Almost every attorney and staff member at J&G volunteers for one or more nonprofits. We also represent dozens of nonprofits of all kinds. Here are some tips for running 501(c)(3) charitable nonprofits.
Tip 1. Care, Obedience and Loyalty.
Members of a nonprofit board of directors are said to have these three duties. The duty of Care means you devote your time and attention to the affairs of the organization as if it was your own business. You are attentive and curious, you know what is happening, you ask questions, and follow up. The duty of Obedience means that you obey the law, and make sure that the organization does as well. Not just the law, but also the Certificate of Incorporation, Bylaws, policies, and board resolutions. The duty of Loyalty means that you put the interests of the organization ahead of your own personal interests and those of your family and business. It means you do not take opportunities that come to the organization. It means you abide by the conflict of interest policy and rules concerning related party transactions.
Tip 2. Policies.
It is good practice adopt written policies of all kinds. Policies for conducting elections, paid time off, accepting gifts, expense reimbursement, use of automobiles, use of credit cards, petty cash, bank deposits, investments, computer privacy, conflict of interest, whistleblowing, and more. There should be as many as are needed to run the organization efficiently and effectively. Larger organizations have dozens of policies, and they are revisited and revised periodically. Policies should not be in the bylaws, which are often difficult to amend. Policies should be adopted by majority vote of the board, and can be amended the same way as conditions change. Of course, board members need to know the policies and have easy access to them. This can be done by preparing a board member manual, or by creating an online board portal.
Tip 3. Watch the Money.
Most volunteers are motivated by mission, not money. But you must watch the money. Barely a week goes by without another newspaper story describing a treasurer or other officer who stole money from a nonprofit. The IRS and the Attorney General are watching. You must also be watching. That is part of your duties of care and obedience. It is not common, but under the right circumstances it is possible for board members to be held personally liable for the misappropriation of organization funds. The Attorney General and many others provide online resources for establishing internal controls and preventing fraud and theft.
Tip 4. Work the Committees.
Nonprofits come in all shapes and sizes, but often there is a fairly small core of dedicated volunteer board members. There is always a lot of work to do and that small group cannot do it all. Unless there is money for paid staff, the solution is usually to form committees that include non-board volunteers. Some committees are permanent and some can be temporary or ad hoc. All should have specific tasks and a written charter describing those tasks. Committees generally study issues or problems and make recommendations to the board; as a rule committees should not have the board’s power to act. Committees can come and go. Don’t be afraid to dissolve an inactive committee. On the other hand, if a necessary permanent committee is not doing its job, exercise your duties of care and obedience and put it to work.
Tip 5. Political Activity.
Conventional wisdom is that nonprofits cannot engage in political activity, but that is not quite accurate. Some people feel that nonprofits that are not engaged in political activity are not adequately pursuing their missions. The trick is to steer clear of prohibited activity. 501(c)(3) nonprofits cannot advocate for or against the election of specific candidates for public office. 501(c)(3) nonprofits cannot advocate for or against the enactment of specific legislation. 501(c)(3) nonprofits can do many other political things such as voter education, issue analysis, voter drives, candidate forums, publishing position papers, educating office holders and candidates, and more. Learn about and consider filing the “501-h election.” The IRS and many others offer guidance online.
This is not intended to be legal advice. You should contact an attorney for advice regarding your specific situation.