A New Year, A Clean Slate: Undergoing a Legal Audit and Adopting Best Practices

As we watched 2014 slowly roll-in, now is a perfect time to get rid of the past habits and start fresh; this applies to you and your non-profit.  The best way to make sure your non-profit starts the new year with everything in place, is to obtain a legal audit.  Legal audits, if done properly, will review all existing documents to determine that your organization has filed all appropriate tax filings, is properly registered in all states where you transact business or solicit funds, updated internal policies, and has proper contracts in place for various organizational partnerships or arrangements with other organizations or business entities.  Most important of all, is that a legal audit will ensure that you are adhering to “best practices.”

While there is no specific “best practices” standard, routinely state non-profit associations will publish resources to help guide non-profit organizations.  Even though there is no specific legal obligation or standard for non-profit organizations (besides those that apply generally to corporations and fiduciary obligations placed on directors and officers), it is beneficial for your organization to proactively adopt “best practices” to help monitor your own growth and progress.  State specific summaries of best practices can be found here and here.  It is imperative to note that best practices do not, in most instances, represent current legal standards, but rather they are reflective of growing trends in non-profit governance and legal discourse.  Additionally, a non-profit organization does not need to adopt every single recommend “best practice”.  Instead, a non-profit organization should review the “best practice” and determine whether the practice will be beneficial to the organization based on its own unique circumstances.

Adopting “best practices,” however, is indicative of a level of sophistication, honesty and trustworthiness that appeals to donors.  They have the ability to raise the profile of your organization by ensuring that each donor interaction is in compliance with your organizational objectives and generally accepted standards.  “Best practices” will give your donors, your staff, and the board of directors a sense of confidence in the organization, its mission, and the means through which the organization satisfies it objectives and goals.

We urge all of our clients and subscribers to use the momentum of this new year to undergo a legal audit and implement “best practices” as part of the organizational value system.  Always remember that “best practices” do not supersede established law or public policy.

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