The National Council of Nonprofits, who’s mission is to advance the vital role, capacity, and voice of charitable nonprofit organizations through our state and national networks, recently released these four policies address scenarios that can derail nonprofits.
- Conflict of Interests: It seems that conflicts of interests are the root of all evil (or at least all negative headlines) in the nonprofit sector. It’s surprising, but not everyone understands that a transaction between a board member and the nonprofit can create a conflict between their separate interests that can jeopardize both the nonprofit and the board member. Does your nonprofit require disclosure of a conflict, and of potential conflicts? (The first is a “must” and we think the second idea is compelling.) What procedures are used to manage conflicts? Is there annual documentation that records how your board handled conflicts to help you complete the IRS Form 990? You can never avoid conflicts entirely, but you can take steps to prevent unjust enrichment to ensure that an insider, such as a board member, does not benefit more from the transaction than the nonprofit. (Such a situation could result in penalties to the individual who benefits, and to the organization.) Read about the importance of having a policy and view a sample conflicts of interests policy.
- Compensation: There have been too many headlines about how “excessive” nonprofit salaries are. All nonprofits must make sure there is board approval of the staff leader’s compensation. Ensuring that the board has approved “reasonable and not excessive” compensation for the executive director/CEO and senior staff is one of the critical fiduciary responsibilities of every nonprofit board. Read about the 3-step process for the board’s review of “executive compensation” recommended by the IRS, and take a look at a sample policy developed by the National Council of Nonprofits.
- Media Spokesperson: Who is authorized to speak to the media on behalf of your nonprofit? What happens when a staff member or board member is contacted by a local news reporter? Do they realize that rather than agreeing to be interviewed on the spot they should follow a procedure so that the organization offers a consistent (and thoughtful) response? See a sample policy reminding staff and volunteers that only the nonprofit’s designated spokesperson(s) should speak with the media. This is one of those policies that you might not have right now – but you’ll be happy you have it in place when a reporter calls.
- Public Disclosure: We think it’s a good idea for every staff member to know how to respond to a request for documentation by a third party and for every nonprofit to have a notebook handy with copies of all the “public” documents that they must provide when asked. It helps to have a straightforward policy outlining how such requests are handled by the organization. Use an online tutorial from the IRS to learn about the IRS regulations that govern what documents a nonprofit must make available to the public and read these FAQs from the IRS about public disclosure requirements. But also realize that state law may require nonprofits to provide copies of other documents. Read about the importance of transparency in the nonprofit sector.