Is your nonprofit legit? Three things you need to know.

Is your nonprofit legit?

Passion for mission is at the heart of a nonprofit, but don’t forget your “business” requirements. Nonprofits must comply with many of the same regulations as businesses, and additional ones that are specific to the sector. As an executive or board member you need to be aware of these, and operate within the law. Here are three things you need to know.

Paperwork.

Make sure your “paperwork” is in order and shared with your board. All members should have a copy of the organization’s IRS 501(c)(3) determination letter; its mission statement; bylaws; and most recent tax filing. Each year the 990 IRS form needs to be submitted on time. If revenue is less than $50,000 you can file the simple 990N: it is a postcard with eight questions. Depending on state law, you may be required to file with the state prior to launching a fundraising campaign. Fundraising counsel or contractors may also need to register with the state.

Board agendas and minutes.

All parties are best served when agendas are distributed well in advance of each board meeting. Board members are required to make informed decisions, and depend on advance receipt of information so each has time to review and contemplate items prior to discussion or a vote. Similarly, minutes should be distributed within 48 hours. While this is not a legal requirement, we suggest this policy as it supports timely and open communication, and allows board members ample time between meetings to complete actions they committed to, and to research topics which may be continued at the next meeting.

Committees and policies.

Your organization needs written policies and procedures that protect against error, fraud, and embezzlement. Policies should also protect “whistleblowers” – people who bring issues to the attention of the board or management, and who could be at risk of retribution. A conflict of interest policy should be in place and reviewed annually. Board members must act in the best interests of the nonprofit. At its most basic level this means you shouldn’t look to profit from the organizations you serve.  Any transactions with board members must always benefit the nonprofit. An example of this could be providing quality office space at below market rates. In terms of committees, make sure you have an audit and finance committee that closely reviews financial information, ensures funds are properly invested and that funds are correctly accounted for. This includes ensuring that gifts and grants are used per donor’s requirements.

Most states and major cities have an agency designed to assist and protect nonprofits and the people (constituents and donors) that support them. Staff and board members should be aware of and comply with these guidelines and regulations. You can check with your attorney general to learn more or you can visit the National Association of State Charity Officials website (www.nasconet.org) for resources specific to your state.

Not paying attention to guidelines and regulations can be a silent killer that disrupts your nonprofit without notice. Take time to know your responsibilities.

Download a copy of “What Every Board Member Should Know: A Guidebook for Tennessee Nonprofits 2016 Edition.”

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Copyright 2016 – Mel and Pearl Shaw

Mel and Pearl Shaw are the authors of Prerequisites for Fundraising Success available on Amazon.com. For help growing your fundraising visit www.saadandshaw.com or call (901) 522-8727.

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