of Directors cannot be convened because a quorum is

not present, a new notice of rescheduled meeting must be provided as set forth

herein.

106 QUORUM AND VOTING FOR BOARD OF DIRECTORS MEETING

a) At meeting of the Board of Directors the presence of a simple majority of directors,

with at least one being an officer, shall constitute a quorum for the transaction of

business. A quorum shall exist for the entire meeting once it is established, even if

one or more directors leave the meeting with the result that less than a simple

majority is present after the departure of such director or directors. Except as

otherwise provided in these Bylaws, the acts done and decisions made by a

majority of directors present at a meeting at which a quorum exists shall be the acts

of the Board of Directors.

b) A quorum established at the inception of any Board meeting, for the transaction of

business, shall continue notwithstanding the subsequent departure of any member

who was counted for the purposes of establishing a quorum.

c) No director may vote by proxy.

d) The Board of Directors may approve the following, only upon the affirmative vote

of two-thirds (2/3) of the directors:

1) The sale or disposition of the all or substantially all the Corporation’s assets;

2) Any merger, reorganization or restructuring involving the Corporation and the

principal terms of such a merger;

3) Any election to dissolve the Corporation;
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4) Any amendments to, or restatements of, the Articles of Incorporation of the

Corporation or these Bylaws.

107 TELEPHONIC MEETINGS

Members of the Board may participate in a meeting through the use of a conference

telephone or similar communications equipment, so long as all directors participating in such

meeting can hear one another. Participation in a meeting pursuant to this paragraph constitutes

presence in person at such meeting.

108 WRITTEN CONSENT

Any action required or permitted to be taken by the Board of Directors may be taken

without a meeting and without prior notice, if all of the directors consent in writing to the

action. The written consent shall be filed with the minutes of the proceedings of the Board

of Directors. Action by written consent (to include facsimile) shall have the same force and

effect as the unanimous vote of the Board.

109 CONFLICT OF INTEREST

a) Any director, officer, employee of the Corporation, or member of a committee of

the Corporation who is interested in a contract or transaction presented to the

Board or a committee for action, authorization, approval, or ratification shall,

without request, make a prompt, full, and frank disclosure of his or her interest

therein to the Board or the committee, prior to action upon the contract or

transaction. The disclosure (if required) shall include all material facts about the

contract or transaction.

b) The body to which the disclosure is made shall thereupon determine, by majority

vote, whether a conflict of interest exists. A person shall be deemed to be

“interested” in a contract or transaction if he or she is a party (or one of the parties)

proposing to contract or deal with the Corporation, or is a shareholder, partner,

employee, officer, trustee, or director of, or has a material financial or influential

interest in, an entity proposing to contract or deal with the Corporation. A person

shall not be deemed to be “interested” in a contract or transaction solely because it

results in a benefit to a person or his or her family by virtue of their membership in

the class of persons intended to be benefitted by a charitable program, as long as

the contract or transaction is authorized by the Corporation in good faith and

without unjustified favoritism.

c) If the body determines that a conflict of interest does exist, the interested person

shall not vote on, nor use his or her personal influence on, nor participate (other

than to present factual information or to respond to questions) in, the discussion

with respect to the contract or transaction. The interested person shall not be

counted in determining the presence of a quorum at any meeting where the
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contract or transaction is considered or acted upon. The minutes of the meeting

shall reflect the disclosure made, the vote on the existence of a conflict, and, where

applicable, the interested person’s abstention from voting and participation, and

whether a quorum was present.

d) This Section 109 shall not apply to the approval of compensation for a director’s

personal services to the corporation as a director.

110 COMPENSATION

Each attending director shall receive compensation of $50 per meetings of the Board of

Directors and committees (for all meetings of the Board of Directors and up to 12 committee

meetings per calendar year), plus mileage. In the event that a quorum of directors or committee

members is not present at a scheduled meeting at the noticed time of meeting, the directors and/or

committee members that do attend shall receive mileage but not compensation.

Directors shall receive reimbursement for actual expenses incurred while attending

conferences or other meetings when requested to attend such conferences or meetings by the

President or a majority of the directors. Reimbursable expenses shall not exceed the current

prevailing rates for federal employees.

TITLE TWO OFFICERS

200 OFFICERS

The officers of the Corporation shall be a President, Vice President, Secretary and

Treasurer. These officers shall be appointed from among the members of the Board of Directors.

201 ELECTION AND TERMS OF OFFICE

a) The officers of the Corporation shall be elected by majority vote of the Board of

Directors at the first and each subsequent Annual Meeting.

b) Officers may be removed from office pursuant to section 104 of these Bylaws. If an

officer is removed, a successor shall be elected by the Board of Directors to serve

until the next Annual of Special Meeting of the Corporation.

202 PRESIDENT

a) The President shall be the Chief Executive Officer of the Corporation and shall

preside at all meetings of the Board of Directors. The President is authorized to

execute, in the name of the Corporation, all contracts and other documents

authorized either generally or specifically by the Board to be executed by the
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Corporation, except when by law or these Bylaws the signature of another director

or member is required.

b) The President shall insure that all orders and resolutions of the Board of Directors

are carried into effect, and in general perform all duties incident to the office of

President.

c) The President shall assure that preparations for meetings of the Corporation are in

order.

d) The President shall have such other duties and authority as may be prescribed by

the Board of Directors from time to time.

203 VICE PRESIDENT

a) The Vice President shall have the authority and perform the duties of the President

in the event of the absence or inability of the President to act or when requested to

do so by the President.

b) The Vice President shall have such other duties and authority as may be prescribed

by the Board of Directors from time to time.

204 TREASURER

a) The Treasurer shall maintain adequate and correct accounts of the properties and

business transactions of the Corporation, including accounts of its assets, liabilities,

receipts, disbursements, gains, losses, capital, retained earnings, and other matters

customarily included in financial statements.

b) The Treasurer shall deposit all moneys or other valuables in the name and to the

credit of the Corporation with such depositories as may be designated by the Board

of Directors and shall disburse the funds of the Corporation as may be ordered by

the Board of Directors. The Treasurer shall render to the Board of Directors, at each

scheduled Board of Directors meeting, an account of all the transactions conducted

by the Treasurer and of the financial condition of the Corporation. The Treasurer

shall make available for inspection at reasonable times by any director or his or her

representative, the financial reports, books and records of the Corporation.

Inspection requests must be received in writing, by the Board of Directors, a

minimum of fourteen (14) days before the inspection is to occur. All inspections

must occur at the office of record during normal business hours.

c) All checks and disbursements shall be executed on behalf of the Corporation by the

Treasurer. No expenditure over one thousand dollars ($1,000) may be made by the

Corporation without the prior approval of the Board of Directors. The Treasurer

shall have the authority and perform the duties of the President in the event of the
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absence or inability of the President or Vice President to act or when requested to

do so by the President.

205 SECRETARY

a) The Secretary shall cause the minutes of the meetings of the Board of Directors to

be kept in a manner best suited to provide an accurate and complete record.

b) The Secretary shall see that all notices of meetings are given in accordance with

these Bylaws.

c) The Secretary shall make available for inspection by any director the Corporation’s

relevant books and records of account, and minutes.

d) The Secretary shall have the authority and perform the duties of the President in the

event of the absence or inability of the President, Vice President, or Treasurer, to

act or when requested to do so by the President. In such cases the Secretary shall

designate a recorder of the minutes of that meeting.

TITLE THREE STAFF

300 EMPLOYEES

The Board of Directors shall employ an Executive Director and shall authorize the

Executive Director to hire other employees to carry out the purposes of the Corporation. All

salaries and other terms of employment shall be approved by the Board of Directors.

301 EXECUTIVE DIRECTOR

a) The Executive Director shall serve at the pleasure of the Board of Directors and for

such compensation as the Board may determine. He or she shall have general

direction over the operation of the Corporation, may perform any duties delegated

by the Board of Directors, and shall be its official representative. He or she shall

comply with all rules and policies lawfully enacted by the Board of Directors and

shall submit to the Board of Directors any reports or documents requested by them.

He or she shall also provide whatever staff support is requested by the Board of

Directors.

b) The Executive Director shall not be an officer of the Corporation but may be

appointed as an ex-officio director without voting rights.

c) All other staff are under the direct supervision of and shall be accountable to the

Executive Director.
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TITLE FOUR COMMITTEES

400 COMMITTEES

a) The Board of Directors may, by resolution adopted by the affirmative vote of a

majority of the directors, designate the officers of the Corporation as an executive

committee.

b) Prior to the Annual Meeting, the Board of Directors shall designate a Nominating

Committee to prepare a slate of candidates to be presented for voting by the

directors, for both vacant seats on the Board of Directors and officers of the

Corporation.

c) The Board of Directors may, by resolution adopted by the affirmative vote of a

majority of the directors, designate standing and ad hoc committees. Each

committee shall have at least one director as a member.

d) Unless the Board of Directors shall otherwise provide, a committee’s meetings shall

be called and conducted in the same manner as provided in these Bylaws with

respect to regular meetings of the Board of Directors. The Board of Directors shall

have power at any time to fill vacancies in, change the membership of, or

discharge any such committee at any time at its discretion.

c) The designation of any committees and the delegation thereto of authority shall not

relieve the Board of Directors of any responsibility imposed upon it by law or these

Bylaws.

401 COMMUNITY INVOLVEMENT

The Corporation may invite the community to participate in its activities at its discretion

from time to time. The Corporation may ensure citizen participation, community

development and accountability of projects by using one or a combination of the following

processes:

a) Ad hoc or special committees of neighbors of a proposed development site;

b) Neighborhood or District advisory councils; and/or

c) One of a series of open meetings for the neighborhood, town or District.
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TITLE FIVE MISCELLANEOUS

500 AMENDMENTS

The Articles of Incorporation of the Corporation, and these Bylaws may be altered,

amended or repealed and new Articles of Incorporation or Bylaws may be adopted by the

affirmative vote of two-thirds (2/3) of the Board of Directors; provided that the Tribal

Council shall approve any amendments, alterations, repeals, or restatements of the Articles

of Incorporation of the Corporation. Any director may propose an amendment.

501 SEAL

The Board of Directors may, by resolution, provide for an appropriate seal which shall

include the name of the Corporation.

502 OFFICES

The registered office of the Corporation shall be as set forth in the Articles of Incorporation

or in the most recent amendment of the Articles of Incorporation of the Corporation. The

Corporation may have such other offices, within or without the Pine Ridge Reservation, as

the directors shall from time to time determine.

503 BOOKS AND RECORDS

The Board of Directors shall cause to be kept at the registered office:

1. minutes of all meetings of the Board of Directors and committees;

2. all financial statements of the Corporation and other records and books of account

necessary and appropriate to the conduct of the corporate business; and

3. the Articles of Incorporation and Bylaws of the Corporation.

504 AUDIT AND REPORTING

The Board of Directors may cause the records and books of account of this Corporation to

be audited at least once in each fiscal year and at such other times as it may deem

necessary or appropriate, and may retain such person or firm for such purposes as it may

deem appropriate. The Corporation shall submit all financial documents and other

required reports to the Tribal Council, in compliance with the ordinances of the Tribal

Council.

505 FISCAL YEAR

The fiscal year of the Corporation shall end on September 30.
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Appendix 5.0 - Job Description for President/Chairpersoni

• Oversee Board and executive committee meetings

• Serve as ex-officio member of all committees

• Work in partnership with the chief executive to make sure Board resolutions are carried out

• Call special meetings if necessary

• Appoint all committee chairs and with the chief executive, recommend who will serve on

committees

• Assist chief executive in preparing agenda for Board meetings

• Assist chief executive in conducting new Board member orientation

• Oversee searches for a new chief executive

• Coordinate chief executive's annual performance evaluation

• Work with the nominating committee to recruit new Board members

• Coordinate periodic Board assessment with the chief executive

• Act as an alternate spokesperson for the organization

• Periodically consult with Board members on their roles and help them assess their

performance

Job description for Vice-Presidentii

• Attend all Board meetings

• Serve on the executive committee

• Carry out special assignments as requested by the Board president

• Understand the responsibilities of the Board president and be able to perform these duties in

the president's absence

• Participate as a vital part of the Board leadership

Job description for Secretaryiii

• Attend all Board meetings

• Serve on the executive committee

• Maintain all Board records and ensure their accuracy and safety

• Review Board minutes

• Assume responsibilities of the president in the absence of the Board president, president-elect,

and vice president

• Provide notice of meetings of the Board and/or of a committee when such notice is required

Job description for Treasureriv

• Knowledge of the organization and personal commitment to its goals and objectives

• Understanding of financial accounting for nonprofit organizations
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• Serves as financial officer of the organization and as chairperson of the finance committee.

• Manages, with the finance committee, the Board's review of and action related to the Board's

financial responsibilities.

• Works with the chief executive and the chief financial officer to ensure that appropriate

financial reports are made available to the Board on a timely basis.

• Assists the chief executive or the chief financial officer in preparing the annual budget and

presenting the budget to the Board for approval.

• Reviews the annual audit and answers Board members' questions about the audit.

Board Manual Componentsv

• the organization's annual report

• Mission statement

• Organization fact sheet (brief history and summary of current programs)

• Organizational chart

• Current strategic plan (or a summary)

• a Board organization chart

• a list of current Board members, titles, affiliations, and contact information

• Board Member Information Forms

• a description of Board members' responsibilities

• Board committee job descriptions

• Most recent minutes

• Annual calendar or program schedule

• Current annual calendar of Board and committee meetings

• the organization's newsletter, brochure, or other publications

• newspaper or magazine articles about the organization

• a brief biography of the executive director

• Articles of incorporation (corporate charter) and bylaws

• Current financial statements and budget for the current fiscal year

• Most recent audit report

• the long-range program and financial plan

• List of donors and sources of funding for two fiscal years

• Selected press releases and articles

• Promotional material (membership brochure, information brochure, advertisements, etc.)

• List of suggested resources (publications and organizations) related to the organization's area of

interest
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Appendix 6.0 – Sample Notice

REQUEST FOR PROPOSALS AND QUALIFICATIONS

The Oglala Sioux Tribe Partnership for Housing, Inc. (“Purchaser”) requests proposals and

qualification statements (“Proposals”) for the following work (the “Work”):

Approximately 15 HUD Code Manufactured Homes

Pine Ridge, South Dakota

The Work consists of manufacture, delivery, and installation on individual sites on the Pine Ridge

Indian Reservation in and around Pine Ridge, South Dakota of approximately 15 HUD Code

manufactured homes, with the following anticipated approximate specifications: 3 or 4 bedrooms, 2

baths, 1,288 square feet (28 x 46), installed on crawl space or basement (predominantly basement)

foundations to be built by others. Homes must be delivered to individual sites no later than July 15,

1999 and be complete on foundations no later than July 30, 1999. There is the potential of further

orders (up to approximately 100-250 homes), but there are no assurances there will be additional

orders or that the supplier of the Work (“Supplier”) will be selected for any subsequent work.

Any potential Supplier may obtain the formal HUD Code Manufactured Homes Criteria (“Criteria”)

by faxing a request to the Oglala Sioux Tribe Partnership for Housing, Inc. at fax number (605)

867-1522, requesting a copy of the Criteria and providing a fax number for return of the Criteria.

Purchaser shall endeavor to fax back a complete set of Criteria within one business day of

receiving a request, but shall not be liable if it does not do so. The Criteria will identify specific

requirements of the Proposals, and identify contacts from which potential Suppliers may obtain

additional information.

All Proposals must be received on May 17, 1999, at the place and in the manner set forth in the

Criteria. Purchaser may, but shall have no obligation to, consider any Proposal which is not so

received.

Following receipt of Proposals, the Purchaser anticipates negotiating with one or more proposed

Suppliers to determine a final Supplier for the Work. Purchaser specifically reserves the right, in its

sole discretion, to reject any or all Proposals, to purchase more or fewer homes with similar or

different specifications than set forth in this Request or the Criteria, to request further information

from any proposed Supplier, to negotiate terms different than provided in this Request or the Criteria,

to have the purchases made by individual tribal members or other persons or entities, to select one

or more Suppliers for any reason it deems reasonable, and to waive any nonconformity.

 

1. ml

ii From http://www.ncnb.org/html/faq.html

iii Ibid.
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 iv From The Finance Committee: The Fiscal Conscience of the Nonprofit Board. Washington, DC: National Center

for Nonprofit Boards, 1995. http://www.ncnb.org/html/faq.html

v

 From NCNB, http://www.ncnb.org/html/faq.html