Here is a compliance checklist to help in your compliance journey for nonprofits.
- Corporate compliance
Nonprofits are required to follow the incorporation like most organizations. The difference between nonprofits and other organizations is in the mission statement. After choosing a mission statement that encompasses the activities of your nonprofit, you need to take various actions to maintain the incorporated status. The first step is to ensure that you register and renew your nonprofit as a legal entity whenever required. This is filed annually in the state that which the nonprofit is incorporated. Additionally, file the corporate annual reports in the state you are registered to conduct operations and designate officially registered agents for your nonprofit.
- Fundraising requirements
The laws of fundraising allow your charity to seek funds and donations from supporters. These laws also enable the collection of proceeds without payment of taxes. Ensure that you follow all federal fundraising requirements and research your state to see if there are unique requirements. Include written disclosure statements on all your solicitations. Know that not all states require written disclosure statements. However, submitting written disclosure statements will help maintain transparency between nonprofits and donors.
- Operational requirements
Like all organizations need to develop, approve and conform to the internal operational procedure guidelines. Ensure you have a copy of the bylaws for your nonprofit ensure that you adhere to the bylaws to avoid any lawsuits. Furthermore, ensure the directors, committee members and officers are elected according to your bylaws. Conduct regular board meetings and make sure you carefully plan them to make everything mission-focused. Furthermore, use the meetings to create strategic decisions and plans. Board meetings can allow you to provide oversight.
- Accounting requirements
Accounting regulations enable nonprofits to enhance transparency and build trust between charities and their donor bases. Up-date your tax-exempt status. Contact the IRS to obtain a letter of determination to prove your tax-exempt status. File IRS Form 990 series returns or time extension requests and note that your tax-exempt status can be revoked if you fail to file this form of returns for up to three consecutive years. If your charity receives grants from the state or federal government, you must provide certification. Ensure your books of accounts are up-to-date and accurate. To achieve this, your organization will need a designated bookkeeper and accountant to help fix your accounting challenges. These two positions are not interchangeable. For instance, accountants have knowledge of financial matters and can be crucial in rectifying financial discrepancies.
- Employee classification
Nonprofits that have paid staff and contractors are required to be classified appropriately, according to the US Department of Labor and the IRS. Moreover, most states classify employees as exempt or non-exempt according to FLSA. Failing to do this may result in penalties.
- Record-keeping requirements
Records form an important part of nonprofits. They are also necessary for legal compliance in addition to ensuring transparency in the organization. As such, you need to ensure that you understand and follow the state and federal guidelines or record-keeping. These records may vary from one state to the other. Find out the specific documents or records that are required relating to your organization and the ones that can be availed to the public.