NONPROFIT COMPLIANCE CHECKLIST

It is important that nonprofits remain compliant with all federal, as well as state or local statutes, at all times. Noncompliance is too risky for a nonprofit’s survival and capacity to fundraise. The following is a comprehensive checklist to ensure that your nonprofit organization is in good standing and operating efficiently.

Nonprofit Corporate Requirements

• Wherever required file state-specific business licenses.
• File corporate annual reports. Charitable corporations must file annually in the state that they are incorporated in, as well as in states where they have offices or employees.
• Have current registered agents in place. States require an individual or company in the state to accept service of process and act as a registered agent if an organization is registered to do business in the state. It is generally best to have a commercial registered agent if your organization has a high rate of employee turnover.

Nonprofit Fundraising Requirements

• If you have not done so yet, make sure that your organization is registered to solicit in all states you will be asking for donations in.
• Make sure to include written disclosure statements on all written solicitations.
• Produce an annual report illustrating revenues and expenses, program outcomes, what your organization plans to accomplish in the upcoming year, and an acknowledgment of contributors.

Nonprofit Operational Requirements

• You should have a current copy of your organization’s Bylaws. Adhere to your company Bylaws to avoid any potential lawsuits.
• Make sure directors, committee members, and officers of your nonprofit organization have been elected in accordance with your Bylaws.
• Nonprofit board members are fiduciaries of your organization. That means that they have certain fiduciary duties. It is important that they understand and adhere to these duties. 
• Conduct regular board meetings. Make sure that you carefully plan board meetings that are mission-focused. Use the meeting to make strategic decisions and strategic plans. Board meetings can provide oversight into how well your charitable organization is fulfilling its mission and overseeing management. Board meetings can also give you an opportunity to strategize for the future and review compliance statuses. Lastly, take board meeting minutes and distribute them within 24 hours, to keep participants focused on goals.
• It is always a best practice for nonprofit boards members and key staff to review articles of incorporation and bylaws on a regular basis to ensure that they are consistent.
• Beware of conflict of interests by having a conflict of interest policy in place. Make sure that all board members understand and sign. For example, a potential conflict of interest could arise if paid officers are not allowed to be directors.
• The Johnson Amendment to the tax code of 1954 prohibits nonprofit organizations from endorsing candidates, contributing to political campaigns or participating in any activity that may be deemed political. However, nonprofits are allowed to engage in nonpartisan election-related activities, such as voter education, registration and get-out-the-vote efforts.

Nonprofit Accounting Requirements

• Ensure that your tax-exempt status is up-to-date.
• File IRS Form 990 series (990-N, 990-EZ, 990 or 990-PF) returns or extension on time. By law, your tax-exempt status could be revoked if you fail to file your Form 990 returns for three consecutive years.
• Make sure you document all unrelated income activities and pay all unrelated income taxes, or all taxes not related to your 501(c)(3) status. Although there are certain exceptions, such as work and activities done by volunteers, unrelated income over $1,000 is subject to taxation.
• If your nonprofit organization receives grants from the federal or state government, it is important that your nonprofit be prepared to provide certification of its granting agency. In addition, make sure your organization properly documents in detail how these funds were used, what was accomplished and how much was left. Make sure to study state specific reporting requirements.
• Make sure your books are accurate and up to date. Bookkeeping helps you analyze your organization’s performance. Inaccurate books or bookkeeping done by an unqualified bookkeeper defeat the purpose. Your books should contain expenses, revenue, bank statements, etc.

Proper Classification of Employees

Nonprofits with paid staff and contractors are required by the US Department of Labor, the IRS and most states to properly classify employees or face penalties. Make sure you follow all federal as well as state employment laws. File W-2 , W-4, I-9 forms, withhold tax, pay social security and medicare taxes.

Nonprofit Record Keeping Requirements

• Make sure you have all state and federal required records. Required records will vary by state and the type of tax-exempt designation your organization falls under. Generally, all rulings, letters, and documents relating to your organization’s tax-exempt status falls within this category. That includes your IRS Determination Letter, and state formation documents, such as your Articles of Incorporation.
• Find out what specific documents or records a state requires to be made available to the general public. If your organization operates in multiple states, find out the requirements for each state.
• You should have copies of your federal tax returns for the past three years. You should also have copies of any state tax filings done in the last 3 years.
• It is important that you have a system and procedures in place as far as record retention is concerned. You will also have requirements such as HR record retention, just as for-profit organizations have.

By Franklin Asongwe