What are laws and what are good practices for nonprofits?

I’m trying to figure out what is actual “law” vs. what is normal or suggested practice for nonprofits.

I know someone whose CC group is a nonprofit. She and her husband make up the board and fill the roles of President, Secretary, and Treasurer. She is the executive director and gets paid for that role. She fills out a 1099 as do her teachers.

B.C.

B.C.,

That is an excellent question!

A nonprofit should have a board of at least 3 unpaid, unrelated people. They set the mission, purpose, vision. They sign all agreements with the church host and the CC licensing agreement. The board decides who to hire and fire. Directors or tutors are employees under the direction and control of this board. This board should not be paid. Being paid for serving on a nonprofit board creates a conflict of interest.

Some of the things I mentioned are laws, mostly driven by state laws about number of board members, their duties, etc.


You can learn what your state laws regarding nonprofit board governance are by visiting :
Nonprofit Governance by State


Some are laws driven by the IRS for 501c3 status such as conflict of interest, inurement, etc.

All the things I mentioned are good practices for nonprofit board members to be in compliance with their fiduciary duties of care, loyalty and compliance.


To learn more about your fiduciary duties as a board member read:  Serving on a nonprofit board: What is required?


 

I look at it like parenting. There is no law that says you must be a good parent, but there are certainly good, sound practices that any responsible parent should follow.

The same is true with operating a nonprofit. Good, responsible board members will avoid conflicts of interest, will have independent board members, will execute their fiduciary duties of loyalty, care and compliance, etc.

The example of the CC nonprofit that you shared is so far from a good example of a well run nonprofit on so many levels that they could be out of compliance with the IRS and state laws. Just like some parents are so neglectful that they violate the law.

But I hope the leaders of the group you mentioned are motivated by a true desire to serve their community of homeschooling families in a good and responsible manner and not just complying with the bare minimum of the law.

We don’t want that for the CC group nor for homeschooling in general. Poorly run homeschool nonprofits reflect badly on all homeschool organizations.

 

 

For help in training your board purchase my  Homeschool Organization Board Manual. It is a combination of a template for your board to create binders to keep important documents and a board training manual to explain the board’s duties and responsibilities.

 

Carol Topp, CPA
HomeschoolCPA.com

Speak Your Mind