We all live in a world of policies and procedures. These guidelines keep us accountable. Having set policies are essential to productive nonprofit management and IRS reporting. Your IRS Form 990 asks you to indicate your financial policies. There are specific policies that govern how you manage your organization and how you expect staff and your board to run. These policies are codes of conduct for your organization.
The fundamental policies for a not-for-profit organization affect 5 major areas:
Conflict of Interest
Gift Acceptance
Retention of Records
Executive’s Compensation
Whistleblower Protection
1. Conflict of Interest
Under this policy, staff and employees and board members must reveal any conflict they may have with other concerns or businesses. This policy should define a conflict. It should also state that any person with a conflict should not be involved or allowed to vote on any matter that involves the conflict entity.
2. Gift Acceptance
This policy clarifies what gifts your organization can accept. Be wary of gifts that do not directly support your mission, or ones that require modifications to remain in compliance with IRS mandates. Having this policy in place helps donors determine what and how to give a contribution to your organization. Being familiar with this policy helps volunteers, staff, and board members when requesting and accepting offerings.
3. Retention of Records
Having a written policy helps volunteers, staff, and board members know just what documentation and digital material they need to file and retain each year--and which documents or digital files they need to destroy or delete. A procedure should be in place to preserve permanent files and protect them from accidental destruction.
4. Executive’s Compensation
Your organization wants to have the most-qualified executive officers. It is the responsibility of your board to appoint and keep a quality CEO or Executive Director. One key point in hiring this person is fair and competitive compensation. IRS Form 990 asks you to recount in detail your method of arriving at the compensation for your executives. External third-parties can often recommend compensation ranges that match the responsibilities of an executive. Form 990 may also request how often the board reviews the compensation.
5. Whistleblower Protection
The term “whistleblower” refers to a person who speaks-up and shares information about activity within your organization or information that appears to be illegal or unethical. Even though the Federal Government has laws forbidding retaliation against staff whistleblowers, your organization needs a stated policy regarding how it will deal with employees who express complaints. Feeling protected, employees may be more compelled to be honest and come forward with opinions.
These 5 essential policies show good governance of your organization. Do you have questions about your organization’s policies? Keep in touch with our blog. We have ideas to share and solutions to management and organizational questions. If you have questions about any other not-for-profit industry topics, contact our not-for-profit team leader at trent@tbfosteraccounting.com.