NONPROFIT REVIEW CHECKLIST ©

To the Reader: The following is a summary of areas that should be reviewed periodically to ensure the health of the nonprofit organization (other than private foundations, which have additional requirements). Such a review should address compliance with legal, regulatory, and financial reporting requirements; assess best management practices; and examine the current financial status of the organization.

This Review Checklist is not designed for general application or use, but rather as a demonstration of how I approach organizational reviews.This checklist comprises eight major categories: organization issues, bylaws, obtaining federal tax-exempt status, quality operational system, the organizational life cycle, policies, financial controls, and review of board and committee minutes.
 

If you would like me to conduct such a review for your organization, click here to contact me.

Organizational Issues

1. Articles of Incorporation contain the required IRS language concerning:
     a.  Purpose clause;
     b.  No private inurement or excess private benefit to insiders;
     c.  Limit on lobbying/no electioneering;
     d.  No power to conduct non-(c)(3) activities;
     e.  Dissolution clause;
     f.   Private foundation rules (even if the organization intends to be classified as a public charity.
2. Articles contain other required language (as needed – this will vary by jurisdiction).

Bylaws

Management should consider whether to address the following bylaws areas:
1. Accounting records; 
2. Advancement of costs of defense by directors and officers;
3. Amendments to bylaws;
4. Annual report;
5. Authority of Officers to appoint subordinate Officers;
6. Classes of members;
7. Committee authorization and power;
8. Directors – qualifications and how selected;
9. Dividends – no dividends shall be paid;
10. Ex officio Board members;
11. Financial matters – contracts, loans, etc.;
12. Fiscal year;
13. Indemnification of directors and officers;
14. Informal meetings;
15. Methods of calling regular and special meetings of members;
16. Method for calling regular and special meetings of the Board;
17. Officers – qualifications and how selected;
18. Place of meetings of members;
19. Procedure for filling vacancies in the board;
20. Quorum for members;
21. Quorum for directors;
22. Removal of officers;
23. Waiver of notice.

Obtaining Federal Tax-Exempt Status

Has this been accomplished? Why or why not?

Organizational Improvement System

Beyond a policies and procedures manual, is there a system that addresses the seven Baldrige Quality Management System™ Criteria for continuous improvement (leadership; strategic planning; customer focus; measurement, analysis, and knowledge management; workforce focus; process management; and results)? Describe. Also, describe the history and environment in which the organization operates.

Life Cycle

Describe the organization’s placement within the life cycle of conception, development, growth, maturity, and decline. Describe the obvious strengths and weaknesses of the organization.

POLICIES IN PLACE

Board Policies

1. Advisory councils;

2. Board assessment;

3. Board member agreements;

4. Board leadership continuity;

5. Board member fundraising;

6. Board member orientation, training, growth;

7. Committees;

8. Committees that are to be comprised of independent Board members; authority to make decisions independently of Board action:      a.      Audit committee;       b.     Others

9. Grant-making process;

10. Job descriptions for Board and Officers;

11. Job descriptions for committee chairs;

12. Qualifications for board membership;

13. Performance evaluation (of Board);

14. Role of the board;

15. Strategic planning: mission, vision, values; goals; and action plans. Periodic review.

Communications Policies

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1. Annual Report;

2. Availability of 990, 990-PF, 990-T to the public; redaction;

3. Crises Communications;

4. Donor relations; 

5. Donor acknowledgment in compliance with IRS requirements;

6. Legal Counsel – who communicates with;

7. Media relations;

8. Sponsorship and endorsement.

Electronic Media Policies

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1. Internet use by employees;

2. Income produced by website use;

3. Review of website design, purpose, and use for the organization.

Employee Policies

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1. At-will employees;

2. Chief executive job description;

3. Chief executive evaluation;

4. Chief executive transition;

5. Equal employment opportunity;

6. Family and medical leave;

7. Human resources;

8. Immigration laws;

9. Nepotism;

10. Policy and procedures guidebook;

11. Sexual harassment;

12. Staff job descriptions;

13. Training and skill development;

14. Whistleblower protection;

15. Workplace environment;

16. Works for hire (intellectual property).

Ethics Policies

1. Conflict of interest policy;
2. Codes of ethics;
3. Complaint process;
4. Confidentiality;
5. Lobbying and political activities;
6. Process to deal with violations of foundation policy whether ethical, legal, or procedural.

Financial Policies

1. Advancement of litigation costs to directors/officers;
2. Budgeting;
3. Capital expenditures;
4. Chief executive compensation;
5. Compensation policy for Board;
6. Compensation policy for employees;
7. Employee benefits;
8. Excess benefit transactions – how to avoid.
9. Expense reimbursement;
10. Financial audits;
11. Financial committees;
12. Financial controls;
13. For-profit subsidiaries;
14. Fundraising;
15. Gift acceptance;
16. Indemnification of litigation costs to directors/officers;
17. Investments;
18. IRS 990 or 990-PF; 990-T;
19. Joint ventures;
20. Procurement (contracting);
21. Reserves and endowments;
22. Risk management;
23. Tax withholding and payment;
24. Unrelated business income;

Program/Grant Policies

1. System in place for determining which grants to pursue (relation to programs).

2. Program/grants performance evaluations required (quantitative, cost/benefit, etc.);
3. Results measured against external comparable programs.

Records Policies

Record retention and document destruction.

FINANCIAL CONTROL POLICIES
 

Employees/Independent Contractors

1. Contract employees;
2. Federal, state, and local tax withholding/payment;
3. Immigration laws forms and reporting;
4. Unemployment compensation;
5. Workers’ compensation;
6. W-2, and 1099 reporting.

Entity

1. External audit;
2. Financial management system;
3. Financial statements;
4. Insurance payments;
5. Internal audit;
6. IRS entity reporting;
7. Sales/use tax;
8. State/local entity reporting

Review of Board and Committee Minutes

1. Board minutes kept?
2. Committee minutes kept?

Note: The IRS recommends that nonprofit organizations have the following in place to help ensure that directors understand their roles and responsibilities and actively promote good governance practices.