For the next several weeks, we are going to focus governance and ethical behavior within nonprofit organizations. It is our hope that by discussing these areas in depth that organizations will understand how vital it is to have good governance practices. This week our area of focus will be meeting legal standards.
Nonprofit organizations must follow all federal, state and local laws and its board of directors is responsible for ensuring that this happens. The IRS gives the responsibility of organizational oversight to the board of directors.
Organizations formed within the last five years or so had to have a Conflict of Interest policy when they filed their corporate documents with the IRS. However, many organizations never look at the policy again. It is a good idea to review the policy on an annual basis and to have all board members sign it. When new board members come in, the policy should also be shared with them during the orientation process. It is also important to remember that the conflict of interest policy is not just for the board of directors; all senior staff members should also sign the policy on an annual basis.
Over the past several years, there have been many instances of situations where staff or volunteers turned their heads the other way when they saw wrongdoing within the organization. As a result of these situations (which really are the minority), it is recommended that all organizations have a “Whistleblower Policy.” A Whistleblower Policy outlines policies and procedures for board members, staff, volunteers or clients to report suspected wrongdoing without fear of retaliation. Along with this policy, the organization should also have procedures in place to investigate any reports of wrongdoing.
Another policy that organizations need to have in place is one that outlines the organization’s policies to retain important documents. Some documents that need to be included in such a policy are those relating to board governance, financial records and historical policy information. Additionally, if the organization receives grant funding, it is important to verify how long documents associated with the grant must be kept.
It is the role of the board of directors to ensure that the assets of the organization are protected. Assets include financial resources, human resources, buildings and equipment. In addition, assets are also non-tangible items such as the reputation and integrity of an organization. An annual review of insurance policies and other operating policies is a best practice to ensure that the organization is prepared in the event of a loss.
Next week, our focus will be on Governance Best Practices.
Have questions? Feel free to contact us.