For many Executive Directors and Working Boards, the ins and outs of managing a nonprofit organization can seem overwhelming. Sometimes you just need help. The Wright Firm assists with ensuring your organization can successfully fulfil its mission.
- Review and advise clients on updates or changes to bylaws and articles
- Grant Management and Compliance
- Board Assessments
- Maintaining Tax Exempt Status with the State and the IRS
- Annual review of Conflict of Interest Policies
- Employment Policies
- Memorandum of Understandings
- Joint Venture Policies with For Profit Entities
- For-profit Business Formation
For more information about pricing and how to work with The Wright Firm, PLLC, Contact Me!
Nonprofit Governance FAQs
Nonprofit governance and nonprofit management are two distinct but interrelated aspects of running a nonprofit organization.
- Nonprofit governance is the system by which a nonprofit is managed and controlled. It includes the board of directors, the executive director, and other key decision-makers. The board of directors is responsible for setting the organization’s overall direction, ensuring its financial health, and overseeing its management. The executive director is responsible for carrying out the board’s directives and managing the day-to-day operations of the organization.
- Nonprofit management is the process of running a nonprofit organization. It includes tasks such as fundraising, budgeting, program development, and human resources management. The management team is responsible for implementing the board’s decisions and ensuring that the organization is able to achieve its goals.
Here is a table that summarizes the key differences between nonprofit governance and nonprofit management:
| Characteristic | Nonprofit Governance | Nonprofit Management |
| Focus | Strategic direction, oversight, accountability | Day-to-day operations, implementation |
| Responsible parties | Board of directors, executive director | Management team |
| Timeframe | Long-term | Short-term |
| Scope | Broad | Narrow |
Here are some common pitfalls in nonprofit governance and how to avoid them:
- Lack of board oversight. The board of directors is responsible for overseeing the organization’s operations and ensuring that it is in compliance with all applicable laws and regulations. To avoid this pitfall, the board should meet regularly and review the organization’s financial statements, performance reports, and other documents. The board should also have a clear understanding of the organization’s mission and vision, and should be actively involved in setting the organization’s strategic direction.
- Financial mismanagement. Nonprofits are often subject to financial scrutiny, so it is important to have strong financial controls in place. To avoid this pitfall, the organization should have a qualified accountant who can prepare and audit the financial statements. The board should also establish clear policies and procedures for financial management, and these policies should be reviewed and updated on a regular basis.
- Conflicts of interest. Conflicts of interest can arise when board members or staff members have personal or financial interests that could conflict with the interests of the organization. To avoid this pitfall, the organization should have a clear policy on conflicts of interest, and all board members and staff members should be required to disclose any potential conflicts of interest.
- Unethical behavior. Nonprofits should strive to operate in an ethical manner, and they should have a clear code of conduct for all board members and staff members. To avoid this pitfall, the organization should have a process for reporting and investigating allegations of unethical behavior.
Here are some common pitfalls in nonprofit governance and how to avoid them:
Lack of board oversight. The board of directors is responsible for overseeing the organization’s operations and ensuring that it is in compliance with all applicable laws and regulations. To avoid this pitfall, the board should meet regularly and review the organization’s financial statements, performance reports, and other documents. The board should also have a clear understanding of the organization’s mission and vision and should be actively involved in setting the organization’s strategic direction.
Financial mismanagement. Nonprofits are often subject to financial scrutiny, so it is important to have strong financial controls in place. To avoid this pitfall, the organization should have a qualified accountant who can prepare and audit the financial statements. The board should also establish clear policies and procedures for financial management, and these policies should be reviewed and updated on a regular basis.
Conflicts of interest. Conflicts of interest can arise when board members or staff members have personal or financial interests that could conflict with the interests of the organization. To avoid this pitfall, the organization should have a clear policy on conflicts of interest, and all board members and staff members should be required to disclose any potential conflicts of interest.
Unethical behavior. Nonprofits should strive to operate in an ethical manner, and they should have a clear code of conduct for all board members and staff members. To avoid this pitfall, the organization should have a process for reporting and investigating allegations of unethical behavior.
Here are some additional tips for avoiding common pitfalls in nonprofit governance:
- Have a well-functioning board of directors. The board of directors is responsible for setting the organization’s overall direction and ensuring its accountability. To have a well-functioning board, the organization should recruit qualified board members who have a diverse range of skills and experience. The board should also meet regularly and be actively involved in the organization’s operations.
- Establish clear policies and procedures. Nonprofits should have clear policies and procedures in place for all aspects of their operations. This will help to ensure that the organization is operating in a consistent and ethical manner.
- Implement a board management system. A board management system can help to streamline the board’s operations and make it easier to track compliance with policies and procedures.
- Get professional advice. If the organization is unsure about how to avoid common pitfalls in nonprofit governance, it should seek professional advice from an attorney or other qualified professional.
By following these tips, nonprofits can help to avoid common pitfalls in governance and ensure that they are operating in a sound and ethical manner.
Bylaws and articles are the governing documents of a nonprofit organization. They define the organization’s structure, operations, and decision-making process. Regularly reviewing and updating these documents can have a number of benefits, including:
- Ensuring that the organization is in compliance with applicable laws and regulations. Laws and regulations governing nonprofits change frequently, so it is important to review the bylaws and articles on a regular basis to ensure that they are still compliant.
- Keeping the bylaws and articles up-to-date with the organization’s current practices. As the organization grows and evolves, its bylaws and articles may need to be updated to reflect these changes. For example, if the organization adds new programs or services, or changes its board structure, the bylaws and articles may need to be updated to reflect these changes.
- Addressing any potential conflicts of interest. Bylaws and articles should include clear policies and procedures for addressing potential conflicts of interest. Regularly reviewing these policies and procedures can help to ensure that they are still effective and that they are being followed.
- Making the bylaws and articles more understandable and accessible to board members and staff. Bylaws and articles can be complex documents, so it is important to review them on a regular basis to ensure that they are still understandable and accessible to board members and staff.
- Ensuring that the bylaws and articles are consistent with the organization’s mission and vision. The bylaws and articles should reflect the organization’s mission and vision. Regularly reviewing these documents can help to ensure that they are still consistent with the organization’s overall goals and objectives.
Overall, regularly reviewing and updating the bylaws and articles can help to ensure that the nonprofit organization is operating in a sound and ethical manner and that it is in compliance with applicable laws and regulations.
Here are some common mistakes made when managing grants and staying in compliance:
- Lack of a grant management plan. A grant management plan is a document that outlines the steps involved in managing a grant, from proposal submission to final reporting. Without a plan, it can be easy to miss deadlines, spend funds incorrectly, or fail to comply with grant requirements.
- Inadequate record-keeping. It is important to keep accurate and complete records of all grant-related activities, including invoices, receipts, and reports. This will help to ensure that the grant is managed properly and that the organization is in compliance with all applicable laws and regulations.
- Failure to monitor progress. It is important to track the progress of the grant on a regular basis to ensure that it is on track to meet its goals. This will help to identify any potential problems early on and take corrective action as needed.
- Failure to comply with reporting requirements. Grant funders typically require grantees to submit regular reports on the progress of the grant. Failure to comply with these reporting requirements can result in the loss of funding or other penalties.
- Failure to address conflicts of interest. Conflicts of interest can arise when grantees or their staff members have personal or financial interests that could conflict with the interests of the grant. It is important to have a clear policy on conflicts of interest and to take steps to mitigate any potential conflicts.
Board assessments can help improve an organization’s governance in a number of ways.
- Identifying strengths and weaknesses. A board assessment can help to identify the strengths and weaknesses of the board’s composition, structure, and operations. This information can then be used to develop strategies for improving the board’s effectiveness.
- Improving communication and collaboration. A board assessment can help to identify areas where communication and collaboration between board members and between the board and management could be improved. This information can then be used to develop strategies for improving communication and collaboration.
- Promoting accountability. A board assessment can help to promote accountability by identifying areas where the board is not effectively fulfilling its responsibilities. This information can then be used to develop strategies for improving the board’s accountability.
- Enhancing the board’s strategic focus. A board assessment can help to enhance the board’s strategic focus by identifying areas where the board is not effectively setting strategic direction for the organization. This information can then be used to develop strategies for improving the board’s strategic focus.
- Improving board oversight. A board assessment can help to improve board oversight by identifying areas where the board is not effectively overseeing the organization’s operations. This information can then be used to develop strategies for improving the board’s oversight.
Overall, board assessments can be a valuable tool for improving an organization’s governance. By identifying strengths and weaknesses, promoting accountability, enhancing the board’s strategic focus, and improving board oversight, board assessments can help to ensure that the board is effectively fulfilling its responsibilities and that the organization is operating in a sound and ethical manner.
Here are some common mistakes made in maintaining tax-exempt status:
- Failure to file Form 990. Form 990 is an annual tax return that all tax-exempt organizations must file with the IRS. Failure to file Form 990 can result in the loss of tax-exempt status.
- Failure to pay taxes on unrelated business income. Even tax-exempt organizations may be required to pay taxes on income that is not related to their exempt purposes. Failure to pay taxes on unrelated business income can result in penalties and interest.
- Engaging in political activity. Tax-exempt organizations are generally prohibited from engaging in political activity. However, there are some exceptions to this rule. Failure to comply with the political activity restrictions can result in the loss of tax-exempt status.
- Failing to maintain adequate records. Tax-exempt organizations are required to maintain adequate records of their finances and activities. Failure to maintain adequate records can make it difficult to demonstrate compliance with tax laws and can result in penalties.
- Making changes to the organization’s structure or operations without prior approval from the IRS. Tax-exempt organizations may need to obtain prior approval from the IRS before making certain changes to their structure or operations. Failure to obtain prior approval can result in the loss of tax-exempt status.
A conflict of interest policy is a set of rules that define what constitutes a conflict of interest and how conflicts will be managed. Conflict of interest policies can help protect an organization in a number of ways:
- Protect the organization’s reputation. Conflicts of interest can damage an organization’s reputation if they are not properly managed. By having a clear conflict of interest policy in place, the organization can demonstrate that it is committed to ethical behavior and that it is taking steps to prevent conflicts of interest.
- Protect the organization’s financial interests. Conflicts of interest can also damage an organization’s financial interests. For example, if a board member has a conflict of interest and votes in favor of a contract that benefits their own company, the organization could lose money. By having a clear conflict of interest policy in place, the organization can reduce the risk of financial losses.
- Protect the organization’s employees. Conflicts of interest can also create unfair situations for employees. For example, if a manager has a conflict of interest and gives preferential treatment to their own family members, other employees may feel that they are not being treated fairly. By having a clear conflict of interest policy in place, the organization can help to ensure that all employees are treated fairly.
- Protect the organization’s mission. Conflicts of interest can also distract from the organization’s mission. For example, if a board member has a conflict of interest and spends more time promoting their own interests than the organization’s interests, the organization’s mission could be compromised. By having a clear conflict of interest policy in place, the organization can help to ensure that its mission remains its top priority.
Overall, conflict of interest policies can help to protect an organization in a number of ways. By defining what constitutes a conflict of interest and how conflicts will be managed, conflict of interest policies can help to protect the organization’s reputation, financial interests, employees, and mission.