Illinois Nonprofit Principles and Best Practices 2020 - Forefront
←
→
Page content transcription
If your browser does not render page correctly, please read the page content below
Illinois Nonprofit Principles and Best Practices 2020
Message from the Attorney General The nonprofit sector fills unmet needs in countless unique and important ways. To accomplish your vital work, you must cultivate the public’s trust in an organization’s mission, its leadership, and the underpinning supportive resources. As Attorney General, I see the value of a vibrant and reliable network of nonprofit organizations. I have dedicated resources to my office’s Charitable Trust Bureau to assist both nonprofits in Illinois that accept donations and those who contribute to them. Our team is available to work with organizations as they fulfill annual registration requirements. We are also able to work with the public to answer questions, educate and intercede as appropriate. As servants of the public, we each have a role to play in providing and protecting resources that advance causes and serve communities. The Illinois Nonprofit Principles and Best Practices booklet by Forefront is a tool to that end. Together, we all can demonstrate the value of charitable endeavors and foster confidence so your work can continue. Thank you for your diligence and your commitment to the highest standards and proven best practices. Please do not hesitate to contact my office if ever you are in need of assistance. Sincerely,
Illinois Nonprofit Principles and Best Practices
Forefront is Illinois’ statewide Currently, Forefront has over 1,100
association representing both Members. Our Nonprofit Members
grantmakers and nonprofits as well as work in over 26 different issue areas
their advisors and allies. Our mission across the state. Our Grantmaker
is to build a vibrant social impact Members include private foundations,
sector for all the people of Illinois. such as family foundations and
We provide education, advocacy, independent foundations, public
thought leadership, and facilitate charities, corporations, donor-
collective action around issues that advised funds, charitable trusts, and
are important to our Members and individual philanthropists. We also
to the sector. actively engage social entrepreneurs,
impact investors, and B-Corps to spur
innovation in the sector.
To help you do your work better,
Forefront updated this Nonprofit
Best Practices guide. This book is
designed to help grantmakers and
nonprofits make specific, concrete
steps to ensure adherence to the high
ethical standards and strong principals
expected of them.
3Illinois Nonprofit Principles and Best Practices
Preamble and Purpose
Nonprofit organizations serve a critical role Please note that there is no one-size-fits-all
in today’s society by providing opportunities approach that must be followed; instead, you
for advancing divested and underserved are encouraged to determine, in consultation
populations, facilitating volunteerism and with legal counsel and other applicable
civic engagement, and developing innovative advisors, how best to integrate these
approaches to solving complex issues--to principles into your nonprofit’s governance
name a few. In order to effectively serve the and operations, as appropriate, and comply
community, however, nonprofits must balance with all other legal requirements applicable
maintaining their commitment to excellence, to your organization.
equity, and accountability while successfully
realizing their missions, managing resources, These Nonprofit Principles and Best Practices
and executing proper governance. In order to are intended to apply generally to both
help Illinois nonprofits strike this balance, grantmaking nonprofits and grantseeking
set forth on the following pages are thirteen nonprofits, unless otherwise specifically
key principles of nonprofit governance, noted. Further, for purposes of these
followed by best practices for consideration in Nonprofit Principles and Best Practices, all
effectuating on these principles. references to “nonprofits” or “organizations”
refer to public charities or private foundations
that have registered with all applicable
regulatory bodies, including, but not limited
to, the Internal Revenue Service, the Illinois
Attorney General’s Charitable Trust Bureau,
the Illinois Secretary of State, and the Illinois
Department of Revenue.
4Illinois Nonprofit Principles and Best Practices
Mission and Governance
1. The nonprofit has a clearly stated e. Meet as frequently as needed to fully
charitable, educational, or scientific and adequately conduct the business
of the organization, including at least
mission that has been approved by
once a year in person.
the governing body and is in pursuit
f. Maintain and distribute to governing
of the public good. body and committee members written
meeting minutes reflecting the actions
a. State the nonprofit’s purpose in the of the governing body, including
mission. minutes of governing body committees
b. Ensure the mission is responsive when taking action on behalf of the
to all relevant constituencies and organization.
communities to be served by the g. Maintain systems and policies to
nonprofit. ensure ongoing communications and
c. Ensure the mission is consistent efficient and effective decision-making
with the “purposes” set forth in during and between meetings of the
its organizational and governing governing body.
instruments. h. Review organizational and governing
instruments, including board-approved
policies, no less frequently than every
2. The role, responsibilities, selection, five years.
and tenure of the governing i. Hire, set reasonable and appropriate
body are clearly stated in the compensation for, and annually
organization’s governing and policy evaluate the performance of the chief
documents and understood by the executive against goals and objectives
agreed to by the chief executive and
governing body members.
governing body. Document the basis
for decisions. If this is a responsibility
a. Establish and adhere to written of a designated committee, a summary
criteria and selection process for the should be provided to the full
governing body. governing body.
b. Stipulate the length of a term and, if
applicable, the number of consecutive
3. The governing body ensures that
and/or total terms individuals may
serve. its members are competent and
c. Consider the appropriate governing
knowledgeable, and includes and
body size and committee structure to seeks diverse points of view and
oversee the organization, encourage experience as needed to provide
discussion, enhance efficiency, and credible and effective oversight of
ensure accountability. all aspects of the nonprofit’s work.
d. Formulate written descriptions
detailing duties and responsibilities
a. Ensure that governing body members
of governing body members and
(e.g., directors or trustees) have the
committees of the governing body.
requisite skills and experience to carry
out their duties.
5Illinois Nonprofit Principles and Best Practices
Mission and Governance (continued)
b. When filling vacancies on the c. Review the mission and strategies
governing body, consider how skills being employed to achieve the
and experience of new members will mission every three to five years
complement existing expertise of to determine whether they meet
governing members. the needs of the organization’s
c. Provide governing body members with constituencies.
the tools and opportunities to develop d. Regularly determine, in consultation
in their roles, including appropriate with the chief executive, staff and, if
orientation for incoming governing the governing body deems necessary,
body members and on-going training outside experts and community
on distinct roles and responsibilities, representatives, whether programs
specifically including legal, financial, are being properly evaluated, and
and fiduciary responsibilities. employ appropriate evaluation
d. Provide access to sufficient techniques to ensure programs are
information and diverse perspectives being delivered efficiently and in
(including, but not limited to, ethnic, accordance with best practices, are
racial, and gender perspectives) to having the desired impact, and are
inform decision making and carry out effective in fulfilling the mission.
due diligence. e. Solicit and act on feedback
e. If not otherwise represented through from program participants and
the governing body, consult when constituents about the effectiveness
appropriate subject matter experts of the programs and operations of the
or community representatives and/ nonprofit.
or include them on committees or f. Analyze and apply all meaningful
advisory groups. data generated through periodic
evaluations of the governing
body, programs, and operations to
4. The governing body regularly ensure accountability and increase
assesses the organization’s mission effectiveness.
and the effectiveness of the g. Know and understand key financial
organization, its leadership, and its metrics beyond just revenues; focus
programs in achieving the mission. on the full costs to the nonprofit to
provide services, operate programs,
a. Regularly conduct a periodic and run the organization overall.
governing body self-evaluation.
b. Set long- (multi-year) and short-
term (annual) objectives to evaluate
program and organizational
effectiveness, and annually evaluate
progress toward achieving objectives.
6Illinois Nonprofit Principles and Best Practices
Legal Compliance, Fiduciary
Responsibility, and Responsible
Stewardship
5. The full membership of the 6. The governing body and staff
governing body is responsible for are aware of and comply with
the organization, and each member all federal, state, and local
acts at all times in an ethical laws, regulations and fiduciary
manner and in the best interest of responsibilities applicable to the
the organization and the public. nonprofit.
a. Maintain policies and practices, a. Educate the governing body and
including a written code of ethics, staff about basic legal, accounting,
a conflict of interest policy, and a audit, and tax issues (including,
whistleblower policy to ensure the but not limited to those concerning
governing body and staff act in an internal operations, grantmaking,
ethical and legal manner. fundraising, licensing, financial
b. Educate the governing body and accountability, and labor and
staff about what constitutes conflict employment), as well as applicable
of interest and prevent or manage provisions of federal, state,
any actual, potential, or perceived local, and international laws and
conflicts through disclosure, regulations that are relevant to the
abstention, or other means. organization’s activities, including
with respect to advocacy, lobbying,
c. Develop and adhere to policies to
and political campaign activities.
prevent inappropriate influence
where one or more stakeholders » T
he laws, rules, and regulations
(e.g., employees or substantial applicable to a nonprofit vary
contributors) of the organization are depending on the specific type of
voting members of the governing nonprofit (i.e., public charity or
body. private foundation); accordingly,
knowing what the laws are that are
d. Establish and adhere to a document
applicable to the organization at
retention policy that provides for
hand is critical.
the safekeeping of key organization
documents and the prevention of » By
way of example, all nonprofits
their destruction upon receiving may (i) advocate for issues
notice of a legal inquiry into the pertinent to their missions,
organization’s operations. and (ii) not engage in political
campaign activity (such as
supporting or opposing a political
candidate); however, the rules
on “lobbying” (as defined in
the Internal Revenue Code) vary
between public charities and
private foundations.
7Illinois Nonprofit Principles and Best Practices
Legal Compliance, Fiduciary
Responsibility, and Responsible
Stewardship (continued)
» P
ublic charities may engage 7. The governing body exercises
in limited lobbying activity (in active oversight of the financial
accordance with the applicable law). affairs of the organization and
» P
rivate foundations may not lobby sets policies to ensure that the
(but they may fund organizations organization’s resources are used
that do lobby, in accordance with
applicable law).
appropriately in furtherance of the
organization’s mission.
b. Seek professional legal and accounting
advice when needed to determine and
support compliance. a. Approve the nonprofit’s budget
c. Develop and adhere to written financial each year and assess financial
management policies adequate for performance relative to the approved
organization size, nature, complexity, budget.
and mission concerning: b. Maintain sufficient resources,
» Administrative expenditures including cash reserves, for effective
administration of the organization
» Internal controls and, if it solicits contributions, for
» Purchasing appropriate fundraising activities.
» Gift acceptance c. Ensure that expenses are reasonable
» Fundraising expenditures and necessary and incurred in
pursuit of the mission of the
» Endowment spending
organization.
» Permitted
and prudent investment
d. Set compensation for chief executive
and asset allocations
officer, staff, and any others who
d. Provide the Form 990 or 990-PF and may receive compensation at
any 990-T to the entire governing body reasonable levels, considering
each year or otherwise ensure governing factors including comparable data
body members are familiar with the of similar organizations, nature
content. of work performed, and time and
e. Develop and adhere to a risk skills required. Document the
management plan and regularly basis for decisions. Note that the
consider the need for insurance governing body may, under limited
coverage and other actions to mitigate circumstances, determine that
risk, taking into account the nature and it is appropriate or permissible
scope of the organization’s activities to compensate members of the
and its resources. governing body; however, due
consideration to the organization’s
governing documents, conflicts of
interest policy, rules pertaining to
excess benefit transactions or self-
dealing, as applicable, as well as the
factors enumerated in this section d.
must be given and substantiated.
8Illinois Nonprofit Principles and Best Practices
Legal Compliance, Fiduciary Communications, Accessibility, Privacy,
Responsibility, and Responsible and Disclosure
Stewardship (continued)
e. Maintain accurate financial records, 8. The organization maintains
prepare internal financial statements appropriate cybersecurity
no less frequently than quarterly, safeguards, including with respect
and provide financial reports to
to protected or confidential
the governing body, addressing any
differences between actual revenues information; ensures that its
and expenses and budgeted revenues intellectual property is used solely
and expenses. in furtherance of its mission; and
f. Assure that any interim and annual monitors and responds to online
financial statements, federal tax returns, and third-party reputational risks.
and reports to state authorities fairly
represent the financial position and
a. Periodically conduct appropriate
financial activities of the organization
risk assessments with respect to the
and comply with the organization’s
nature and scope of data collected
governing documents through review
and maintained by the organization.
by the governing body, committee
thereof, or authorized officer or agent, b. Respect and protect the
as determined by the governing body to confidentiality and privacy rights
be the appropriate person or persons to of individual clients, grantees,
review such documents on behalf of the employees, donors, volunteers,
organization. governing body members, and others
in the organization consistent with
g. Determine whether an audit of the
applicable law.
nonprofit is legally required (see Illinois
Solicitation for Charity Act, Sec. 4., c. Develop and maintain appropriate
Annual Report of Charities). Even if not cybersecurity safeguards, which
legally required, larger organizations are may include, but are not limited
strongly urged to consider securing an to, antivirus software, password
audit by an outside public accounting protocols, firewalls, encryption,
firm or, at a minimum, a review of and internal controls regarding
financial condition by an outside firm. access to data.
» For
organizations that have an audit, d. Understand and comply with
establish an audit committee; for applicable law governing disclosure
organizations whose size or structure and reporting of data breaches,
makes an audit committee infeasible, disposal of confidential or protected
the full governing body or portion information, and similar issues.
thereof that is knowledgeable about e. Monitor and enforce restrictions on
financial statements should oversee the use of organization’s intellectual
the audit or review. property by third parties, including
fundraisers, vendors, contract
parties, and charitable or similar
databases.
9Illinois Nonprofit Principles and Best Practices
Communications, Accessibility, Privacy,
and Disclosure (continued)
f. Review and keep up-to-date any 9. The nonprofit responsibly
profiles on third-party websites collects, maintains, and properly
(e.g., GuideStar/Candid, the Illinois disposes of personally identifiable
Attorney General’s online charitable
information received from donors,
organization database, and
Foundation Center). employees, volunteers, and clients.
g. Be mindful of which third-party
websites are linked to on the a. Entities that collect and maintain
organization’s website and the personally identifiable information
content that is posted thereon; such as social security numbers
certain content on the third-party and financial information have
site may be deemed attributable a responsibility to protect the
to the organization through linking information. Nonprofit organizations
(such as support or opposition for may have personally identifiable
a political candidate that would be information about donors,
impermissible for the non-profit to employees, volunteers, and clients.
directly post). b. Take stock of the information
h. Maintain appropriate policies and collected and maintained by the
procedures that govern who is organization. Periodically review
authorized to post content on the the information the organization
nonprofit’s website or other social collects on forms and applications
media platforms, and ensure that to ensure the organization is only
all posts comply with applicable law collecting information necessary for
pertinent to the nonprofit. its operations.
i. Designate one or more specified c. Scale down and keep only the
individuals act as the official information the organization needs.
“spokesperson” or “spokespeople” If there isn’t a legitimate need for
for the nonprofit, authorized to issue collecting the sensitive information,
public statements on behalf of the don’t collect or keep it. Phase out
organization (in response to inquiries the use of SSNs for administrative
or otherwise), and encourage such purposes and internal identification
individuals to consult with legal where applicable.
counsel, as applicable, before d. Protect the information the
issuing any such statements. organization keeps. Develop data
security policies to protect personally
identifiable information the
organization maintains in both paper
and electronic files.
e. Destroy client information in a
secure way. Designate an employee
or retain an outside company to
oversee record keeping and disposal
according to the Illinois Personal
Information Protection Act, which
provides guidance for safe and
proper disposal.
10Illinois Nonprofit Principles and Best Practices
Communications, Accessibility, Privacy,
and Disclosure (continued)
f. Plan ahead. Create a plan for to your constituents, such as grant
responding to data breaches guidelines, organizational and
including notification to the effected program reports and evaluations,
individuals and law enforcement. and certain other relevant financial
g. Assess the organization’s policies information. If the organization
and procedures to ensure that does not maintain a website, make
the organization complies with them available upon request. If
applicable laws and data security third-party providers post this
best practices as technology information instead, review those
changes. sites periodically to ensure accuracy.
d. Make available the names of
governing body members, officers,
10. The nonprofit embraces and key staff members.
transparency and accountability e. Publish an address and the
by making information about its name of an individual to contact
mission, program activities and for information. Nonprofits that
outcomes, and finances available maintain offices, if feasible, should
to the public and communicates also publish a phone number, office
in a clear, timely, and proactive location, and office hours. Whenever
feasible, an email address for
manner.
inquiries should be provided.
f. Respond to and act promptly on
a. Ensure all financial, organizational, complaints.
and program reports and educational
g. Develop and follow policies defining
materials are complete and accurate
timely response to complaints.
in all material respects.
h. When resources permit, develop a
b. Understand the full costs of
social media strategy to ensure that
running the nonprofit’s programs
relevant organizational and program
and operations, including the costs
information reaches all important
of the nonprofit’s infrastructure
and relevant audiences on a timely
(such as the cost of reasonable and
basis.
necessary staff training, operational
tools, and other costs that advance i. Remember that a nonprofit’s
the nonprofit’s mission), and be audience is the community it serves.
prepared to disclose and discuss Build strong relationships with the
those full costs with prospective community served, community
funders. leaders in that community, and other
nonprofits serving that community
c. Make available to the public
(among others). Keeping the lines
basic informational data about
of communication open with these
the organization, which should
stakeholders and providing clear and
include the Form 990 or 990-
transparent information builds trust,
PF (or a website link to copies
earns respect, and demonstrates
provided by other organizations
integrity.
such as Guidestar/Candid), and
consider posting information useful
11Illinois Nonprofit Principles and Best Practices
Communications, Accessibility, Privacy,
and Disclosure (continued)
11. Nonprofits that raise funds h. Provide appropriate training and
from the public or from donor supervision of people soliciting
institutions maintain solicitation funds to ensure they understand
their responsibilities and applicable
policies that reflect the
federal, state, and local laws,
organization’s mission and and prohibit techniques that are
use of solicited funds. coercive, intimidating, or intended to
harass potential donors.
a. Represent the organization’s policies
and practices accurately and respect 12. Grantmaking nonprofits establish,
the dignity of program beneficiaries
follow, and clearly communicate
in all solicitation materials.
processes for receiving, reviewing,
b. Disclose important and relevant
and acting on grant applications,
information to potential donors.
and for monitoring and evaluating
c. Honor all statements in fundraising
grants made; and act fairly
appeals about the use of a
contribution (e.g., restrictions on and responsibly in considering
use of fundraising proceeds, or the funding needs of potential
commitments to allocate funds to grantees.
certain programs).
d. Respect the rights of donors in a. Make readily available a brief written
accordance with established statement including:
professional standards such as
» Program interests
“A Donor Bill of Rights.”
» G
rantmaking policies, including
e. Ensure donated funds are used for
types of funding provided
purposes consistent with the donor’s
intent, whether as described in » Geographic or policy restrictions
the relevant solicitation materials » P
referred ways of receiving
or as specifically directed by the applications
donor, and maintain supporting » S
teps in the proposal review and
documentation regarding donor’s due diligence process
intent in the organization’s files.
» T
imetable for consideration of
f. Ensure that internal or external grant requests
fundraisers are not compensated
based on a commission or a
percentage of the amount raised.
g. Ensure compliance with state
fundraising/solicitation registrations
and requirements, including with
respect to digital fundraising.
12Illinois Nonprofit Principles and Best Practices
Communications, Accessibility, Privacy, Managing Human Capital
and Disclosure (continued)
b. Establish and maintain relationships 13. Invest in and perform appropriate
with grantseekers based on mutual diligence to get to know your
respect, candor, understanding, and people.
fairness.
c. When reviewing potential grants,
inquire about a non-profit’s full a. Consult with legal counsel to
costs of running its programs understand and abide by labor
and operations, including its and employment laws applicable
infrastructure costs; consider general to the nonprofit’s workforce, adopt
operating support whenever possible appropriate policies addressing
and, if not, ensure that a reasonable matters such as whistleblower
and appropriate portion of grant matters and employee conduct, and
proceeds can be utilized by the non- develop, monitor, and enforce the
profit grantee to cover these costs. procedures of an employee (and, if
applicable, volunteer) handbook.
d. Communicate clearly and on a timely
basis with potential grantees. b. Develop job descriptions and clear
delegations of authority (under IL
e. Advise those affected by an law, the governing body cannot
adverse, negative funding decision delegate away its fiduciary duties),
or significant policy or procedure professional development and
change within a reasonable period of ongoing training of employees,
time. volunteers, and staff.
f. Clearly explain reporting and c. Conduct appropriate diligence
evaluation requirements and (including, for example, background
periodically review these checks) of members of the governing
requirements to ensure that they are body, employees or individuals
necessary, appropriate, and provide serving as staff, and volunteers,
sufficient benefit to the grantmaking and specifically those with oversight
organization to justify the time and of and responsibility for financial
effort they require of it grantees. matters or with signing authority on
g. Ensure your diligence procedures are behalf of the nonprofit.
designed to evaluate nonprofit and d. Additionally, if the nonprofit has
program sustainability, operational volunteers:
health of the organization, and
receipt of timely and accurate » C
onduct volunteer trainings on the
reporting to enable you to better nonprofit’s mission and important
understand your grantees and be rules and regulations applicable to
better prepared to evaluate their the nonprofit.
future funding requests. » C
onsider the nature of the
volunteer work to be performed
and conduct appropriate
background checks on volunteers.
e. Set clear performance metrics
and annual reviews to determine
performance.
13Number of Illinois Nonprofit Organizations » A ll Nonprofit Organizations: 71,493 » 5 01(c)(3) Public Charities (includes some Religious Organizations): 47,613 » 5 01(c)(3) Private and Public Foundations: 6,153 » O ther 501(c) Nonprofit Organizations*: 17,103 *includes Civic Leagues, Chambers of Commerce, Veterans Organizations, etc. Economic Impact of the Illinois Nonprofit Sector » E mploys 585,086 – over 11% of the state’s workforce » G enerates more than $115.1 billion in annual revenues » H olds assets of $329.7 billion » Illinois Foundations annually give over $3.6 billion » Illinoisans give $9.2 billion to charity each year 14
Acknowledgements Forefront is grateful for the input and expertise of the following individuals who helped with the creation of this updated guide. Jim Parsons Dawn Melchiorre The Brinson Foundation Forefront Jodi Pellettiere Patt Lisa May Simpson Quarles & Brady, LLP Forefront Scott McFarland Bryan Zarou Serve Illinois Commission on Forefront Volunteerism and Community Service Theresa Geary Attorney General’s Office This publication was made possible by a generous contribution from the Illinois State Treasurer’s Office Charitable Trust Program. For more information on how Forefront can support your work, go to www.MyForefront.org.
You can also read
