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two boardroom tables

If you’ll think back to the early 2000s, in the aftermath of the Enron scandal (among others such as Tyco, Global Crossing, and WorldCom) the climate of distrust and dramatic malfeasance demanded reform of corporate accounting, governance, and other business practices. Accordingly, U.S. Congress passed the Sarbanes-Oxley Act, a law name that’s easier to remember than the actual full legislation name: The American Competitiveness and Corporate Accountability Act of 2002. In summary, the legislation required adherence to certain governance standards by corporate management, and expanded the role the governing board plays in financial and auditing oversight and procedures. It also applied standards of operation to public accounting firms.

Sarbanes-Oxley’s intended consequences were multitudinous, including closing accounting loopholes, increasing accountability and disclosure requirements, rebuilding public trust in American corporations, and increasing penalties for corporate and executive wrongdoing.

Although Sarbanes-Oxley was passed with publicly-traded companies top mind, there are two provisions that are explicitly relevant to tax-exempt organizations: the whistleblower policy and document retention and destruction protocol.

Whistleblower

A whistleblower policy is not technically mandated for nonprofit organizations, but it makes smart sense to adopt such a policy. Why? First off, it encourages stakeholders in the organization to bring attention to problems in the early stages where issues may be more solvable. It’s also important for state and federal liability purposes and ensuring organization executives, board members, and other stakeholders understand their right to report as well as the implications of inhibiting such reporting.

Section 1107 of Sarbanes-Oxley makes it a federal crime to knowingly take any action with the intent of retaliation against a person who has reported truthful information to law enforcement relating to any current or possible federal offense. Violators of this provision are subject to fines and/or imprisonment for up to 10 years.

An ideal nonprofit whistleblower policy should both set a process for complaints to be addressed and include protection for whistleblowers. A well-written whistleblower policy can encourage an appropriate, swift response of investigation and solutions to complaints.

Form 990, the annual information report the majority of nonprofit organizations are required to file, states the following in its instructions:

A whistleblower policy encourages staff and volunteers to come forward with credible information on illegal practices or violations of adopted policies of the organization, specifies that the organization will protect the individual from retaliation, and identifies those staff or board members or outside parties to whom such information can be reported.

Record-keeping

macbook on table

The acts of document retention and destruction are also covered under Sarbanes-Oxley. Section 802 of the Act defines the criminal penalties for tampering with documents in relation to federal investigations and bankruptcy. It reads:

Whoever knowingly alters, destroys, mutilates, conceals, covers up, falsifies, or makes a false entry in any record, document, or tangible object with the intent to impede, obstruct, or influence the investigation or proper administration of any matter within the jurisdiction of any department or agency of the United States or any case filed under title 11, or in relation to or contemplation of any such matter or case, shall be fined under this title, imprisoned not more than 20 years, or both.

You read that right. Violators of this provision can be fined and/or imprisoned for up to 20 years.

Additionally, Section 1102 of Sarbanes-Oxley makes it a crime to tamper with a record or otherwise impede an official proceeding. Violators of the provision may be fined and/or imprisoned up to 20 years if they “corruptly” alter, destroy, mutilate, or conceal a record, document or other objects, or make an attempt to do so, with the intent to impair the object’s integrity or availability for use in an official proceeding. (Note, the term “corruptly” is not defined, but your organization can and should use the best judgment on the word.)

Your nonprofit should include specifics related to these Sarbanes-Oxley provisions in a “document retention and destruction policy.” This policy should clarify what types of documents should be retained, how they should be filed, and for what duration. It should also outline proper deletion and or destruction techniques to ensure compliance and reduce liability risks.

Get Policies Set in Place: 10 for 990 Policy Special

Nonprofit organizations should have relevant and updated policies in place that provide guidance for compliance with these Sarbanes-Oxley requirements. I’m offering the 10 for 990 nonprofit policy special where I’ll draft 10 policies related to annual reporting on Form 990 for only $990. Two of the policies included—whistleblower and document retention and destruction—specifically address requirements under Sarbanes-Oxley.

Seize the opportunity to get strong policies in place for a compliant future! Additionally, if you have specific questions about Sarbanes-Oxley compliance don’t hesitate to contact me directly via email (Gordon@gordonfischerlawfirm.com) or by phone (515-371-6077).

tennis court net

Serena-ity Now!

On the blog we’ve been going “back to school,” and our lessons wouldn’t be complete without a mandatory gym class. Which brings us to the question: is there gender bias in sports? Duh, yes. Mos def. It’s been especially newsworthy in tennis too.

There was nothing wrong with Serena Williams’ catsuit. Please, if a guy wore that, it would be noticed for sure, but certainly not banned.

Even worse: France’s Alizé Cornet received a code violation at the U.S. Open on Tuesday for removing her shirt on the court sidelines (she had a sports bra underneath). This is something men do all the time, and even while on the court.

The conversation continues in the aftermath of the US Open Finals last night between Serena Williams and Naomi Osaka. Were the umpire’s penalties in U.S. Open Final match the result of sexism? I certainly think so. I mean, I’ve seen male players such as, say, Rafael Nadal or John McEnroe, go absolutely bananas on the court and not receive a penalty to the tune of $17k.

Three Truth Bombs

Here are three truths that aren’t changed by any contretemps at Arthur Ashe Stadium:

First, Serena Williams is the greatest tennis player in history.

Second, at least on this day, Naomi Osaka outplayed Williams thoroughly for an amazing upset win.

Third, America, I love you like crazy, the crazy way that only an immigrants’ kid could love America. But, you have serious problems with sexism and misogyny.

Pink tennis ball stuck in fence

From the Tennis Court to Law Court

Here’s yet another truth bomb: nonprofits, already under terrific scrutiny by board members, donors, stakeholders, and government agencies, can’t afford even a whiff of a controversy like the tennis examples above. Even allegations of scandal can destroy previously successful nonprofits. And, just like the game of tennis, both need to consistently be working toward implementing rules and standards that ensure equity.

Such situations can split Boards, cause stakeholders to resign or pull back, snap shut donors’ wallets, and even result in expensive litigation. Fortunately, there are policies and procedures that can prevent your hardworking organization from ever having to deal with controversy (particularly those relating to discrimination, gender bias, and the like), by deterring such actions from every occurring. Let’s first discuss the IRS Form 990 and then the policies that relate to this annual information return.

IRS Form 990

IRS Form 990. This is the form that (most) nonprofits have to annually file some version of. Say what you will about the IRS – but in Form 990, the IRS provides nonprofits a path to prosperity. On Form 990, the IRS asks about several major policies and procedures that actually help nonprofits govern smarter. Any and every nonprofit should have all of these policies and procedures in place, with regular updates as appropriate. But, in our context, three policies are particularly relevant here.

At this point in the blog post, I feel as though I can actually hear you: “I don’t think we could ever afford that in our budget…we don’t know where to start!”

Before I delve into specific policies that will help your fave nonprofit combat discrimination and bias, let me repeat a special offer. I offer all nonprofits 10 major policies and procedures on IRS Form 990, drafted specifically and individually to each organization. for a flat fee of $990. No jokes, tricks, or hidden fees. Interested in learning more? Give this post a read, and don’t hesitate to contact me to take advantage of this solid, straight-up deal.

Compensation Policy

Data related to compensation is reported in three different sections on Form 990: “Officers, Directors, Trustees, Key Employees, and Highest Compensated Employees;” “Statement of Functional Expenses,” lines 5, 7, 8, and 9; and Schedule J;” and “Compensation Information for Certain Officers, Directors, Trustees, Key Employees, and Highest Compensated Employees.”

Having a set policy in place that objectively establishes salary ranges for positions, updated job descriptions, relevant salary administration, and performance management, is used to establish equality and equity in compensation practices. A statement of compensation philosophy and strategy, which explains to current and potential employees and board members how compensation supports the organization’s mission, can be included in the compensation policy.

Generally, this policy provides the benefits of:

  • Enhanced confidence of donors and supporters
  • Consistent framework for decision making on compensation
  • Increased compliance with federal and state employment laws
  • Reduced risk to the organization and its management and governing board

This policy can state clearly an organization’s intention to abide by federal and state law under which it is illegal to have pay differentiate based on gender.

Document Retention and Destruction Policy

This policy should clarify what types of documents should be retained, how they should be filed, and for what duration. It should also outline proper deletion and or destruction techniques.

The document retention and destruction (DRD) policy is useful for a number of reasons. The principle rational as to why any organization would want to adopt such a policy is that it ensures important documents—financial information, employment records, contracts, information relating to asset ownership, etc.—are stored for a period of time for tax, business, and other regulatory purposes. No doubt document retention could be important for proof in litigation or a governmental investigation.

When I was a litigator, I represented employers who could not find a key document–a personnel file; written warning; performance review, and the like. Needless to say, in all these situations, the missing documents were a huge disadvantage to the employer in defending itself. Make sure that doesn’t happen to you by setting down rules as to what documents to keep and how long to keep them.

You know, there’s even a question of federal code. You may have heard of the federal law, the Sarbanes-Oxley Act of 2002. It reaffirms the importance of a DRD policy. Sarbanes-Oxley reads:

“Whoever knowingly alters, destroys, mutilates, conceals, covers up, falsifies, or makes a false entry in any record, document, or tangible object with the intent to impede, obstruct, or influence the investigation or proper administration of any matter within the jurisdiction of any department or agency of the United States or any case filed under title 11, or in relation to or contemplation of any such matter or case, shall be fined under this title, imprisoned not more than 20 years, or both.”

While the Sarbanes-Oxley legislation generally does not pertain to tax-exempt organizations, it does impose criminal liability on tax-exempt organizations for the destruction of records with the intent to obstruct a federal investigation.

Yet another reason a DRD policy is an excellent idea, is it forces an organization to save space and money associated with both hard copy and digital file storage, by determining what is no longer needed and when…it’s like sanctioned spring cleaning!

Whistleblower Policy

Nonprofits, along with all corporations, are prohibited from retaliating against employees who call out, draw attention to, or “blow the whistle” against employer practices. A whistleblower policy should set a process for complaints, including gender bias or harassment, to be addressed and include protection for whistleblowers.

Ultimately this policy can help insulate your organization from the risk of state and federal law violation and encourage sound, swift responses of investigation and solutions to complaints.

A whistleblower policy encourages staff and volunteers to come forward with credible information on illegal practices or violations of adopted policies of the organization, specifies that the organization will protect the individual from retaliation, and identifies those staff or board members or outside parties to whom such information can be reported. (Instructions to Form 990)

The Sarbanes-Oxley Act (referenced under the document retention and destruction policy above) also applies here. If found in violation of Sarbanes-Oxley, both an organization and any individuals responsible for the retaliatory action could face civil and criminal sanctions and repercussions including prison time.

Employee Handbook

On top of the super important policies he first line of defense for nonprofits is a well drafted, individualized employee handbook. Really, how can you NOT have an employee handbook? An employee handbook even if you have but a single employee makes clear the rights and responsibilities of both the employer and employee. So many disputes can be avoided by a clear, easy-to-read, and direct employee handbook.

In terms of gender discrimination, there are several provisions that should help insulate your favorite nonprofit. Your employee handbook would have an equal opportunity statement; anti-harassment policy; complaint procedure; and rules about compensation, document retention, and whistleblowing.

I offer a free “starter” employee handbook that can get you thinking about the types of provisions you should/could include in your employee handbook.

Update As Needed

If you already have some (or all) of the above policies or employee handbook 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.

Playing tennis Without a Net?

tennis shoes on red court

Robert Frost famously opined that writing free verse is like playing tennis without a net. Well, I don’t know about that, but any nonprofit without the 10 major polices asked about on IRS Form 990, or without an employee handbook, is definitely like playing tennis without a net, ball, lines, umpires, or rules! And, the best way to play the “game” while assuring equity and fairness for all the players involves preventing bias and discrimination from ever holding a place on the court.

Schedule your free one-hour consultation and let’s talk about your organization’s needs!

hockey-rink-stanley-cup

Robert Frost famously quipped that writing poetry that doesn’t rhyme is like “playing tennis without a net.”

Right now, a different sport without a net is grabbing our attention. Currently the NHL sports fans are tuned into the Stanley Cup Playoffs, an epic battle between two seemingly evenly matched teams: the Washington Capitals and the Vegas Golden Knights. 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 Stanley Cup 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.

don't just stand there book on table

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.

Special Offer!

Right now, I’m offering 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 which 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 because 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.

Policy Highlight

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.)

Compensation

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 financial status of the organization, managing funds, and developing financial goals. The financial management policies and procedures should also outline the budgeting process, investments 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.

Fundraising

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.

Gift Acceptance

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.

Investment

Before investments are made on behalf of the organization, there should be a sound investment policy in place to define who is accountable for the investment decisions. The policy should also offer guidance on activities of growing/protecting the investments, earning interest, and maintain access to cash if necessary.

Public Disclosure

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.

Whistleblower

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.

Keeping Up-To-Date

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 the coolest sports trophy—the Stanley Cup. 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 gordon@gordonfischerlawfirm.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.

I’ll never forget that night. Several months ago, a simple notification popped up on my Twitter account. Very rarely have five words caused me such joy: “Soledad O’Brien is following you.”

I was social media starstruck!

Sure, I know that this was likely the doing of a digital tool that auto-follows accounts that tweet about certain subjects. Or, maybe it was one of the social media interns who saw my retweets of @soledadobrien and decided to throw me a follow as a fan. Since she follows 447k accounts I have no doubt that the impressive individual herself didn’t actually follow me…but hey, we all like to feel liked and heard even if it’s a digital facade.

To understand why this was such a Big Hairy Audacious Deal (if you got the reference to Jim Collins’ concept, applause!), let me put this into context of my small, “local” Twitter account and Ms. O’Brien’s worldwide acclaim.

A Lonely 440+

My Twitter account has merely around 440 followers (at the time of publication). I put out great content, and it’s growing slowly and surely, but would love for more people to join the party. (In fact, if you’re reading this and haven’t followed @FischerGordon yet, check out all the great info I share on estate planning, nonprofit formation and compliance, and charitable giving on top of Iowa-centric news and all around interesting factoids.) But, let’s be honest I have a long way to go to catch up to the likes of the Big Ben clock that simply tweets “bong” in various quantities and the San Francisco fog, apparently named Karl.

Soledad is Superb

In contrast to my lowly follower count, @soledadobrien has a well-deserved follower count at 809k and counting. For those few of you who are unaware, Soledad O’Brien is a world-famous broadcast journalist renowned for her roles as anchor and correspondent for MSNBC, CNN, HBO, and Al Jazeera America. She has been a tremendously well respected presence in broadcast news since 1991. She has covered so many huge stories I can’t possibly list them all. Countless times she’s been on “best of” lists and she’s won a Peabody Award and four Emmy Awards.

Presently, Ms. O’Brien is the host of Matter of Fact with Soledad O’Brien, a show focusing on politics and socioeconomic concerns produced by her very own multi-platform Starfish Media Group.

Newsworthy Nonpxrofit Policy Special Worthy of O’Brien’s Reporting

I would regularly check to see if Soledad O’Brien ever unfollowed me. Maybe the social media software algorithm wised up or the social media intern was tasked with clearing out the followings of accounts with sub-500 followers. But, my coolest follower (sorry everyone else!) is still there! This fact has, of course, let me to the inevitable conclusion: O’Brien must want me on her show! Why else would she follow an attorney who’s on a mission to maximize charitable giving in Iowa?

Why would she want me on her show at all? I’m biased, but I think the 10 for 990 nonprofit policy special (available through March 15) is certainly newsworthy! While not a political scoop, the 10 for 990 deal could benefit (Iowa) nonprofits working toward the betterment of socioeconomic issues and/or advocating for increased engagement in American democracy.

A journalist of O’Brien’s caliber would need some more details before she ever agreed to have me on as a guest. As such, the 10 for 990 offer provides nonprofits the ten policies discussed on the IRS’ Form 990 for the flat fee of only $990. (IRS Form 990 is the tax form nonprofits must complete once they’ve reached a certain monetary threshold. Just like individuals have to fill out a personal income tax form). The 10 policies asked about on the Form 990 include conflict of interest, document retention and destruction, whistleblower, compensation, fundraising, gift acceptance, financial policies and procedures, and investment.

If Ms. O’Brien were to ever interview me on this truly fantastic deal, I would share the benefits of having a qualified attorney craft these important policies and explain the collective responsibilities of nonprofit boards.

Even if you’re not an award-winning journalist turned CEO, I would love to talk to you about this policy special. Because Form 990 is typically due in May, now is the perfect time to get ahead on compliance. Nonprofit executives, board members, and even engaged volunteers should contact me via email or phone (515-371-6077) to learn how this could fit in with your organization’s goals.