If you are involved in running a non-profit organization, whether you're a paid employee or a volunteer, you'll want to make certain that you are following all of the legalities surrounding a non-profit. Many people that run non-profits are volunteers, and if you have no knowledge on some of the strict regulations that come along with a non-profit, you may be doing things you shouldn't. Here is an overview on the top things you should make sure you're doing when you are involved in running a non-profit organization.
Initiate a Conflict of Interest Policy
One of the most important things your non-profit should do is initiate a conflict of interest policy. This policy will ensure that no one on your board will be benefiting from any work that your non-profit engages in, or any business that your non-profit conducts. For example, you may want to conduct a fundraiser with a restaurant that donates a certain percentage of proceeds from dinner sales back to the organization.
A conflict of interest would arise if one of your board members was the owner of that restaurant. Even though a portion of the profits are going back to the non-profit, the board member is benefiting from the transaction as well, since their business is also making money off of the fundraiser.
Some states have changed their non-profit laws to require that non-profit organizations adopt a conflict of interest policy, but it's in the company's best interest to do so whether or not the state laws require.
Personal Benefit of Members
Another common mistake in non-profits organizations that are set up to help a specific group of people is allowing members to benefit personally from any funds raised. This would be in the case of a booster club. Your members are the participants on a certain sports team or a club, and the mission of your organization is to raise money to go on a trip or buy equipment.
The mistake that many non-profits make is allowing each member of the team benefit individually by allocating a certain amount of money towards each member. The IRS has strict rules that if booster clubs are found to be allowing individual benefit, the clubs could have their non-profit designation taken away.
Accounting Procedures and Practices
Even though non-profit organizations don't have to pay taxes, they still have to file a tax return. Also, check with your state to determine the filing requirements, as some states require non-profits to file a registration with their state for charitable organizations. Make sure you have someone on your staff or volunteer list that is experienced in accounting practices for non-profits.
If you are unsure on how to run your group, or you fear past members have not followed the rules, contact a business lawyer to sit down with you and discuss ways you can make improvements.