For any organization, regularly reviewing policies is essential to remain compliant, efficient, and aligned with mission goals. For not-for-profits, this is especially crucial given the unique compliance, financial management, and operational standards required in the sector. A thorough annual review of not-for-profit policies allows leaders to adapt to evolving circumstances, ensuring policies not only meet current regulatory requirements but also reflect the organization’s growth and strategic priorities.
Why Annual Policy Reviews Matter for Not-for-Profits
It’s wise to review policies at least once a year. While policies themselves may not always require updates, external factors such as economic shifts, changes in leadership, or new funding requirements can drive the need for revisions.
Policies Highlighted in IRS Form 990
The IRS Form 990, which requires disclosure of certain not-for-profit policies, is a great guide for reviewing your organization’s governance structure. Part VI: Governance, Management, and Disclosure specifically asks whether your organization has implemented the following policies:
- Conflict of Interest Policy
- Whistleblower Policy
- Document Retention and Management Policy
Additionally, Schedule M of the 990 inquires about a gift acceptance policy, which can be vital for not-for-profits that regularly receive donations of non-cash items.
Key Policies to Review and Update
Here are several not-for-profit policies that should be regularly reviewed:
1. Investment Policy
As economic conditions and investment strategies evolve, reviewing your investment policy ensures alignment with both current financial goals and risk tolerance levels. This policy should reflect the organization’s mission, guiding how assets are allocated, diversified, and managed for long-term sustainability.
2. Conflict of Interest Policy
Maintaining a robust conflict of interest policy is essential for fostering trust and transparency, particularly within the board and leadership teams. This policy should clearly define conflicts, outline disclosure procedures, and establish a process for managing potential conflicts. Updating this policy as the organization grows or as regulatory guidelines change (such as those reflected in the IRS Form 990) can help safeguard integrity.
3. Endowment Spending Policy
If your not-for-profit holds endowments, it’s critical to regularly assess your endowment spending policy to ensure it aligns with your organization’s financial health and long-term objectives. Market fluctuations, regulatory changes, or new standards can impact endowment fund management and spending.
Often Overlooked Policies That Strengthen Compliance
Certain policies may be overlooked but are highly recommended for not-for-profits:
1. Fraud Policy
Outlining measures to detect and prevent fraud is critical. This policy should detail how your organization addresses financial misconduct, from reporting to corrective actions.
2. Gift Acceptance Policy
This policy establishes guidelines for what types of gifts can be accepted, ensuring all donations align with the organization’s mission and values while minimizing potential liabilities.
3. Expense Reimbursement Policy
Clear guidelines for expense reimbursement ensure transparency and prevent potential misuse of funds, which is particularly important in a not-for-profit where donor funds are involved.
4. Fundraising Policy
This policy can define ethical fundraising practices and outline procedures that align with both regulatory requirements and the organization's mission.
Ensuring Compliance with Board-Approved Policies
Annual reviews serve as an opportunity to verify compliance with existing policies. Changes in staff, leadership, or funder expectations can affect the organization’s ability to adhere to established protocols. By reviewing each not-for-profit policy and confirming that staff members are informed and compliant, you reduce the risk of oversight and strengthen your organization’s governance.
Strong Policies Support Strong Organizations
Having well-defined, current not-for-profit policies is essential to maintaining your organization’s integrity, efficiency, and compliance. Strong policies are the foundation for a strong organization, helping you manage resources effectively and maintain the trust of your community, donors, and regulators.
If you would like assistance with reviewing, developing, or updating your organization’s policies, contact us today. Our team is here to help you navigate the complexities of not-for-profit policy management to ensure compliance and support your organization’s mission.
