Right now, a different sport without a net is grabbing our attention. Currently, the NHL sports fans are tuned into the NHL All-Star Game where representatives from some of the best teams like the St. Louis Blues and Boston Bruins take to the ice. So, allow me to make a Frost-ian point about nonprofits in a hockey context.
For a nonprofit to operate without having proper policies and procedures in place, is like playing the NHL All-Star Game without a net – and without sticks, skates, helmets, or a puck. Without certain policies in place, a nonprofit simply cannot run properly. Without rules, there can be no expectations. Board members, officers, staff, donors, volunteers, and other stakeholders must work to ensure they’re not skating on thin ice. Give your stars the protection they need, and the tools they require, to be a winning team.
Where to Start?
From working with a wide range of nonprofit clients, I’ve learned that many want proper policies and procedures, but they are simply stymied or confused on where to start. That’s where an attorney well-versed in nonprofit law can come in.
Many nonprofits have to fill out an annual form, IRS Form 990. Form 990 is unique in that it not only asks about financial information but also many of its questions directly ask about policies and procedures. There are at least 10 major polices asked about on Form 990.
I offer 10 major policies and procedures nonprofits definitely need for a flat fee of $990. This includes consultations and a full review round to make sure the policies and procedures fit the needs and operations of your particular nonprofit. Adopting the policies explained in this guide will ultimately save your nonprofit organization time and resources, and you can feel great about having a set of high-quality documents to guide internal operations, and present to the public.
All Nonprofits Need These 10 Policies
Whether a nonprofit is large or small, new or decades-old, a mission that is narrow or multi-faceted, all nonprofits should have these policies in place. Yes, these policies are asked about on Form 990, but even if a tax-exempt organization is not required to submit a variation of the 990, the benefits are still immense. In general, having policies in place provides a framework and the expectations for an organization’s executives, employees, volunteers, and board members. Such policies can also be referenced if/when issues arise.
Another major reason to have proper policies and procedures in place is that they provide a foundation for soliciting, accepting, and facilitating charitable donations.
Additionally investing in strongly written, organization-specific policies is a practice in preparation in case of an audit. (The IRS audits tax-exempt organizations, just as it audits companies and individuals.
Among the major policies and procedures included in my special 10 for 990 offer are the following. (You can download my free guide with more extensive information and explanations regarding these policies and procedures.)
Under IRS rules, compensation for nonprofit staff must be “reasonable and not excessive.” The IRS recommends a three-step process for determining appropriate compensation: (1) conduct a review of what similarly-sized peer organizations, (2) in the same or similar geographic location, (3) of comparable positions.
Conflict of Interest
A conflict of interest policy should do two important things: (1) require board members with a conflict (or a potential conflict) to disclose it, and (2) exclude individual board members from voting on matters in which there is a conflict. If consistently adhered to, this policy can inspire internal and external stakeholder confidence in the organization, as well as prevent potential violations of federal and state laws.
Document Retention and Destruction
The document retention policy should specify what types of documents should be retained, how they should be filed, and for what duration. This policy should also outline proper deletion/destruction techniques.
Financial Policies & Procedures
This specifically addresses guidelines for making financial decisions, reporting the financial status of the organization, managing funds, and developing financial goals. The financial management policies and procedures should also outline the budgeting process, investment reporting, what accounts may be maintained by the nonprofit, and when scheduled auditing will take place.
Form 990 Review
Form 990 asks about . . . . Form 990! That’s about as meta as the IRS gets. Specifically, this policy covers how Form 990 was prepared and how it was approved. A written policy is incredibly useful in clarifying a specific process for distribution and procedure review by the board of directors.
This one may seem obvious, but almost every nonprofit needs a fundraising policy, as almost all nonprofits engage in some sort of charitable fundraising. Your organization is no exception! This policy should include provisions for compliance with local, state, and federal laws, as well as the ethical norms the organization chooses to abide by in fundraising efforts.
If well-written and applied across the organization, the policy can help the organization to kindly reject a non-cash gift that can carry extraneous liabilities and obligations the organization is not readily able to manage.
Before investments are made on behalf of the organization, there should be a sound investment policy in place to define who is accountable for investment decisions. The policy should also offer guidance on activities of growing/protecting the investments, earning interest, and maintain access to cash if necessary.
Form 990 specifically asks the filing organization to report if certain documents are made available to the public, such as governing documents (like the bylaws), conflict of interest policy, and financial statements. Additionally, the form asks for the name, address, and phone number of the individual(s) who possesses the financial “books” and records of the organization.
Nonprofits, along with all corporations, are prohibited by the federal government from retaliating against employees who call out, draw attention to, or “blow the whistle” against the employer’s practices.
If you already have some (or all) of the above-listed policies in place, seriously consider the last time they were updated. How has the organization changed since they were written? Have changes to state and federal laws impacted these policies at all? It may be high time for a new set of policies that fits your organization.
Why 10 For 990
The mission of Gordon Fischer Law Firm is to promote and maximize charitable giving in Iowa, and to that point I want to help every Iowa nonprofit be legally compliant. It’s like how the coach wants to do everything they can to help their team win on the ice. The 10 policies a part of this promotion will save you time, resources, and you can feel good about having a set of high-quality policies to guide internal operations and present to the public.
Again, for now, I’m offering these 10 policies—including needed consultations—for the low flat fee of only $990. Contact me anytime at email@example.com or give me a call at 515-371-6077. I look forward to discussing your tax-exempt organization’s needs and how we can set you up for compliance success.
When you truly believe in a cause or issue your favorite nonprofit is addressing, you want everything to be in place to achieve the utmost success. This most certainly means adopting well-written and well thought out policies and procedures.
Make a smart paradigm shift in 2020. Stop thinking about adopting policies and procedures as something you “must” do…just another administrative hassle. Instead, realize that adopting the right policies and procedures protects you and your fave nonprofit, and even more importantly, sets you up for success.
A conflict of interest policy is inarguably one of the most essential policies a nonprofit board adopts. A conflict of interest policy addresses two critically important issues:
- Requires board members with a conflict (or a potential conflict) to disclose it.
- Excludes individual board members from voting on matters in which there is a conflict.
Who is responsible, and who gets the credit, for your nonprofit being a nonprofit? If you think about it, it’s the IRS! No less an authority than the Internal Revenue Service (IRS) highly encourages nonprofits to adopt specific types of governance policies to limit exposure to abuse, vulnerabilities, and engagement of nonexempt activities. One important such policy is a conflict of interest policy.
Note the IRS Form 990 (essentially the tax return form for nonprofits) directly asks whether the nonprofit has a conflict of interest policy, how the organization determines when board members have a conflict of interest, and what steps are taken following such a determination.
If your nonprofit already has a conflict of interest policy already in place, great! It may be a good time to hold a board meeting to review it.
If your organization does not have a conflict of interest policy, and/or you’re unsure of what specifics it should include, don’t hesitate to take me up on my free consultation offer.
If you have any questions or want to discuss further shoot me an email or give me a call at 515-371-6077.
Two Other Elements
Besides three parties, at least two other elements are necessary for a valid trust.
- The trust instrument is the document that sets forth the terms of the trust.
- The other necessary element is property. After all, the trustee must be holding something for the benefit of the beneficiary.
Property of the Trust
When laypersons use the word “property,” I believe they usually mean real estate. But, lawyers use the term “property” much, much more broadly, to mean literally any transferable interest. Sometimes trust property is also referred to as the res or corpus or assets of the trust. (Bonus words!)
Any property can be held in trust. Seriously, check out this list of 101 assets that would fit in a trust. You could likely think of literally hundreds more types or categories of property to place in your own individual trust.
Pour Over Trust
How about an unfunded trust that will receive property at some point in the future? Can you even do that?
Yes, that can certainly be done. This is usually called a pour-over trust. (More bonus words!) The pour-over trust deserves its own blog post. Briefly, a pour-over trust is usually set up by language in a will. A will may validly devise property to a trust, established during the testator’s lifetime, and then funded at her death.
Let’s take a very simple example. Kate has a lawyer write her will, including language that at her death all her Monster Truck memorabilia be placed in a trust for the benefit of her nieces and nephews. Only at Kate’s death will the property be transferred into the trust, not before.
The important points are that property is necessary, at some point, to make a trust valid, and that literally any transferable interest in property – anything! – can be held in a trust.
Let’s Talk Trusts
It can be difficult to determine on your own if a trust may be right for your personal situation. It certainly doesn’t hurt to take me up on my offer for a free one-hour consultation. Give me a call at 515-371-6077 or shoot me an email at firstname.lastname@example.org.