What it means to be a nonprofit

I have become involved in a small nonprofit that existed for many years. While the previous board members were familiar with the mission, they were unfamiliar with operating a nonprofit. They assumed that being small meant they were okay with not following all the nonprofit rules.

If the IRS approves a letter of determination and the nonprofit receives money, they must follow basic nonprofit rules. Size matters only in what rules to follow.

For example, this nonprofit had not filed an income tax form for several years. Previous members decided that the nonprofit’s small income exempted them from filing. This caused the nonprofit status to be revoked and it was reinstated at a cost.

Every board member should learn how to run a nonprofit. Of all the things to learn, the two most important ones are:

  • Protect the money by creating financial guidelines. Include at least two unrelated people on the bank account and require dual signatures on all expenses. Also, establish a process to balance the bank account and report to the members.
  • Keep the bylaws updated. These are the operating rules of the nonprofit and should be reviewed at least every two years. The most important part of the bylaws is what makes a quorum. Too low a number and changes could be made without members having a say. Too high a number and nothing can get change, even when needed.

Other matters to pay attention to are having a budget, maintaining archives, and keeping a set of operating procedures updated.

Everyone in a nonprofit has responsibility to make sure that, not only is the mission met, but that the nonprofit operates according to the rules. No matter the size of the nonprofit.

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