Born on this day in 1998, Amanda Gorman was just 22 years-old when she became the youngest
U.S. inaugural poet at the 2021 swearing-in of President Joe Biden. She has said that she drew inspiration for her poem, “The Hill We Climb,” from Abraham Lincoln, the Rev. Martin Luther King Jr., and poet Maya Angelou, who became the first woman to read a poem at a presidential inauguration in 1993.
Ahead of her reading, Oprah Winfrey gave Gorman a ring shaped like a birdcage in reference to Angelou’s, “I Know Why the Caged Bird Sings.” It was a thoughtful and generous gesture.
Nonprofits receive thoughtful and generous gifts, too.
Indeed, they rely on the generosity of the public to support their work. But did you know it’s sometimes wiser to “just say no” to a gift?
Not every gift comes from an “Angel Network”!
Knowing which donations to accept, and sometimes even better, which gifts to decline, is critically important for every nonprofit. That’s because some gifts, offered with the best intentions, can jeopardize a nonprofit’s reputation, create financial headaches, and even compromise its mission.
A well-drafted Gift Acceptance Policy (sometimes referred to as a “GAP”) can help a nonprofit avoid potential pitfalls, as well as establish procedures for accepting, tracking, and managing donations.
The IRS and GAPs
While the IRS doesn’t require a nonprofit to have a Gift Acceptance Policy, its Form 990 does ask that it be filed if available. (You’ll recall that IRS Form 990 is the “tax return” nonprofits must file every year). By expressly referencing the Gift Acceptance Policy on its Form 990, it’s clear the IRS considers adopting and following a GAP “best practice” for nonprofits — and a strong signal your nonprofit should adopt one if it hasn’t already.
Gone are the days when a nonprofit’s responsibilities were no more complicated than depositing checks or acknowledging a donor in a newsletter. Today, accepting and managing gifts is a more complicated undertaking that comes with heightened donor expectations, increased fiduciary obligations for Officers and Directors, and greater reporting requirements. Overall, a Gift Acceptance Policy provides necessary safeguards for both nonprofits and donors.
What IS a Gift Acceptance Policy, Anyway?
Broadly, a Gift Acceptance Policy describes the kinds of gifts a nonprofit will and will not accept and how they will be administered. Adopting a robust written policy regarding gift acceptance is an important part of nonprofit best practices that serve to instill fiduciary discipline, provide legal protection, and contribute to an organization’s long-term viability by ensuring that the nonprofit will not accept gifts that it does not have the time or resources to manage.
The process of developing and adopting a Gift Acceptance Policy also enables staff and boards to understand the complexities and challenges associated with certain kinds of gifts, focuses attention on donor stewardship, presents new opportunities for fundraising, and introduces clarity, control, and consistency into the nonprofit development program.
A case-by-case approach to accepting gifts—or having no policy whatsoever—can lead to poor decision-making by boards who might be tempted by a dazzling but wholly impracticable gift or blinded by their own tastes and personal opinions. Haphazard or arbitrary decisions can also confuse and frustrate potential donors, who are left wondering why their proffered gift was rejected.
Crafting and Adopting a Gift Acceptance Policy
A Gift Acceptance Policy is created through collaboration among a nonprofit’s Officers, Directors, staff, and legal counsel. Because each nonprofit is unique, it needs its own individual policy specific to its needs and mission and not one borrowed from another organization.
In addition to outlining its position on gifts, a Gift Acceptance Policy provides a roadmap for the Board of Directors and other fiduciary decision-makers. A clear and well-designed GAP also gives donors and prospective donors information they need for tax and other reporting purposes.
Approval by Board
Once drafted, the Gift Acceptance Policy must be approved and adopted by the nonprofit’s Board of Directors. Hopefully, a consensus of Directors can be reached on all issues addressed by the GAP.
Regular Reference and Review
The GAP should not be considered written in stone or simply left on a shelf to gather dust. The Gift Acceptance Policy should be readily consulted in any case of a non-cash or unusual gift.
More broadly, the GAP should be reviewed every year, at the least, to take into consideration any changes in the nonprofit’s circumstances, accommodate unexpected types of gifts, or reflect developments in tax law or technology.
Critical Elements of a Gift Acceptance Policy
A well-drafted Gift Acceptance Policy follows best practices in transparency, financial control, legal responsibility, and donor support. It should include the following elements:
The nonprofit’s mission statement;
The purpose of the Gift Acceptance Policy;
The use of legal counsel in matters relating to the acceptance of gifts;
The policy on restricted gifts;
The types of gifts the nonprofit will and will not accept;
Reporting requirements and responsibilities;
Gift Acceptance Committee (or another group, such as an Executive Committee, that is prepared to be consulted on gifts); and
Adherence to ethical standards and accountability.
Types of Gifts
Donors have a number of options when it comes to charitable giving. For nonprofits, though, not all gifts are created equal. Some gifts may be more costly or complex to manage than a nonprofit can handle, or the nature of a gift might fall outside its mission and goals.
A Gift Acceptance Policy needs to take into consideration all of the issues related to each of these types of gifts and provide clear and objective reasons the nonprofit can point to for accepting—or refusing—a gift.
Refusing Gifts
Refusing a gift is difficult for both a nonprofit and a donor. A Gift Acceptance Policy can help in this regard because it serves to manage the expectations of donors and guide the nonprofit’s decision-making. The reasons for turning down a gift are many and not always obvious.
There is still a mindset among many nonprofits that any donation is better than no donation. For new—or less sophisticated—nonprofits, turning down any gift can seem counterintuitive or even rude. That’s why a Gift Acceptance Policy that clearly sets out an organization’s position on gifts is in the best interest of every nonprofit, no matter its size or its mission. A strong GAP helps nonprofits “just say no” by delineating important strategic and financial reasons for accepting some gifts while rejecting others.
Donors Rights
If nothing else convinces a nonprofit that it must either adopt or revise its Gift Acceptance Policy, the specter of alienating existing donors or discouraging potential ones can often be the spur it needs. Building strong relationships with donors and enhancing donor retention are fundamental to any fundraising strategy and start with a formal Gift Acceptance Policy.
At minimum, a well-thought-out Gift Acceptance Policy assures donors they will receive timely and meaningful recognition. Further, the GAP can emphasis that donor intent will always be followed. After all, donors have a right to expect that their gift will be used as promised and consistent with their intentions.
Whether it is determining the criteria for naming rights for new building or deciding how to acknowledge a ten dollars ($10) check, a Gift Acceptance Policy helps to enhance and preserve donor relationships—especially when gifts are rejected. For example, if a nonprofit has a formal, written policy of rejecting, say, anonymous gifts, this makes it easier to explain to the donor why his or her anonymous donation cannot be accepted even though it might be generous—and tempting.
Conclusion
A Gift Acceptance Policy is critical for promoting charitable giving as well as limiting risk to nonprofits. They also help donors by providing clarity and enhancing transparency when deciding to make a gift. A GAP should be as integral to a nonprofit as professionally prepared employee and endowment policy handbooks, governing documents like articles and bylaws, and practices like board training.
Importantly, a Gift Acceptance Policy can make it easier for a nonprofit to say, “thanks, but no thanks” to a gift. And, who knows, it could mean the opportunity to say “yes” to an even better one.
Email Me!
If your organization is interested in adopting (or revisiting!) a Gift Acceptance Policy, please don’t hesitate to reach out to Gordon Fischer Law Firm.
For the month of March, I’m offering a special to Iowa nonprofits. I will draft, revise, and edit the ten (10) policies expressly referenced by the IRS on Form 990 (which of course includes a Gift Acceptance Policy) specific to the unique mission of your nonprofit.
Iowa native George Nissen built his first “tumbling device” in 1934 out of angle iron, canvas, and rubber springs. He perfected the contraption, renamed it the “trampoline,” after the Spanish word for springboard. On March 6, 1945, Nissen received a patent for the springy piece of equipment.
Nissen’s trampoline was used to train aviators in World War II and astronauts during the Space Age. Athletes still use it for cross-training and trampolining has become a competitive sport in itself.
The backyard trampoline with a safety net is as ubiquitous as the swing set and — even better — can be repurposed for other uses after the kids get tired of it. People have turned them into everything from chicken coops to greenhouses to sunshades.
You could say a Document Retention Policy is like a trampoline — it will always give you something good to fall back on. (Ouch!)
Seriously, though, nonprofits need a good Document Retention Policy to ensure all information related to their business operations, employees, and finances is managed in a systematic and well-organized manner.
A well-drafted Document Retention Policy sets guidelines for how long particular records and documents — both electronic and paper — must be kept and how and when they should be destroyed. It serves two primary functions. First, making sure your nonprofit meets federal and state legal and regulatory requirements. Second, and just as important, it protects the reputation, privacy, and interests of you and your employees.
It should include a description of each kind of document the Policy covers and the retention time for each, because these can vary. For example, bank statements should be kept for at least three (3) years. On the other hand, the IRS requires that year-end financial statements be kept permanently, while the minimum retention period for general correspondence is two (2) years.
The Policy must also provide detailed information about how to label and store paper documents and electronic files. There should be guidelines for backing up electronic files, as well as a secure method for purging this information.
Following the guidelines of a Document Retention Policy might seem rather time-consuming and nit-picky, but in reality it will improve the efficiency of your record management while at the same increasing the security of the sensitive information in your files.
If you’re dedicated to elevating your nonprofit to new heights, creating, implementing, and observing a Document Retention Policy is essential. (Double ouch!)
If your organization is interested in adopting (or revisiting!) a Document Retention Policy, please don’t hesitate to reach out to Gordon Fischer Law Firm.
For the month of March, I’m offering a special to Iowa nonprofits. I will draft, revise, and edit the ten (10) policies expressly referenced by the IRS on Form 990 (which of course includes a Document Retention Policy) specific to the unique mission of your nonprofit.
https://www.gordonfischerlawfirm.com/wp-content/uploads/2017/05/GFLF-logo-300x141.png00Lexi Luneckashttps://www.gordonfischerlawfirm.com/wp-content/uploads/2017/05/GFLF-logo-300x141.pngLexi Luneckas2024-03-06 11:03:182024-03-06 11:05:39On March 6, 1945, Iowan George Nissen patents the trampoline
Iowa Nonprofits Need to Jump Into Adopting and Implementing a Flexible-But-Firm Document Retention Policy
On March 5, 1770, a group of American colonists gathered outside Boston’s Custom House on King Street and began taunting the British private who was guarding it.
The soldier sent word to his regiment that he needed backup, and the colonists sent word to anyone who would listen that they wanted more people to join them. You know the rest — someone in the rowdy mob threw an object that hit a British soldier in the head and when he fired into the crowd other soldiers discharged their muskets as well.
After the smoke had cleared, 11 colonists had been shot and five would die from their injuries.
In America, the event became known as the “Boston Massacre” while in Britain it was referred to as “the incident on King Street.” Whatever you call it, the tensions between the two sides had become a deadly conflict.
****
Conflicts of interest rarely — if ever — turn bloody. But that doesn’t mean they can’t harm a nonprofit.
Conflicts of interest can arise in a nonprofit when someone there has a personal interest in the outcome of a decision.
A Conflict of Interest Policy is one of the most powerful tools a nonprofit can adopt to protect itself from situations that involve mixing personal and organizational interests that might compromise its reputation and mission.
Donors and the public want to feel good about supporting an organization that is committed to ethical principles. Implementing and enforcing a Conflict of Interest Policy sends a message that their interests are aligned with yours.
Conflicts of interest aren’t always clear cut, which is why a well-drafted policy is so important.
Board members are frequently in the position of having a conflict of interest because of their decision-making role. A conflict might arise when a board member has a financial stake in a company that the nonprofit is considering for a contract. Or is involved in an issue that might impact a family member, friend, or business associate.
If not managed properly, conflicts can lead to actions that violate a nonprofit’s mission, erodes public trust, and even threatens its tax-exempt status.
Although the IRS doesn’t require nonprofits to have a Conflict of Interest Policy to maintain their tax-exempt status, the IRS Form 990 specifically asks if they have one. (You’ll recognize the IRS Form 990 as the “tax return” that all nonprofits must file every year.) This means the IRS considers it a “best practice” — and your nonprofit should adopt one if it hasn’t already.
A comprehensive Conflict of Interest Policy addresses a range of situations, describes how they can arise, and provides guidelines for handling them. It explains the process for individuals to disclose any potential conflicts they may have, and if a conflict is present, a way to recuse themselves.
The Policy should establish how to handle a conflict of interest if one does occur, such as documenting its nature, the steps to address it, and the outcome. Having a clear record of how conflicts were handled demonstrates accountability and transparency — the kind of values donors and the public look for in nonprofits they want to support
That’s because even the hint of a conflict of interest that is not managed properly can lead to a lack of trust and disillusionment.
A Conflict of Interest Policy can protect your nonprofit from a lot of potential problems — you don’t want to go down in history as having made a bad decision that could have been avoided.
If your organization is interested in adopting (or revisiting!) a Conflict of Interest Policy, please don’t hesitate to reach out to Gordon Fischer Law Firm.
For the month of March, I’m offering a special to Iowa nonprofits. I will draft, revise, and edit the ten (10) policies expressly referenced by the IRS on Form 990 (which of course includes a Conflict of Interest Policy) specific to the unique mission of your nonprofit.
https://www.gordonfischerlawfirm.com/wp-content/uploads/2017/05/GFLF-logo-300x141.png00Lexi Luneckashttps://www.gordonfischerlawfirm.com/wp-content/uploads/2017/05/GFLF-logo-300x141.pngLexi Luneckas2024-03-05 14:46:372024-03-05 14:46:37March 5, 1770: The Boston Massacre
And, The “Must-Have” Conflict of Interest Policy in Nonprofit Governance
March 7: Happy Birthday to Poet and Activist Amanda Gorman!
Nonprofits[Nonprofits Need Gift Acceptance Policies]
March 7, 2024
Born on this day in 1998, Amanda Gorman was just 22 years-old when she became the youngest
U.S. inaugural poet at the 2021 swearing-in of President Joe Biden. She has said that she drew inspiration for her poem, “The Hill We Climb,” from Abraham Lincoln, the Rev. Martin Luther King Jr., and poet Maya Angelou, who became the first woman to read a poem at a presidential inauguration in 1993.
Ahead of her reading, Oprah Winfrey gave Gorman a ring shaped like a birdcage in reference to Angelou’s, “I Know Why the Caged Bird Sings.” It was a thoughtful and generous gesture.
Nonprofits receive thoughtful and generous gifts, too.
Indeed, they rely on the generosity of the public to support their work. But did you know it’s sometimes wiser to “just say no” to a gift?
Not every gift comes from an “Angel Network”!
Knowing which donations to accept, and sometimes even better, which gifts to decline, is critically important for every nonprofit. That’s because some gifts, offered with the best intentions, can jeopardize a nonprofit’s reputation, create financial headaches, and even compromise its mission.
A well-drafted Gift Acceptance Policy (sometimes referred to as a “GAP”) can help a nonprofit avoid potential pitfalls, as well as establish procedures for accepting, tracking, and managing donations.
The IRS and GAPs
While the IRS doesn’t require a nonprofit to have a Gift Acceptance Policy, its Form 990 does ask that it be filed if available. (You’ll recall that IRS Form 990 is the “tax return” nonprofits must file every year). By expressly referencing the Gift Acceptance Policy on its Form 990, it’s clear the IRS considers adopting and following a GAP “best practice” for nonprofits — and a strong signal your nonprofit should adopt one if it hasn’t already.
Gone are the days when a nonprofit’s responsibilities were no more complicated than depositing checks or acknowledging a donor in a newsletter. Today, accepting and managing gifts is a more complicated undertaking that comes with heightened donor expectations, increased fiduciary obligations for Officers and Directors, and greater reporting requirements. Overall, a Gift Acceptance Policy provides necessary safeguards for both nonprofits and donors.
What IS a Gift Acceptance Policy, Anyway?
Broadly, a Gift Acceptance Policy describes the kinds of gifts a nonprofit will and will not accept and how they will be administered. Adopting a robust written policy regarding gift acceptance is an important part of nonprofit best practices that serve to instill fiduciary discipline, provide legal protection, and contribute to an organization’s long-term viability by ensuring that the nonprofit will not accept gifts that it does not have the time or resources to manage.
The process of developing and adopting a Gift Acceptance Policy also enables staff and boards to understand the complexities and challenges associated with certain kinds of gifts, focuses attention on donor stewardship, presents new opportunities for fundraising, and introduces clarity, control, and consistency into the nonprofit development program.
A case-by-case approach to accepting gifts—or having no policy whatsoever—can lead to poor decision-making by boards who might be tempted by a dazzling but wholly impracticable gift or blinded by their own tastes and personal opinions. Haphazard or arbitrary decisions can also confuse and frustrate potential donors, who are left wondering why their proffered gift was rejected.
Crafting and Adopting a Gift Acceptance Policy
A Gift Acceptance Policy is created through collaboration among a nonprofit’s Officers, Directors, staff, and legal counsel. Because each nonprofit is unique, it needs its own individual policy specific to its needs and mission and not one borrowed from another organization.
In addition to outlining its position on gifts, a Gift Acceptance Policy provides a roadmap for the Board of Directors and other fiduciary decision-makers. A clear and well-designed GAP also gives donors and prospective donors information they need for tax and other reporting purposes.
Approval by Board
Once drafted, the Gift Acceptance Policy must be approved and adopted by the nonprofit’s Board of Directors. Hopefully, a consensus of Directors can be reached on all issues addressed by the GAP.
Regular Reference and Review
The GAP should not be considered written in stone or simply left on a shelf to gather dust. The Gift Acceptance Policy should be readily consulted in any case of a non-cash or unusual gift.
More broadly, the GAP should be reviewed every year, at the least, to take into consideration any changes in the nonprofit’s circumstances, accommodate unexpected types of gifts, or reflect developments in tax law or technology.
Critical Elements of a Gift Acceptance Policy
A well-drafted Gift Acceptance Policy follows best practices in transparency, financial control, legal responsibility, and donor support. It should include the following elements:
Types of Gifts
Donors have a number of options when it comes to charitable giving. For nonprofits, though, not all gifts are created equal. Some gifts may be more costly or complex to manage than a nonprofit can handle, or the nature of a gift might fall outside its mission and goals.
A Gift Acceptance Policy needs to take into consideration all of the issues related to each of these types of gifts and provide clear and objective reasons the nonprofit can point to for accepting—or refusing—a gift.
Refusing Gifts
Refusing a gift is difficult for both a nonprofit and a donor. A Gift Acceptance Policy can help in this regard because it serves to manage the expectations of donors and guide the nonprofit’s decision-making. The reasons for turning down a gift are many and not always obvious.
There is still a mindset among many nonprofits that any donation is better than no donation. For new—or less sophisticated—nonprofits, turning down any gift can seem counterintuitive or even rude. That’s why a Gift Acceptance Policy that clearly sets out an organization’s position on gifts is in the best interest of every nonprofit, no matter its size or its mission. A strong GAP helps nonprofits “just say no” by delineating important strategic and financial reasons for accepting some gifts while rejecting others.
Donors Rights
If nothing else convinces a nonprofit that it must either adopt or revise its Gift Acceptance Policy, the specter of alienating existing donors or discouraging potential ones can often be the spur it needs. Building strong relationships with donors and enhancing donor retention are fundamental to any fundraising strategy and start with a formal Gift Acceptance Policy.
At minimum, a well-thought-out Gift Acceptance Policy assures donors they will receive timely and meaningful recognition. Further, the GAP can emphasis that donor intent will always be followed. After all, donors have a right to expect that their gift will be used as promised and consistent with their intentions.
Whether it is determining the criteria for naming rights for new building or deciding how to acknowledge a ten dollars ($10) check, a Gift Acceptance Policy helps to enhance and preserve donor relationships—especially when gifts are rejected. For example, if a nonprofit has a formal, written policy of rejecting, say, anonymous gifts, this makes it easier to explain to the donor why his or her anonymous donation cannot be accepted even though it might be generous—and tempting.
Conclusion
A Gift Acceptance Policy is critical for promoting charitable giving as well as limiting risk to nonprofits. They also help donors by providing clarity and enhancing transparency when deciding to make a gift. A GAP should be as integral to a nonprofit as professionally prepared employee and endowment policy handbooks, governing documents like articles and bylaws, and practices like board training.
Importantly, a Gift Acceptance Policy can make it easier for a nonprofit to say, “thanks, but no thanks” to a gift. And, who knows, it could mean the opportunity to say “yes” to an even better one.
Email Me!
If your organization is interested in adopting (or revisiting!) a Gift Acceptance Policy, please don’t hesitate to reach out to Gordon Fischer Law Firm.
For the month of March, I’m offering a special to Iowa nonprofits. I will draft, revise, and edit the ten (10) policies expressly referenced by the IRS on Form 990 (which of course includes a Gift Acceptance Policy) specific to the unique mission of your nonprofit.
My email is:
gordon@gordonfischerlawfirm.com
####
[Nonprofits Need Gift Acceptance Policies]
On March 6, 1945, Iowan George Nissen patents the trampoline
NonprofitsIowa Nonprofits Need to Jump Into Adopting and Implementing a Flexible-But-Firm Document Retention Policy
March 6, 2024
Iowa native George Nissen built his first “tumbling device” in 1934 out of angle iron, canvas, and rubber springs. He perfected the contraption, renamed it the “trampoline,” after the Spanish word for springboard. On March 6, 1945, Nissen received a patent for the springy piece of equipment.
Nissen’s trampoline was used to train aviators in World War II and astronauts during the Space Age. Athletes still use it for cross-training and trampolining has become a competitive sport in itself.
The backyard trampoline with a safety net is as ubiquitous as the swing set and — even better — can be repurposed for other uses after the kids get tired of it. People have turned them into everything from chicken coops to greenhouses to sunshades.
You could say a Document Retention Policy is like a trampoline — it will always give you something good to fall back on. (Ouch!)
Seriously, though, nonprofits need a good Document Retention Policy to ensure all information related to their business operations, employees, and finances is managed in a systematic and well-organized manner.
A well-drafted Document Retention Policy sets guidelines for how long particular records and documents — both electronic and paper — must be kept and how and when they should be destroyed. It serves two primary functions. First, making sure your nonprofit meets federal and state legal and regulatory requirements. Second, and just as important, it protects the reputation, privacy, and interests of you and your employees.
It should include a description of each kind of document the Policy covers and the retention time for each, because these can vary. For example, bank statements should be kept for at least three (3) years. On the other hand, the IRS requires that year-end financial statements be kept permanently, while the minimum retention period for general correspondence is two (2) years.
The Policy must also provide detailed information about how to label and store paper documents and electronic files. There should be guidelines for backing up electronic files, as well as a secure method for purging this information.
Following the guidelines of a Document Retention Policy might seem rather time-consuming and nit-picky, but in reality it will improve the efficiency of your record management while at the same increasing the security of the sensitive information in your files.
If you’re dedicated to elevating your nonprofit to new heights, creating, implementing, and observing a Document Retention Policy is essential. (Double ouch!)
If your organization is interested in adopting (or revisiting!) a Document Retention Policy, please don’t hesitate to reach out to Gordon Fischer Law Firm.
For the month of March, I’m offering a special to Iowa nonprofits. I will draft, revise, and edit the ten (10) policies expressly referenced by the IRS on Form 990 (which of course includes a Document Retention Policy) specific to the unique mission of your nonprofit.
My email is:
gordon@gordonfischerlawfirm.com
####
Iowa Nonprofits Need to Jump Into Adopting and Implementing a Flexible-But-Firm Document Retention Policy
March 5, 1770: The Boston Massacre
NonprofitsAnd, The “Must-Have” Conflict of Interest Policy in Nonprofit Governance
March 5, 2024
On March 5, 1770, a group of American colonists gathered outside Boston’s Custom House on King Street and began taunting the British private who was guarding it.
The soldier sent word to his regiment that he needed backup, and the colonists sent word to anyone who would listen that they wanted more people to join them. You know the rest — someone in the rowdy mob threw an object that hit a British soldier in the head and when he fired into the crowd other soldiers discharged their muskets as well.
After the smoke had cleared, 11 colonists had been shot and five would die from their injuries.
In America, the event became known as the “Boston Massacre” while in Britain it was referred to as “the incident on King Street.” Whatever you call it, the tensions between the two sides had become a deadly conflict.
****
Conflicts of interest rarely — if ever — turn bloody. But that doesn’t mean they can’t harm a nonprofit.
Conflicts of interest can arise in a nonprofit when someone there has a personal interest in the outcome of a decision.
A Conflict of Interest Policy is one of the most powerful tools a nonprofit can adopt to protect itself from situations that involve mixing personal and organizational interests that might compromise its reputation and mission.
Donors and the public want to feel good about supporting an organization that is committed to ethical principles. Implementing and enforcing a Conflict of Interest Policy sends a message that their interests are aligned with yours.
Conflicts of interest aren’t always clear cut, which is why a well-drafted policy is so important.
Board members are frequently in the position of having a conflict of interest because of their decision-making role. A conflict might arise when a board member has a financial stake in a company that the nonprofit is considering for a contract. Or is involved in an issue that might impact a family member, friend, or business associate.
If not managed properly, conflicts can lead to actions that violate a nonprofit’s mission, erodes public trust, and even threatens its tax-exempt status.
Although the IRS doesn’t require nonprofits to have a Conflict of Interest Policy to maintain their tax-exempt status, the IRS Form 990 specifically asks if they have one. (You’ll recognize the IRS Form 990 as the “tax return” that all nonprofits must file every year.) This means the IRS considers it a “best practice” — and your nonprofit should adopt one if it hasn’t already.
A comprehensive Conflict of Interest Policy addresses a range of situations, describes how they can arise, and provides guidelines for handling them. It explains the process for individuals to disclose any potential conflicts they may have, and if a conflict is present, a way to recuse themselves.
The Policy should establish how to handle a conflict of interest if one does occur, such as documenting its nature, the steps to address it, and the outcome. Having a clear record of how conflicts were handled demonstrates accountability and transparency — the kind of values donors and the public look for in nonprofits they want to support
That’s because even the hint of a conflict of interest that is not managed properly can lead to a lack of trust and disillusionment.
A Conflict of Interest Policy can protect your nonprofit from a lot of potential problems — you don’t want to go down in history as having made a bad decision that could have been avoided.
If your organization is interested in adopting (or revisiting!) a Conflict of Interest Policy, please don’t hesitate to reach out to Gordon Fischer Law Firm.
For the month of March, I’m offering a special to Iowa nonprofits. I will draft, revise, and edit the ten (10) policies expressly referenced by the IRS on Form 990 (which of course includes a Conflict of Interest Policy) specific to the unique mission of your nonprofit.
My email is: gordon@gordonfischerlawfirm.com
####
And, The “Must-Have” Conflict of Interest Policy in Nonprofit Governance