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Nonprofit Policy Spotlight: Conflict of Interest

Conflict of Interest chair with book on table

When you truly believe in a cause or issue your favorite nonprofit is addressing, you want everything to be in place to achieve the utmost success. This most certainly means adopting well-written and well thought out policies and procedures.

Make a smart paradigm shift in 2020. Stop thinking about adopting policies and procedures as something you “must” do…just another administrative hassle. Instead, realize that adopting the right policies and procedures protects you and your fave nonprofit, and even more importantly, sets you up for success.

25 Days of Giving: Nonprofit Policies Your Organization Needs to Consider

A conflict of interest policy is inarguably one of the most essential policies a nonprofit board adopts. A conflict of interest policy addresses two critically important issues:

  1. Requires board members with a conflict (or a potential conflict) to disclose it.
  2. Excludes individual board members from voting on matters in which there is a conflict.

Who is responsible, and who gets the credit, for your nonprofit being a nonprofit? If you think about it, it’s the IRS! No less an authority than the Internal Revenue Service (IRS) highly encourages nonprofits to adopt specific types of governance policies to limit exposure to abuse, vulnerabilities, and engagement of nonexempt activities. One important such policy is a conflict of interest policy.

Note the IRS Form 990 (essentially the tax return form for nonprofits) directly asks whether the nonprofit has a conflict of interest policy,  how the organization determines when board members have a conflict of interest, and what steps are taken following such a determination.

If your nonprofit already has a conflict of interest policy already in place, great! It may be a good time to hold a board meeting to review it.

If your organization does not have a conflict of interest policy, and/or you’re unsure of what specifics it should include, don’t hesitate to take me up on my free consultation offer.

If you have any questions or want to discuss further shoot me an email or give me a call at 515-371-6077.

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Stanley Cup Inspired: How Policies & Procedures Help Nonprofits Win the Game

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 NHL All-Star Game where representatives from some of the best teams like the St. Louis Blues and Boston Bruins take to the ice. So, allow me to make a Frost-ian point about nonprofits in a hockey context.

For a nonprofit to operate without having proper policies and procedures in place, is like playing the NHL All-Star Game without a net – and without sticks, skates, helmets, or a puck. Without certain policies in place, a nonprofit simply cannot run properly. Without rules, there can be no expectations. Board members, officers, staff, donors, volunteers, and other stakeholders must work to ensure they’re not skating on thin ice. Give your stars the protection they need, and the tools they require, to be a winning team.

25 Days of Giving: Nonprofit Policies Your Organization Needs to Consider

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!

I offer 10 major policies and procedures nonprofits definitely need for a flat fee of $990. This includes consultations and a full review round to make sure the policies and procedures fit the needs and operations of your particular nonprofit. Adopting the policies explained in this guide will ultimately save your nonprofit organization time and resources, and you can feel great about having a set of high-quality documents to guide internal operations, and present to the public.

Nonprofit Policy Special: 10 for Form 990

All Nonprofits Need These 10 Policies

Whether a nonprofit is large or small, new or decades-old, a mission that is narrow or multi-faceted, all nonprofits should have these policies in place. Yes, these policies are asked about on Form 990, but even if a tax-exempt organization is not required to submit a variation of the 990, the benefits are still immense. In general, having policies in place provides a framework and the expectations for an organization’s executives, employees, volunteers, and board members. Such policies can also be referenced if/when issues arise.

Another major reason to have proper policies and procedures in place is that they provide a foundation for soliciting, accepting, and facilitating charitable donations.

Additionally investing in strongly written, organization-specific policies is a practice in preparation in case of an audit. (The IRS audits tax-exempt organizations, just as it audits companies and individuals.

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.

Nonprofit Policy Spotlight: Conflict of Interest

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.

Nonprofits & Sarbanes-Oxley Compliance

Financial Policies & Procedures

This specifically addresses guidelines for making financial decisions, reporting the financial status of the organization, managing funds, and developing financial goals. The financial management policies and procedures should also outline the budgeting process, investment reporting, what accounts may be maintained by the nonprofit, and when scheduled auditing will take place.

Form 990 Review

Form 990 asks about . . . . Form 990! That’s about as meta as the IRS gets. Specifically, this policy covers how Form 990 was prepared and how it was approved. A written policy is incredibly useful in clarifying a specific process for distribution and procedure review by the board of directors.

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 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.

Collective Responsibilities of Nonprofit Boards

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 on the ice. The 10 policies a part of this promotion will save you time, resources, and you can feel good about having a set of high-quality policies to guide internal operations and present to the public.

Again, for now, I’m offering these 10 policies—including needed consultations—for the low flat fee of only $990. Contact me anytime at 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.

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10 For 990: Pitch to my Most Impressive Twitter Follower

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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.

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Collective Responsibilities of Nonprofit Boards

talking at a table

If you’re like me, you love watching team sports be it baseball in the summer, basketball through the winter, or curling and volleyball during the Olympics! For a shot at winning, each of the team members must expertly perform their position. While not as exhilarating to watch, nonprofit boards are similar to team sports; the board of directors (the team) can only be successful if each of the individual members (just like individual athletes) play their positions well. That means individual board members must hold one another accountable for the overall outcomes of the nonprofit organization. In this way, there is shared responsibility of the individual board members for their actions, for the good of the board as a collective entity.

While each nonprofit can vary in structural organization, let’s review what a typical board of directors is collectively responsible for. (Note: directors can be known by other names, such as trustees, regents, directors, or a council.)

Governing with Compliance Top of Mind

cooperative on rock

The board has a responsibility of compliance.

First off, it’s important to remember that the nonprofit board is the ultimate governing authority of the tax-exempt organization. The board is therefore responsible (and can be held legally liable) for what happens within and to the nonprofit. Compliance is the word to keep in mind. A board makes certain the organization is compliant with local, state, and federal laws, as well as its own policies and procedures. Nonprofit policies are invaluable documents that provide structure and guidance in operations and decision-making. They supersede the individual team members’ opinions for the good of the nonprofit as a whole. Without updated and relevant adopted policies, nonprofit boards have a significantly difficult time achieving a solid standard of compliance.

Download my free guide for nonprofit leaders on policies and procedures your organization needs. Then, check out my special deal on nonprofit policies related to Form 990 (annual information return) such as gift acceptance, investment, conflict of interest, and whistleblower policies.

Money on the Mind

Speaking of important policies, nonprofit boards have a responsibility to approve some compensation decisions. Boards are involved with compensation decisions to various extents, from approval of just the top executive’s salary, to all staffers’ compensations—it just depends on organizational structure. However, at the very least, board members should be involved with compensation points asked about on Form 990. (Again, a great reason to snag the 10 for 990 deal!)

Keep a Quorum

The board has the responsibility to maintain a quorum for meetings. Your nonprofit’s bylaws (a foundational document a part of formation) should define a quorum—the minimum number of voting members present—needed to hold a meeting. How do you decide on a quorum? It’s the minimum number of board member who should be reasonably able to attend a meeting. Maintaining a quorum means a majority of voting members are making decisions on behalf of the organization. If a quorum is left to be too flexible, the organization runs the risk of a few members (not the majority) making executive decisions.

Three Ds

The board’s responsibilities can be summed up in the easy to remember “three Ds”: duty of care, duty of loyalty, and duty of obedience. This isn’t just a useful pneumonic device, these are the legal standards (as defined by case law) to which a board’s actions are collectively held.

  • Duty of care: This means that board members are expected to actively participate in making decisions, resolving issues, and participate in planning.
  • Duty of loyalty: Board members must put the interests of the nonprofit ahead of their own personal and professional interests. This means that even merely potential conflicts of interest must be studiously avoided. (Your nonprofit MUST have a conflict of interest policy dispersed, reviewed, and signed by each board member.)
  • Duty of obedience: Compliance with all local, state, and federal regulations and laws applicable to the nonprofit, is an essential responsibility for board members.

Legal & Financial Responsibilities of Nonprofit Board Members

Mission Ready

Ultimately the board has the responsibility to keep the organization committed and focused on its stated mission. This is encompassed within the three Ds. In working to uphold the tax-exempt purpose of the nonprofit it’s important all board members recognize their individual responsibilities, and those of the board as a whole, overlap. If the board fails to uphold its duties, in some situations, an individual on the board could be found legally liable (and typically served with fines and/or other restrictions).

Questions about collective responsibilities and how they apply to a nonprofit board you’re involved with? Want to schedule a board training or orientation to brief board members on their legal and financial duties? Need to get those important policies asked about on Form 990 in place? Don’t hesitate to reach out via email or by phone (515-371-6077).

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