The end of 2014 is almost here, which means it’s time for end-of-the-year cleanup in your nonprofit organization. There are a number of federal, state, and internal activities that come due around this time of year. Additionally, there are a number of activities throughout the year you must conduct in order to stay compliant.

Failure to abide with these requirements can lead to a loss of good standing, revocation of 501(c)(3) status, fines, penalties, and more.

In order to stay compliant, and to keep on pursuing your mission, I’ve listed a number of compliance activities your organization should address.

A slight disclaimer: not all of these activities will pertain to your organization, and your organization may have differing requirements from those I’ve written here. The point is for you to start thinking about your specific compliance requirements throughout the entire year.

State Compliance

1) Annual Reports

Many states require nonprofit organizations to file an annual report. Has your organization filed this year?

2) Taxes

If your organization is NOT exempt in your state, have you paid all your taxes?

3) Charitable Solicitation Registration

Many states have a charitable solicitation requirement, meaning you need to register before you conduct any fundraising activities (see article on this requirement). Each state has a different registration form and procedure. Make sure your organization understands which states it solicits donations from, and the resulting registration requirements.

Also, depending on your state, you may be required to include disclosure statements on your fundraising materials. Check state requirements, and provide adequate disclosures on all your materials.

4) Charitable Solicitation Renewal

In addition to registration, many states require charities to renew their charitable solicitation license annually. Are your organization’s registrations up-to-date?

5) Other Licenses and Renewals

Does your nonprofit have active licenses or permits for its specific activities? Are you operating under any DBA or fictitious names? Some of these require periodic renewal, so check to see whether they are all current.

6) Moving to a New State

If your nonprofit has begun, or plans to transact business in another state, you’ll need to obtain authority to transact business there. This process is called foreign qualification, and includes appointing a registered agent, registering for taxes, applying for licenses, and registering to solicit donations, if required.

7) Changes to Corporate Information

Have you changed addresses, directors, officers, or registered agents? Most states require you to update this information, usually by filing an amendment, a Statement of Information, or a change of agent form.

8) Annual Board Meeting

Nonprofits are required in most states to hold an annual board meeting. As always, take minutes of this and all other meetings.

IRS Compliance

9) IRS Form 990

Nonprofits are required to file IRS Form 990 after the end of their fiscal year. Failure to file this can lead to revocation of your hard-earned tax-exempt status.

10) Donor Receipts

The IRS stipulates that your organization provide receipts to donors of cash, property, and other contributions. Surely, your donors wish to have proof of their contribution as well! Here’s a helpful template for you (customization required).

11) Review Board Composition

IRS Form 990 stipulates no more than 49% of the board can comprise of family members, and has other composition requirements. Do a review, and take necessary actions.

12) Review Policies and Standards

This may include investment policies, conflict of interest policies, employment policies, whistleblower policies, and bylaws. Are your policies current? Are they still compliant with IRS requirements?

13) Employee & Executive Compensation

Your nonprofit is permitted to compensate employees and executives. This compensation must be deemed reasonable, and fully disclosed on Form 990. Know who the paid individuals in your organization are, and be sure their compensation is reasonable.

Internal Compliance

14) 2015 Budget

By now, your organization should have next year’s budget in place, including projected contributions and revenue, program costs, and other expenditures. Has the Board approved the budget? Make sure any conflicts of interest are resolved according to your organization’s Conflict of Interest Policy.

15) Review of Employees and Payroll

This ties into #13. If your organization added a first or new employee, have you filed the necessary tax and IRS forms? Is your employer insurance policy up-to-date? Lastly, if that employee resides in another state, you’ll have to foreign qualify (see #6).

16) Grant Reporting

Has your organization received any grants over the past year? Have you completed any required grant reports, which attest to the progress your organization has made towards the goals you outlined in the grant application.

17) Record-Keeping

Be sure to record or keep any updates and new filings made with the IRS, any state or local government, or internally, in your company records. You never know when you might need them.

Nonprofits play a leading role to society: they provide support and services where neither the government nor for-profit sector ventures. However, governments hold nonprofits to high standards of compliance to ensure their activities are well documented, and that their purpose is truly charitable.

For your organization, however, this means abiding by a number of rules. Reviewing your compliance activities is easier for smaller nonprofits, but can be done in larger organizations with a team of employees, or outside help, dedicated to the task.

The good news is that compliant nonprofits are often successful nonprofits. Staying current and monitoring these activities will allow you to operate more freely, to pursue new and larger contributions, and to further your mission.

From myself and everyone at Harbor Compliance, Happy Holidays and a Blessed New Year!

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  1. […] more information, please view Wrapping up 2014—A Review of Nonprofit Compliance on Nonprofit […]

  2. […] to comply can put an organization’s non-profit status in jeopardy. In his recent guest post, Wrapping Up 2014 – A Review of Nonprofit Compliance, Harbor Compliance’s James Gilmer warns, “Failure to abide with these requirements can lead to […]

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