Sometimes, the best option for two or more organizations seeking to come together in pursuit of a shared goal might be a structural change or the creation of a new entity. Such options are shown in the centermost circle on the Map. For example:
- Joint Venture Corporations (including MSOs). Joint venture corporations consolidate some portion of the administrative, programmatic, or advocacy functions of two or more organizations within a jointly controlled corporation. The partner organizations share governance of the new organization. Many joint venture corporations are established in order to further a specific programmatic or advocacy goal. A management service organization (MSO) is a specific type of new organization created to integrate administrative functions, and thus increase the operational efficiency of participating organizations.
The Children and Family Services Center is a single building in Charlotte, North Carolina where ten agencies offer comprehensive assistance to children and families. The CFSC, a separate 501(c)(3), is governed by a board made up of representatives from each of the participating agencies as well as at-large community leaders.(http://childrenfamily.org/)
- Parent-Subsidiary Structure. A parent-subsidiary structure is an integration of some or all administrative functions and programmatic services of participating organizations, with the goal of increased administrative and programmatic efficiency and/or efficacy. Although the visibility and identity of the original organizations often remain intact in a parent-subsidiary relationship, some organizations involved in such restructurings consolidate to the point where they look and function much like a merged organization. Not everyone with this intent refers uses this language; some organizations prefer to use the term “affiliated entities.”
A parent-subsidiary structure is sometimes chosen due to the restrictions on transferability of contracts, licenses or certifications, restrictions which may be temporary in nature. The creation of a parent-subsidiary structure allows the organizations to achieve the benefits of a consolidated organization while maintaining distinct corporations.
This was the goal for AARP and Experience Corps. In 2011, Experience Corps joined forces with AARP to become AARP Experience Corps, an award-winning national program that engages 50- plus adults as tutors and mentors for children in grades K-3. As an “affiliated entity” of AARP, AARP Experience Corps retained its own 501(c)(3) (allowing it to accept federal grants and conduct charitable fundraising), but program operations (e.g., staff) were transferred to AARP. This arrangement remained in place for over three years. As is often the case, however, the boards are now in the process of dissolving the Experience Corps 501(c)(3), after which Experience Corps will become a program of the AARP Foundation. (http://www.lapiana.org/stories-our-clients/nonprofit-stories/aarp-experience-corps.aspx)
- Merger or Acquisition. A merger or acquisition is an integration that includes the integration of all programmatic and administrative functions to increase the administrative efficiency and programmatic impact of one or more organizations. Note: FASB (Financial Accounting Standards Board) requires an “accounting” determination of either a merger or acquisition, as described below.
A merger occurs when two or more organizations are dissolved into a newly created corporation that includes some or all of the resources, administrative infrastructure, and programs of the original organizations.
An acquisition occurs when one corporation is dissolved (acquired corporation) with all activities and resources transferred into the surviving (acquirer) corporation. (The selection of an acquisition form of consolidation does not limit the identity/branding, governance, or leadership options of the participating organizations. However the selection of an acquisition form of consolidation does impact the booking of assets within the surviving corporation as outlined by FASB Statement No. 164.) An acquisition may also involve formation of a new entity where one participating entity has obtained control of the nonprofit activities or businesses of all participating entities (e.g., by appointing significantly more of the governing board of the newly formed entity, retaining its bylaws and policies, etc.).
In 2012 Family and Youth Services (FAYS) merged with the Women’s Center of San Joaquin County to become Women’s Center – Youth & Family Services (Women’s Center-YFS). Women’s Center-YFS is San Joaquin County’s only provider of shelter and services specifically designed to meet the needs of homeless and runaway youth and victims of domestic violence and sexual assault. (http://www.womenscenteryfs.org)