In NPR’s coverage, I’m focusing on the blog page where the story is posted. Not the four minute story, but the blog post and its shorter audio interview. A former director of the Service’s Tax Exempt/Government Entities team explains nonprofit examinations and audits aren’t a priority because considerably more money can be recovered from taxpayers and businesses.
That makes all of us in the nonprofit community responsible for operating properly. The buzzwords like accountability, transparency and compliance are well known, nearly cliché, and most of us recognize donors increasingly demand clean operations. That in itself should provide sufficient motivation.
Fear also motivates. If you don’t fear an IRS review because you’re resting on favorable odds, recognize that other interests within government are looking over your shoulder. From your state attorney general and secretary of state to the Federal Trade Commission and Congress, there are ample institutions helping to make sure you do the right thing.
Do you honestly not know what’s right? Do you fear the things you don’t know or understand? Your employees probably know the way. (That’s what I’ve seen for 13 years.) Are you listening to them? (In my 13 years, probably not.) If you prefer, there are thousands of consultants, in all stripes, to help your charity find its course.
Ultimately, it’s a matter of conscience–your charity’s conscience. What does it tell you about the right way to conduct business, to keep its reputation, donors, employees and board out of trouble?
That message is stronger than any IRS can put out.
Thanks for your good work with NonProfit National Resource Directory, Marcia.
What an important topic, Tony! Since you mentioned consultants who can help keep a nonprofit on the “straight and narrow”, I wanted to let folks know that they can find specialists in over 80 categories of service in NonProfit Direct:The NonProfit National Resource Directory. There are those with expertise in legal issues affecting nonprofits as well as board governance, finances, fund-raising and much more.
Nonprofits play such a vital role in the health, safety, and well-being of our society. All face challenges at one time or another. NonProfit Direct is there to help our nonprofit sector thrive.
Good points, thanks a lot for contributing, Andy!
It’s not just the IRS, fortunately, who are responsible for keeping nonprofits on the straight and narrow. Nonprofits are also registered with the state and need to follow state laws and regulations. Nonprofits’ IRS 990 forms are available to the public (unlike individual’s tax forms), and audits are, usually, too. Guidestar and other organizations are available for donors to check. Local media can also serve a watchdog function. Many (although not all) Board members will want to ensure that their organization does the right thing, too.
Andy
Yes! And thanks for raising the issue. As a nonprofit consultant, and a donor, it’s always amazing to me the number of people who are trying to “save the world” in the nonprofit sector and who are also unethical. It would seem to be an oxymoron. On the other hand, many times missteps can be attributed to ignorance and lack of resources (time and money).
For some reason, I didn’t think I was the only one thinking about this. Thanks, Kathy.
Tony, I completely agree with your comments especially regarding charities failing to listen to their employees.
As a consultant, I have seen several Executive Directors (against the recommendation of other staff) cut corners or fail to educate their board about legal and ethical responsibilities in efforts to save money or believing that the board knows all the rules and will step in if they feel that it is worth the money. The reality is that most board members do not know their legal and ethical responsibilities. The Attorney General of Minnesota has a great resource for explaining board responsibilities (http://www.ag.state.mn.us/charities/fiduciaryduties.asp).
With our access to technology, donors and society in general are becoming much more savvy about evaluating charities and holding them accountable. Just saying that you are “Doing good” is not enough. If you are a nonprofit, you have a legal and ethical obligation to operate as though you are a trustee of others’ resources, because in fact you are.