The Number One Thing Regulators Wish All Nonprofits Would Do Better
By Dustin McKissen, March 16, 2017
In a recent article for The Nonprofit Times, attorneys Tracy L. Boak and Karen I. Wu shared
the five things regulators (including the IRS and state officials) believe
nonprofits need to improve on to comply with state and local laws.
Number one on their list?
Issues related to governance. Specifically, boards of
directors failing to maintain proper documentation of meetings or conduct
robust discussions prior to making decisions, and serving as a rubber stamp for
Concerns about governance ranked higher than concerns about overhead
and fundraising costs as well as solicitation and use of donor gifts, both areas
that represent significant compliance risks for nonprofits.
As a former nonprofit executive, it’s easy for me to see why
concerns about governance practices superseded concerns about fundraising.
Nonprofit executives are generally very conscious of how money comes in to an
organization and what that money is spent on. Yes, there are notable instances
where prominent nonprofits were caught going on wild spending sprees, but in
general nonprofits are careful when it comes to money.
That’s a little easier to become sloppy with.
Creating accurate minutes and properly documenting
interactions between board members—particularly on important issues like
compensation for executives—is easy to neglect, overlook, or just make a
mistake on. And unlike draining your organization’s bank account on over-the-top
employee perks and treats, a mistake related to governance isn’t likely to land
you on the front page of newspapers.
But it can land you in front of IRS auditors as well as state
When an auditor asks how the Board approved a raise for the
CEO or Executive Director, an answer without supporting documentation is an
answer that can potentially result in serious trouble for your organization.
And this isn’t just true for charities and the types of
organizations we typically associate with the term “nonprofit.”
Trade associations, school boards, credit unions—any
organization with a board of directors runs the risk of serious compliance
issues when it fails to practice proper governance, particularly when it comes
to documenting important board decisions.
In fact, failing to follow best governance practices in a
school board can result in a scandal that damages an entire community’s brand,
and improper governance practices at a credit union can result in a host of
regulators making life a lot harder for the organization.
When it comes to governance, compliance is essential for your
organization. Failing to comply with governance requirements can create a host
of legal and regulatory consequences. And even if you don’t end up in trouble
with the IRS, failing to comply can damage your organization’s brand with
funders, donors, members, foundations, or whoever you get your money from.
Fortunately, BoardPaq is
designed to make compliance easier than ever. Tools like Minutes Builder make
creating minutes simpler than ever, and BoardPaq is built with the industry’s highest security standards.
Compliance isn’t sexy.
It isn’t crowdfunding or figuring out how to use Snapchat to
But compliance is critical—and BoardPaq is a cost-efficient
board portal designed to make sure your organization stays on the right side of