Welcome to the World of Nonprofit Regulation

I’m dizzy. As I look at the myriad of regulatory bodies and try to make sense of the maze that is nonprofit accountability, I am stunned anyone would want to start a nonprofit.

Run. Run fast.

For those of you brave enough to stay, you’re in for a wild journey. Nonprofit management is not about the warm, fuzzy feelings of “doing good.” No way. The administrative expertise needed is becoming increasingly more complex and more professional every day. You may find yourself working with state sales tax issues one day, third party rating systems later that day, and fielding a late afternoon call from the TV station asking for a quote about the latest charity scandal.

The responsibility — and the power — of the nonprofit executive is in the ability to make sense of all of this, educate the Board, the public, and the staff, and, somehow, still make a difference in the lives of your clients.

It’s not for the faint of heart. Here is a broad overview of the major regulatory channels or levels.

Channels of Nonprofit Regulation

Mandatory Regulations: Nonprofits have a series of requirements they must fulfill at the federal and state levels. For example, incorporation, registration, tax accounting,  as well a myriad of policies including conflict of interest, whistleblower, document retention and destruction, gift acceptance policies, and more. Don’t forget the laws and regulations for employers (nonprofit and for-profit), sales permits/sales tax for those nonprofits who sell products. Plus, these laws can and do change. And, you also have to think about regulations  pertaining to your subsector and business activities. Deal with food? Don’t forget about the health code. Deal with medical patients or students? The law is very clear about privacy issues.

Voluntary Accountability: The Independent Sector has a wonderful compendium of standards, codes, and principles for nonprofit organizations. Many of these are opportunities for nonprofits to voluntarily hold themselves to a higher standard. Some, like the Maryland Standard of Excellence, come with certification. Others focus on subsector-specific concerns. Either way, it is a good idea to check in and make sure you’re up to par as a nonprofit and as a member of your subsector.  It would be wonderful if more nonprofits really understood and voluntarily committed to the highest ethical standards.

Third Party Standards: There are a host of third party bodies also known as “Charity Watch Dogs” that rate charities’ performance. These include the BBB, Charity Navigator, Guidestar, and more. There are many problems with these rating systems; however, they are a part of our lives and it appears they are here to stay.

See what I mean? Nonprofit executives are responsible for maintaining compliance (sometimes mandatory, sometimes voluntary) with more rules and regulations than we might have imagined.

Still committed to the nonprofit sector? Join the growing body of people committed to taking the sector to the next level of professionalism and accountability. Welcome.



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