Setting Pay the Right Way: Why Your Nonprofit Needs a Clear Compensation Policy
January 14, 2026
I. INTRODUCTION
Setting compensation for employees and contractors is a core task for any nonprofit. These decisions affect people, finances, and public trust, which is why they should be guided by a clear and consistent Compensation Policy. Because compensation decisions are closely tied to a nonprofit’s tax-exempt status and governance obligations, they are also subject to regulatory scrutiny. The IRS underscores this importance by addressing compensation and compensation practices in multiple sections of Form 990.
A well-designed Compensation Policy helps organizations approach these decisions deliberately and with appropriate oversight, setting the stage for the standards discussed below.
II. WHY HAVE A COMPENSATION POLICY?
A. Employee Care and Morale
Every organization, regardless of size or success, is built on the individuals who carry out its mission. Fair and competitive compensation plays a critical role in employee satisfaction, retention, and morale. Competitive wages allow a nonprofit to attract qualified candidates and build a team that aligns with the organization’s values and goals.
B. Donor Confidence
Donors care not only about a nonprofit’s mission, but also about how that mission is carried out. Compensation practices are one area where donors may look for signs of ethical management and responsible stewardship of resources. A clear and organized Compensation Policy helps demonstrate that the organization takes its obligations seriously, including in how employees are compensated and supported.
C. Consistency
A written Compensation Policy promotes consistency by establishing guidelines, pay standards, and the use of comparability data. This structure reduces the need for ad hoc decision-making and helps save time and administrative resources. The policy can also serve as a helpful reference when responding to questions from donors, employees, or prospective hires, keeping the nonprofit’s messaging consistent.
D. Budget Targeting
Nonprofits operate within defined budgets, which may include restricted funds such as government or corporate grants. A well-drafted Compensation Policy helps ensure that compensation decisions align with budgetary constraints while still supporting recruitment and retention goals.
E. Legal Compliance and Reduced Risks of Lawsuit
A Compensation Policy also supports compliance with state and federal employment laws and plays a role in maintaining tax-exempt status. IRS Form 990 requests compensation-related information in multiple sections, including Part I, Part VI, Part VII, Part IX, and Schedule J. Without a structured policy, nonprofits may face increased risk of disputes or claims of unfair treatment. Having an attorney assist with drafting and periodically reviewing a Compensation Policy can significantly reduce legal and operational risks.
III. WHAT A COMPENSATION POLICY SHOULD INCLUDE
A. Purpose and Scope
A Compensation Policy, like most policies, should explain its own purpose and scope. It should state which forms of compensation it covers and should declare those forms of compensation to be reasonable, fair, and supported by appropriate data. It should also tie compensation back to the organization’s mission and public-charity status.
B. Assignment of Responsibility
A Compensation Policy should clearly identify who is responsible for reviewing and approving compensation decisions. Many organizations delegate this responsibility to a finance committee or similar body, with ultimate oversight resting with the board of directors.
C. Use of Comparability Data
An equitable Compensation Policy relies on comparability data to establish reasonable compensation levels. Comparability data should include, but not be limited to, the following:
1. Salary and benefit studies from independent sources;
2. Written job offers for similar positions at similar organizations (similar in ways like asset
size, geographic location, mission, staff, and services);
3. Documented discussions with similar nonprofit or for-profit organizations; and
4. Information obtained from IRS Form 990 filings of comparable organizations.
All compensation decisions, including the data relied upon and any deviations from it, should be documented and retained in the organization’s records.
D. Conflicts Of Interest
Any board member or member of a finance or similar committee with the power to make compensation-related decisions should, of course, recuse themselves from doing so when they stand to make a personal benefit, such as deciding their own salary, or the salary of a spouse or close family member. While these situations should be majorly addressed in a separate Conflict of Interest Policy, reiterating this requirement in the Compensation Policy helps avoid even the appearance of impropriety.
E. Documentation and Transparency
All compensation decisions should be documented in a timely and consistent manner. A Compensation Policy should promote this by defining documentation practices and standards. Clear records support accountability and compliance with reporting obligations.
F. Periodic Review
As with other key governance policies, a Compensation Policy should be reviewed and approved initially by the board of directors. However, it’s incredibly important that the board is not only involved in the creation of the policy, but also in the maintenance of it. Because it will undoubtedly need updating at some point, the Compensation Policy should address its own amenability, including the specifics of who and under what circumstances it can be reviewed or updated.
IV. CONCLUSION
Nonprofits of all sizes benefit from a clear, equitable Compensation Policy. It provides guidance for leadership, reassurance for employees, transparency for donors, and support for compliance and reporting obligations.
If you’d like guidance on drafting, updating, or reviewing your Compensation Policy, I’m happy to help. Reach out anytime at gordon@gordonfischerlawfirm.comto start the conversation. I offer a free consultation!
Every nonprofit, every year, must complete and file a version of Form 990, which the IRS calls its “Return of Organization Exempt From Income Tax.” The long version of IRS Form 990 asks about many financial matters, including but not limited to donations, money on hand, non-cash assets, and breakdowns of expenses.
IRS Form 990 goes even further and asks nonprofits if they have in place certain policies. In fact, the IRS asks about ten (10) specific policies on Form 990. The IRS does not mandate adopting these ten (10) policies. The IRS is at the very least signaling what policies nonprofits should have in place. This helps show nonprofits what the IRS considers to be best practices.
II. REASONS AND BENEFITS TO ADOPT THESE TEN (10) POLICIES
One might ask, if these policies are not absolutely required, why should a nonprofit invest the time and effort to adopt them? Without clear and properly enforced governance policies, an Iowa nonprofit may face regulatory scrutiny, potential penalties, and reputational harm that can negatively impact donor confidence and fundraising efforts. Beyond risk management, these ten (10) policies provide substantial and practical benefits for nonprofits, including but not limited to the following:
Enhanced confidence among donors and other stakeholders.
A consistent framework for sound decision making.
Improved compliance with federal and state laws.
Reduced risk to the nonprofit and its management and governing board.
The existence of a policy does not, by itself, guarantee compliance. However, having written policies in place establishes expectations and provides guidance for board members, employees, donors, volunteers, and other stakeholders. When issues arise, these policies serve as a clear reference point for addressing concerns in a consistent and responsible manner. Another important reason to adopt these policies is that the IRS audits tax exempt nonprofits. Having appropriate governance policies in place can benefit a nonprofit during an audit by demonstrating a commitment to transparency, accountability, and compliance. In addition, well drafted policies provide a solid foundation for soliciting, accepting, and managing charitable donations.
Finally, Form 990 is publicly available and often reviewed by major donors, foundations, and other stakeholders. When completed thoughtfully, it can serve as a valuable public relations tool that reflects a nonprofit’s commitment to good governance, financial responsibility, and alignment with its mission.
III. WHAT POLICIES ARE WE TALKING ABOUT?
The IRS revised Form 990 in 2008. The old version focused largely on financial data. Now Form 990 reports extensive information on operations such as board governance, fundraising, non-cash assets, and more. Below are the ten (10) policies in alphabetical order.
COMPENSATION
Competitive and fair compensation is just as important for nonprofit employees as it is for employees in the for profit sector. A well written compensation policy establishes objective salary ranges for positions, incorporates updated job descriptions, and outlines performance management and evaluation standards.
A strong compensation policy should also include a statement of compensation philosophy and strategy, explaining how compensation practices support the nonprofit’s mission and values. By setting clear and consistent guidelines, this policy promotes fairness, transparency, and accountability in how employees and executives are compensated.
Panoramic image, Man hand holding piggy bank on wood table. Save money and financial investment
CONFLICT OF INTEREST
A conflict of interest policy serves two essential purposes. First, it requires board members, officers, and key employees to disclose any actual or potential conflicts. Second, it ensures that individuals with a conflict are excluded from voting on matters in which they have a personal or financial interest.
Form 990 defines a conflict of interest as a situation in which a person in a position of authority can benefit financially from a decision, including indirect benefits to family members or closely associated businesses. A clear and well enforced conflict of interest policy helps protect the nonprofit’s integrity, promotes ethical decision making, and reduces the risk of regulatory and legal sanctions by ensuring that conflicts are properly disclosed, evaluated, and managed in a transparent and ethical manner.
DOCUMENT RETENTION AND DESTRUCTION
A document retention and destruction policy explains what types of records should be retained, how they should be stored, and how long they must be kept. It also outlines appropriate methods for the secure destruction of documents that are no longer required. This policy helps ensure that important financial, employment, contract, and governance records are preserved for legal, tax, and regulatory purposes. In addition to supporting compliance, a clear document retention policy helps nonprofits manage storage efficiently, reduce unnecessary record keeping, and respond appropriately if litigation, audits, or government investigations arise.
FINANCIAL POLICIES AND PROCEDURES
Financial policies and procedures guide how a nonprofit manages its finances on a day to day basis. These policies address budgeting, financial reporting, internal controls, account management, and audit practices. They also establish expectations for transparency, accuracy, and responsible stewardship of nonprofit funds. By providing a consistent framework for financial decision making, these policies help protect the organization’s assets, support regulatory compliance, and promote confidence among donors, board members, and other stakeholders.
FORM 990 REVIEW
Form 990 asks whether a complete copy of the return is provided to all members of the governing body before it is filed. A Form 990 review policy outlines how and when the return is distributed to board members and describes the process used to review the information for accuracy and completeness.
This policy encourages accountability and informed oversight by the board of directors. It also helps ensure that leadership understands the information being reported to the IRS and the public, reducing the risk of errors and misunderstandings.
Form 990 Return of Organization Exempt From Income Tax inscription on the sheet.
FUNDRAISING
Almost every nonprofit engages in some form of charitable fundraising. A fundraising policy addresses compliance with local, state, and federal laws, as well as the ethical standards the nonprofit chooses to follow in its fundraising efforts.
This policy should also clarify appropriate practices for both soliciting and receiving donations. By establishing clear guidelines, a fundraising policy promotes transparency, accountability, and donor confidence while helping the nonprofit conduct its fundraising activities responsibly.
GIFT ACCEPTANCE
While related to the fundraising policy, the gift acceptance policy focuses on how a nonprofit evaluates and manages certain types of donated assets. This policy provides clear guidance for board members and staff when considering proposed non-cash donations, including real estate, equipment, or other complex assets.
A well drafted gift acceptance policy also helps a nonprofit identify and decline gifts that may carry unwanted liabilities, restrictions, or ongoing obligations that the organization is not prepared to manage. This protects the nonprofit from financial, legal, and operational risks associated with unsuitable donations.
INVESTMENT
An investment policy defines who is responsible for making investment decisions and how the nonprofit’s assets will be managed, protected, and grown. It also establishes guidelines for risk management, diversification, and maintaining appropriate access to cash when needed.
By outlining both management authority and board oversight, an investment policy helps ensure that financial resources are used prudently and in furtherance of the nonprofit’s mission. It also promotes long term financial stability and responsible stewardship of charitable assets.
PUBLIC DISCLOSURE
A public disclosure policy explains which nonprofit documents must be made available to the public and which may remain internal. Certain records, such as governing documents, financial statements, and Form 990, are often subject to public inspection.
This policy helps ensure compliance with disclosure requirements while allowing the nonprofit to maintain appropriate confidentiality for sensitive internal information. It also supports transparency and public trust.
WHISTLEBLOWER
A whistleblower policy establishes a process for reporting suspected illegal conduct, financial mismanagement, or violations of nonprofit policies. It also protects individuals who report concerns from retaliation.
By encouraging staff and volunteers to raise issues in good faith, this policy helps nonprofits identify and address problems early, promote ethical behavior, and reduce the risk of legal or regulatory violations.
IV. CONCLUSION
With passion leading the way and strong policies guiding your efforts, your nonprofit can operate more effectively, ethically, and confidently. These ten (10) policies help protect, strengthen, and support your organization’s long term success.
Clear and well drafted governance policies provide a framework for responsible decision making, promote transparency and accountability, and help ensure compliance with federal and state law. They also build trust with donors, volunteers, and the communities your nonprofit serves.
If your organization does not yet have these ten (10) policies in place, or if your current policies need to be updated, I can help. I offer customized drafting of all ten (10) policies for Iowa nonprofits.
To learn more, please contact me at gordon@gordonfischerlawfirm.com.
Bylaws are one of the most misunderstood documents in the nonprofit world. They are often treated as paperwork to be copied from a template, adopted once, and forgotten. In reality, Bylaws quietly control how power is exercised, how decisions are made, and how conflict is resolved inside a nonprofit organization. Well-drafted Bylaws make governance feel manageable and predictable. Poorly-drafted Bylaws create confusion, gridlock, and risk, often at the worst possible moments. Leadership transitions, internal disputes, audits, grant reviews, or periods of rapid growth are usually when bylaw problems surface.
This guide is designed to help Iowa nonprofits understand what Bylaws are, why they matter, what Iowa law expects, and how to approach them thoughtfully and confidently.
What Bylaws Are
Bylaws are the internal rules that govern how a nonprofit operates day to day. They describe how authority is exercised, how decisions are made, and how leadership functions in practice. In
short, Bylaws explain how the organization runs once it exists. They function as the organization’s operating manual. When questions arise about who has authority, how decisions are approved, or what process must be followed, the Bylaws are the first place to look.
What Bylaws Are Not
Bylaws do not create the nonprofit. That role belongs to the Articles of Incorporation, which establish the organization as a legal entity and are filed with the Iowa Secretary of State. Bylaws are not filed with the state. Instead, they are adopted by the governing body and kept with the organization’s internal records. They are meant to be used, consulted, and relied upon
regularly.
Think of the Articles as defining the organization’s outer legal boundaries. The Bylaws then step inside those boundaries and explain how the organization actually functions.
Iowa Law and Nonprofit Bylaws
Iowa nonprofit corporations are governed by the Revised Iowa Nonprofit Corporation Act, found in Iowa Code Chapter 504. While the statute does not require nonprofits to file their Bylaws with
the state, it assumes that Bylaws exist and that they address core governance fundamentals.
Iowa’s Default Rules and Why They Matter
Iowa law does not provide a detailed checklist of required bylaw provisions. Instead, it sets default rules that apply unless the Bylaws say otherwise. This flexibility is intentional, but it places responsibility on the organization to make deliberate choices.
If Bylaws are silent on an issue, Iowa’s default rules control. Sometimes those defaults are appropriate. Other times, they do not reflect how the board expects to operate or how the organization actually functions.
The Legal Authority for Bylaws
Iowa Code Section 504.206 allows Bylaws to contain any provision for regulating and managing the affairs of a corporation that is not inconsistent with law or the Articles of Incorporation. This
is where most governance decisions are made in practice. Thoughtful Bylaws allow an organization to customize governance while remaining fully compliant with Iowa law.
IRS Expectations and Bylaws
The Internal Revenue Service does not require nonprofits to submit Bylaws when forming a corporation. However, when an organization applies for tax exempt status, any adopted Bylaws
are typically included with the application and may be reviewed. The IRS does not mandate specific bylaw language. Instead, it looks for evidence of sound governance practices that support the organization’s charitable purpose. The questions on Form 1023 reflect these expectations.
Well-drafted Bylaws help demonstrate that a nonprofit is governed responsibly, that authority is properly exercised, and that safeguards exist to prevent private benefit or misuse of charitable
assets.
Business concept meaning Form 1023 Application for Recognition of Exemption Under Section 501(c)(3) of the Internal Revenue Code with inscription on the sheet.
Core Provisions Every Iowa Nonprofit Bylaws Should Address
Bylaws are where governance becomes operational. Some provisions are essential for basic functionality and oversight, while others provide clarity and protection as the organization
grows.
Charitable Purpose and Tax Exempt Limitations
Bylaws often restate the organization’s charitable purpose and include restrictions related to private inurement, political activity, and prohibited conduct. This reinforces alignment with federal tax exempt requirements and keeps governance focused on mission.
Board Authority and Governance Role
Bylaws should clearly establish that the board of directors is responsible for managing and overseeing the nonprofit. This includes policy setting, fiduciary oversight, and strategic direction.
Board Size, Qualifications, and Terms
These provisions define who may serve as a director, how many directors may serve, how long they serve, and how turnover is handled. Clear rules reduce uncertainty and help maintain continuity.
Meetings, Quorum, and Voting
Bylaws establish how and when meetings occur, what constitutes a quorum, how votes are taken, and whether electronic participation is permitted. These rules determine when board action is
valid.
Director Accountability and Removal
Clear procedures for resignation, removal, attendance expectations, and vacancies support effective oversight and provide a roadmap when governance challenges arise.
Officers and Executive Authority
Bylaws should identify officer roles, selection procedures, term lengths, and authority. This helps maintain clarity between governance and management responsibilities.
Committees and Delegation Limits
Committee provisions define what authority may be delegated and what decisions must remain with the full board. This prevents unintended delegation of core responsibilities.
Optional but Strategic Bylaw Provisions
Many nonprofits include additional provisions that add protection, flexibility, and clarity over time. These provisions often address topics such as executive leadership structure, fiduciary standards, compensation and reimbursement safeguards, limitation of liability, indemnification, amendment procedures, and dissolution approval requirements. While optional, these provisions frequently become critical during periods of growth, leadership transition, or conflict.
Board Managed and Member Managed Nonprofits in Iowa
One of the most important and commonly misunderstood aspects of nonprofit governance is whether an organization has members. Most Iowa nonprofits are board managed and do not have statutory members. In these organizations, the board holds ultimate authority.
Some nonprofits intentionally create members with voting rights. This can be appropriate in certain circumstances, but it significantly changes governance dynamics and approval requirements.
A common problem arises when Bylaws unintentionally create members through imprecise language. This can result in unexpected voting rights or approval thresholds the board never intended.
If an organization does not intend to have members, the Bylaws should say so clearly and explicitly.
How Bylaws Fit Into a Healthy Governance System
Bylaws do not stand alone. They exist within a hierarchy of governing documents. The Articles of Incorporation sit at the top. Beneath them are the Bylaws. Supporting both are board adopted policies and procedures. These documents should work together. When they do not, confusion and risk follow. Conflicting provisions can raise questions about authority, validity of actions, and compliance. Strong governance treats Bylaws as part of an integrated system, not as an isolated document.
Common Bylaw Mistakes Iowa Nonprofits Encounter
Many bylaw problems do not stem from a single bad clause. They arise from practical mismatches between written rules and real world operations. Common issues include:
• Using Bylaws copied from another state
• Creating unintended members
• Adopting procedures that do not match actual practice
• Allowing Bylaws to drift out of alignment with Articles
• Layering amendments instead of adopting restated Bylaws
Templates can be a helpful starting point, but they rarely produce Bylaws that truly fit an organization without thoughtful customization.
Adopting, Amending, and Restating Bylaws
Bylaws are typically adopted by the board at the initial organizational meeting. Once adopted, they should be kept with the organization’s records and reviewed periodically.
As organizations evolve, Bylaws often need to be updated. In many cases, adopting restated Bylaws that consolidate all changes into a single clean document is preferable to layering amendments over time. Clear amendment procedures help ensure that changes are deliberate, properly approved, and well documented.
When Iowa Nonprofits Should Consider Updating Their Bylaws
Certain moments often signal that Bylaws deserve attention. These include leadership changes, organizational growth, IRS reinstatement, internal conflict, grantmaker requests, or major structural changes such as mergers or dissolutions. Addressing Bylaws proactively is almost always easier and less costly than fixing problems after
they surface.
Final Thoughts
Bylaws are not busywork. They are a practical tool that supports effective governance, clear decision making, and organizational stability. When drafted thoughtfully, Bylaws reduce uncertainty and help nonprofit leaders focus on mission rather than mechanics. When neglected, they can quietly undermine even the best intentions. I have worked with hundreds of Iowa nonprofits to draft, update, and align Bylaws with how organizations actually operate and where they are headed. If you are creating new Bylaws, revisiting old ones, or simply want clarity about what yours really say, I am always happy to talk.
Good governance is achievable. And it starts with getting the fundamentals right.
Frequently Asked Questions About Iowa Nonprofit Bylaws
Do nonprofit Bylaws have to be filed with the state of Iowa?
No. Bylaws are internal governing documents and are not filed with the Iowa Secretary of State. They should be adopted by the board and kept with the organization’s records.
Are nonprofit Bylaws legally binding?
Yes. Bylaws are binding on the organization and its directors and officers. Boards are expected to follow them, and deviations can create legal and governance risk.
Can a board ignore its Bylaws if everyone agrees?
Generally no. Even unanimous agreement does not override the Bylaws. If a provision no longer works, the proper solution is to amend or restate the Bylaws.
How often should Iowa nonprofits review their Bylaws?
As a best practice, Bylaws should be reviewed periodically, often every two to three years, and whenever there is significant growth, leadership change, or organizational restructuring.
Who has the authority to amend nonprofit Bylaws in Iowa?
In most Iowa nonprofits, the board of directors has authority to amend the Bylaws, unless the Articles of Incorporation or Bylaws reserve that power to members.
What happens if Bylaws conflict with the Articles of Incorporation?
The Articles of Incorporation control. Bylaws that conflict with the Articles or with Iowa law can be unenforceable and should be corrected.
Do small nonprofits really need formal Bylaws?
Yes. Size does not eliminate the need for clear governance rules. In fact, smaller organizations often benefit the most from well drafted Bylaws.
Why Your Nonprofit Needs a Clear Compensation Policy
NonprofitsSetting Pay the Right Way: Why Your Nonprofit Needs a Clear Compensation Policy
January 14, 2026
I. INTRODUCTION
Setting compensation for employees and contractors is a core task for any nonprofit. These decisions affect people, finances, and public trust, which is why they should be guided by a clear and consistent Compensation Policy. Because compensation decisions are closely tied to a nonprofit’s tax-exempt status and governance obligations, they are also subject to regulatory scrutiny. The IRS underscores this importance by addressing compensation and compensation practices in multiple sections of Form 990.
A well-designed Compensation Policy helps organizations approach these decisions deliberately and with appropriate oversight, setting the stage for the standards discussed below.
II. WHY HAVE A COMPENSATION POLICY?
A. Employee Care and Morale
Every organization, regardless of size or success, is built on the individuals who carry out its mission. Fair and competitive compensation plays a critical role in employee satisfaction, retention, and morale. Competitive wages allow a nonprofit to attract qualified candidates and build a team that aligns with the organization’s values and goals.
B. Donor Confidence
Donors care not only about a nonprofit’s mission, but also about how that mission is carried out. Compensation practices are one area where donors may look for signs of ethical management and responsible stewardship of resources. A clear and organized Compensation Policy helps demonstrate that the organization takes its obligations seriously, including in how employees are compensated and supported.
C. Consistency
A written Compensation Policy promotes consistency by establishing guidelines, pay standards, and the use of comparability data. This structure reduces the need for ad hoc decision-making and helps save time and administrative resources. The policy can also serve as a helpful reference when responding to questions from donors, employees, or prospective hires, keeping the nonprofit’s messaging consistent.
D. Budget Targeting
Nonprofits operate within defined budgets, which may include restricted funds such as government or corporate grants. A well-drafted Compensation Policy helps ensure that compensation decisions align with budgetary constraints while still supporting recruitment and retention goals.
E. Legal Compliance and Reduced Risks of Lawsuit
A Compensation Policy also supports compliance with state and federal employment laws and plays a role in maintaining tax-exempt status. IRS Form 990 requests compensation-related information in multiple sections, including Part I, Part VI, Part VII, Part IX, and Schedule J. Without a structured policy, nonprofits may face increased risk of disputes or claims of unfair treatment. Having an attorney assist with drafting and periodically reviewing a Compensation Policy can significantly reduce legal and operational risks.
III. WHAT A COMPENSATION POLICY SHOULD INCLUDE
A. Purpose and Scope
A Compensation Policy, like most policies, should explain its own purpose and scope. It should state which forms of compensation it covers and should declare those forms of compensation to be reasonable, fair, and supported by appropriate data. It should also tie compensation back to the organization’s mission and public-charity status.
B. Assignment of Responsibility
A Compensation Policy should clearly identify who is responsible for reviewing and approving compensation decisions. Many organizations delegate this responsibility to a finance committee or similar body, with ultimate oversight resting with the board of directors.
C. Use of Comparability Data
An equitable Compensation Policy relies on comparability data to establish reasonable compensation levels. Comparability data should include, but not be limited to, the following:
1. Salary and benefit studies from independent sources;
2. Written job offers for similar positions at similar organizations (similar in ways like asset
size, geographic location, mission, staff, and services);
3. Documented discussions with similar nonprofit or for-profit organizations; and
4. Information obtained from IRS Form 990 filings of comparable organizations.
All compensation decisions, including the data relied upon and any deviations from it, should be documented and retained in the organization’s records.
D. Conflicts Of Interest
Any board member or member of a finance or similar committee with the power to make compensation-related decisions should, of course, recuse themselves from doing so when they stand to make a personal benefit, such as deciding their own salary, or the salary of a spouse or close family member. While these situations should be majorly addressed in a separate Conflict of Interest Policy, reiterating this requirement in the Compensation Policy helps avoid even the appearance of impropriety.
E. Documentation and Transparency
All compensation decisions should be documented in a timely and consistent manner. A Compensation Policy should promote this by defining documentation practices and standards. Clear records support accountability and compliance with reporting obligations.
F. Periodic Review
As with other key governance policies, a Compensation Policy should be reviewed and approved initially by the board of directors. However, it’s incredibly important that the board is not only involved in the creation of the policy, but also in the maintenance of it. Because it will undoubtedly need updating at some point, the Compensation Policy should address its own amenability, including the specifics of who and under what circumstances it can be reviewed or updated.
IV. CONCLUSION
Nonprofits of all sizes benefit from a clear, equitable Compensation Policy. It provides guidance for leadership, reassurance for employees, transparency for donors, and support for compliance and reporting obligations.
If you’d like guidance on drafting, updating, or reviewing your Compensation Policy, I’m happy to help. Reach out anytime at gordon@gordonfischerlawfirm.com to start the conversation. I offer a free consultation!
Your Iowa Nonprofit Needs These 10 Policies
NonprofitsJanuary 12, 2026
10 Policies Every Nonprofit Should Have in Place
I. IRS FORM 990
Every nonprofit, every year, must complete and file a version of Form 990, which the IRS calls its “Return of Organization Exempt From Income Tax.” The long version of IRS Form 990 asks about many financial matters, including but not limited to donations, money on hand, non-cash assets, and breakdowns of expenses.
IRS Form 990 goes even further and asks nonprofits if they have in place certain policies. In fact, the IRS asks about ten (10) specific policies on Form 990. The IRS does not mandate adopting these ten (10) policies. The IRS is at the very least signaling what policies nonprofits should have in place. This helps show nonprofits what the IRS considers to be best practices.
II. REASONS AND BENEFITS TO ADOPT THESE TEN (10) POLICIES
One might ask, if these policies are not absolutely required, why should a nonprofit invest the time and effort to adopt them? Without clear and properly enforced governance policies, an Iowa nonprofit may face regulatory scrutiny, potential penalties, and reputational harm that can negatively impact donor confidence and fundraising efforts. Beyond risk management, these ten (10) policies provide substantial and practical benefits for nonprofits, including but not limited to the following:
The existence of a policy does not, by itself, guarantee compliance. However, having written policies in place establishes expectations and provides guidance for board members, employees, donors, volunteers, and other stakeholders. When issues arise, these policies serve as a clear reference point for addressing concerns in a consistent and responsible manner. Another important reason to adopt these policies is that the IRS audits tax exempt nonprofits. Having appropriate governance policies in place can benefit a nonprofit during an audit by demonstrating a commitment to transparency, accountability, and compliance. In addition, well drafted policies provide a solid foundation for soliciting, accepting, and managing charitable donations.
Finally, Form 990 is publicly available and often reviewed by major donors, foundations, and other stakeholders. When completed thoughtfully, it can serve as a valuable public relations tool that reflects a nonprofit’s commitment to good governance, financial responsibility, and alignment with its mission.
III. WHAT POLICIES ARE WE TALKING ABOUT?
The IRS revised Form 990 in 2008. The old version focused largely on financial data. Now Form 990 reports extensive information on operations such as board governance, fundraising, non-cash assets, and more. Below are the ten (10) policies in alphabetical order.
Competitive and fair compensation is just as important for nonprofit employees as it is for employees in the for profit sector. A well written compensation policy establishes objective salary ranges for positions, incorporates updated job descriptions, and outlines performance management and evaluation standards.
A strong compensation policy should also include a statement of compensation philosophy and strategy, explaining how compensation practices support the nonprofit’s mission and values. By setting clear and consistent guidelines, this policy promotes fairness, transparency, and accountability in how employees and executives are compensated.
Panoramic image, Man hand holding piggy bank on wood table. Save money and financial investment
A conflict of interest policy serves two essential purposes. First, it requires board members, officers, and key employees to disclose any actual or potential conflicts. Second, it ensures that individuals with a conflict are excluded from voting on matters in which they have a personal or financial interest.
Form 990 defines a conflict of interest as a situation in which a person in a position of authority can benefit financially from a decision, including indirect benefits to family members or closely associated businesses. A clear and well enforced conflict of interest policy helps protect the nonprofit’s integrity, promotes ethical decision making, and reduces the risk of regulatory and legal sanctions by ensuring that conflicts are properly disclosed, evaluated, and managed in a transparent and ethical manner.
A document retention and destruction policy explains what types of records should be retained, how they should be stored, and how long they must be kept. It also outlines appropriate methods for the secure destruction of documents that are no longer required. This policy helps ensure that important financial, employment, contract, and governance records are preserved for legal, tax, and regulatory purposes. In addition to supporting compliance, a clear document retention policy helps nonprofits manage storage efficiently, reduce unnecessary record keeping, and respond appropriately if litigation, audits, or government investigations arise.
Financial policies and procedures guide how a nonprofit manages its finances on a day to day basis. These policies address budgeting, financial reporting, internal controls, account management, and audit practices. They also establish expectations for transparency, accuracy, and responsible stewardship of nonprofit funds. By providing a consistent framework for financial decision making, these policies help protect the organization’s assets, support regulatory compliance, and promote confidence among donors, board members, and other stakeholders.
Form 990 asks whether a complete copy of the return is provided to all members of the governing body before it is filed. A Form 990 review policy outlines how and when the return is distributed to board members and describes the process used to review the information for accuracy and completeness.
This policy encourages accountability and informed oversight by the board of directors. It also helps ensure that leadership understands the information being reported to the IRS and the public, reducing the risk of errors and misunderstandings.
Form 990 Return of Organization Exempt From Income Tax inscription on the sheet.
Almost every nonprofit engages in some form of charitable fundraising. A fundraising policy addresses compliance with local, state, and federal laws, as well as the ethical standards the nonprofit chooses to follow in its fundraising efforts.
This policy should also clarify appropriate practices for both soliciting and receiving donations. By establishing clear guidelines, a fundraising policy promotes transparency, accountability, and donor confidence while helping the nonprofit conduct its fundraising activities responsibly.
While related to the fundraising policy, the gift acceptance policy focuses on how a nonprofit evaluates and manages certain types of donated assets. This policy provides clear guidance for board members and staff when considering proposed non-cash donations, including real estate, equipment, or other complex assets.
A well drafted gift acceptance policy also helps a nonprofit identify and decline gifts that may carry unwanted liabilities, restrictions, or ongoing obligations that the organization is not prepared to manage. This protects the nonprofit from financial, legal, and operational risks associated with unsuitable donations.
An investment policy defines who is responsible for making investment decisions and how the nonprofit’s assets will be managed, protected, and grown. It also establishes guidelines for risk management, diversification, and maintaining appropriate access to cash when needed.
By outlining both management authority and board oversight, an investment policy helps ensure that financial resources are used prudently and in furtherance of the nonprofit’s mission. It also promotes long term financial stability and responsible stewardship of charitable assets.
A public disclosure policy explains which nonprofit documents must be made available to the public and which may remain internal. Certain records, such as governing documents, financial statements, and Form 990, are often subject to public inspection.
This policy helps ensure compliance with disclosure requirements while allowing the nonprofit to maintain appropriate confidentiality for sensitive internal information. It also supports transparency and public trust.
WHISTLEBLOWER
A whistleblower policy establishes a process for reporting suspected illegal conduct, financial mismanagement, or violations of nonprofit policies. It also protects individuals who report concerns from retaliation.
By encouraging staff and volunteers to raise issues in good faith, this policy helps nonprofits identify and address problems early, promote ethical behavior, and reduce the risk of legal or regulatory violations.
IV. CONCLUSION
With passion leading the way and strong policies guiding your efforts, your nonprofit can operate more effectively, ethically, and confidently. These ten (10) policies help protect, strengthen, and support your organization’s long term success.
Clear and well drafted governance policies provide a framework for responsible decision making, promote transparency and accountability, and help ensure compliance with federal and state law. They also build trust with donors, volunteers, and the communities your nonprofit serves.
If your organization does not yet have these ten (10) policies in place, or if your current policies need to be updated, I can help. I offer customized drafting of all ten (10) policies for Iowa nonprofits.
To learn more, please contact me at gordon@gordonfischerlawfirm.com.
The Ultimate Guide to Bylaws for Iowa Nonprofits
NonprofitsJanuary 6, 2026
The Ultimate Guide to Bylaws for Iowa Nonprofits
Bylaws are one of the most misunderstood documents in the nonprofit world. They are often treated as paperwork to be copied from a template, adopted once, and forgotten. In reality, Bylaws quietly control how power is exercised, how decisions are made, and how conflict is resolved inside a nonprofit organization. Well-drafted Bylaws make governance feel manageable and predictable. Poorly-drafted Bylaws create confusion, gridlock, and risk, often at the worst possible moments. Leadership transitions, internal disputes, audits, grant reviews, or periods of rapid growth are usually when bylaw problems surface.
This guide is designed to help Iowa nonprofits understand what Bylaws are, why they matter, what Iowa law expects, and how to approach them thoughtfully and confidently.
What Bylaws Are
Bylaws are the internal rules that govern how a nonprofit operates day to day. They describe how authority is exercised, how decisions are made, and how leadership functions in practice. In
short, Bylaws explain how the organization runs once it exists. They function as the organization’s operating manual. When questions arise about who has authority, how decisions are approved, or what process must be followed, the Bylaws are the first place to look.
What Bylaws Are Not
Bylaws do not create the nonprofit. That role belongs to the Articles of Incorporation, which establish the organization as a legal entity and are filed with the Iowa Secretary of State. Bylaws are not filed with the state. Instead, they are adopted by the governing body and kept with the organization’s internal records. They are meant to be used, consulted, and relied upon
regularly.
Think of the Articles as defining the organization’s outer legal boundaries. The Bylaws then step inside those boundaries and explain how the organization actually functions.
Iowa Law and Nonprofit Bylaws
Iowa nonprofit corporations are governed by the Revised Iowa Nonprofit Corporation Act, found in Iowa Code Chapter 504. While the statute does not require nonprofits to file their Bylaws with
the state, it assumes that Bylaws exist and that they address core governance fundamentals.
Iowa’s Default Rules and Why They Matter
Iowa law does not provide a detailed checklist of required bylaw provisions. Instead, it sets default rules that apply unless the Bylaws say otherwise. This flexibility is intentional, but it places responsibility on the organization to make deliberate choices.
If Bylaws are silent on an issue, Iowa’s default rules control. Sometimes those defaults are appropriate. Other times, they do not reflect how the board expects to operate or how the organization actually functions.
The Legal Authority for Bylaws
Iowa Code Section 504.206 allows Bylaws to contain any provision for regulating and managing the affairs of a corporation that is not inconsistent with law or the Articles of Incorporation. This
is where most governance decisions are made in practice. Thoughtful Bylaws allow an organization to customize governance while remaining fully compliant with Iowa law.
IRS Expectations and Bylaws
The Internal Revenue Service does not require nonprofits to submit Bylaws when forming a corporation. However, when an organization applies for tax exempt status, any adopted Bylaws
are typically included with the application and may be reviewed. The IRS does not mandate specific bylaw language. Instead, it looks for evidence of sound governance practices that support the organization’s charitable purpose. The questions on Form 1023 reflect these expectations.
Well-drafted Bylaws help demonstrate that a nonprofit is governed responsibly, that authority is properly exercised, and that safeguards exist to prevent private benefit or misuse of charitable
assets.
Business concept meaning Form 1023 Application for Recognition of Exemption Under Section 501(c)(3) of the Internal Revenue Code with inscription on the sheet.
Core Provisions Every Iowa Nonprofit Bylaws Should Address
Bylaws are where governance becomes operational. Some provisions are essential for basic functionality and oversight, while others provide clarity and protection as the organization
grows.
Charitable Purpose and Tax Exempt Limitations
Bylaws often restate the organization’s charitable purpose and include restrictions related to private inurement, political activity, and prohibited conduct. This reinforces alignment with federal tax exempt requirements and keeps governance focused on mission.
Board Authority and Governance Role
Bylaws should clearly establish that the board of directors is responsible for managing and overseeing the nonprofit. This includes policy setting, fiduciary oversight, and strategic direction.
Board Size, Qualifications, and Terms
These provisions define who may serve as a director, how many directors may serve, how long they serve, and how turnover is handled. Clear rules reduce uncertainty and help maintain continuity.
Meetings, Quorum, and Voting
Bylaws establish how and when meetings occur, what constitutes a quorum, how votes are taken, and whether electronic participation is permitted. These rules determine when board action is
valid.
Director Accountability and Removal
Clear procedures for resignation, removal, attendance expectations, and vacancies support effective oversight and provide a roadmap when governance challenges arise.
Officers and Executive Authority
Bylaws should identify officer roles, selection procedures, term lengths, and authority. This helps maintain clarity between governance and management responsibilities.
Committees and Delegation Limits
Committee provisions define what authority may be delegated and what decisions must remain with the full board. This prevents unintended delegation of core responsibilities.
Optional but Strategic Bylaw Provisions
Many nonprofits include additional provisions that add protection, flexibility, and clarity over time. These provisions often address topics such as executive leadership structure, fiduciary standards, compensation and reimbursement safeguards, limitation of liability, indemnification, amendment procedures, and dissolution approval requirements. While optional, these provisions frequently become critical during periods of growth, leadership transition, or conflict.
Board Managed and Member Managed Nonprofits in Iowa
One of the most important and commonly misunderstood aspects of nonprofit governance is whether an organization has members. Most Iowa nonprofits are board managed and do not have statutory members. In these organizations, the board holds ultimate authority.
Some nonprofits intentionally create members with voting rights. This can be appropriate in certain circumstances, but it significantly changes governance dynamics and approval requirements.
A common problem arises when Bylaws unintentionally create members through imprecise language. This can result in unexpected voting rights or approval thresholds the board never intended.
If an organization does not intend to have members, the Bylaws should say so clearly and explicitly.
How Bylaws Fit Into a Healthy Governance System
Bylaws do not stand alone. They exist within a hierarchy of governing documents. The Articles of Incorporation sit at the top. Beneath them are the Bylaws. Supporting both are board adopted policies and procedures. These documents should work together. When they do not, confusion and risk follow. Conflicting provisions can raise questions about authority, validity of actions, and compliance. Strong governance treats Bylaws as part of an integrated system, not as an isolated document.
Common Bylaw Mistakes Iowa Nonprofits Encounter
Many bylaw problems do not stem from a single bad clause. They arise from practical mismatches between written rules and real world operations. Common issues include:
• Using Bylaws copied from another state
• Creating unintended members
• Adopting procedures that do not match actual practice
• Allowing Bylaws to drift out of alignment with Articles
• Layering amendments instead of adopting restated Bylaws
Templates can be a helpful starting point, but they rarely produce Bylaws that truly fit an organization without thoughtful customization.
Adopting, Amending, and Restating Bylaws
Bylaws are typically adopted by the board at the initial organizational meeting. Once adopted, they should be kept with the organization’s records and reviewed periodically.
As organizations evolve, Bylaws often need to be updated. In many cases, adopting restated Bylaws that consolidate all changes into a single clean document is preferable to layering amendments over time. Clear amendment procedures help ensure that changes are deliberate, properly approved, and well documented.
When Iowa Nonprofits Should Consider Updating Their Bylaws
Certain moments often signal that Bylaws deserve attention. These include leadership changes, organizational growth, IRS reinstatement, internal conflict, grantmaker requests, or major structural changes such as mergers or dissolutions. Addressing Bylaws proactively is almost always easier and less costly than fixing problems after
they surface.
Final Thoughts
Bylaws are not busywork. They are a practical tool that supports effective governance, clear decision making, and organizational stability. When drafted thoughtfully, Bylaws reduce uncertainty and help nonprofit leaders focus on mission rather than mechanics. When neglected, they can quietly undermine even the best intentions. I have worked with hundreds of Iowa nonprofits to draft, update, and align Bylaws with how organizations actually operate and where they are headed. If you are creating new Bylaws, revisiting old ones, or simply want clarity about what yours really say, I am always happy to talk.
Good governance is achievable. And it starts with getting the fundamentals right.
Frequently Asked Questions About Iowa Nonprofit Bylaws
Do nonprofit Bylaws have to be filed with the state of Iowa?
No. Bylaws are internal governing documents and are not filed with the Iowa Secretary of State. They should be adopted by the board and kept with the organization’s records.
Are nonprofit Bylaws legally binding?
Yes. Bylaws are binding on the organization and its directors and officers. Boards are expected to follow them, and deviations can create legal and governance risk.
Can a board ignore its Bylaws if everyone agrees?
Generally no. Even unanimous agreement does not override the Bylaws. If a provision no longer works, the proper solution is to amend or restate the Bylaws.
How often should Iowa nonprofits review their Bylaws?
As a best practice, Bylaws should be reviewed periodically, often every two to three years, and whenever there is significant growth, leadership change, or organizational restructuring.
Who has the authority to amend nonprofit Bylaws in Iowa?
In most Iowa nonprofits, the board of directors has authority to amend the Bylaws, unless the Articles of Incorporation or Bylaws reserve that power to members.
What happens if Bylaws conflict with the Articles of Incorporation?
The Articles of Incorporation control. Bylaws that conflict with the Articles or with Iowa law can be unenforceable and should be corrected.
Do small nonprofits really need formal Bylaws?
Yes. Size does not eliminate the need for clear governance rules. In fact, smaller organizations often benefit the most from well drafted Bylaws.
Email Me!
My email is:
gordon@gordonfischerlawfirm.com
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