When I ask leaders at nonprofit organizations about their corporate compliance plan, I get many different answers. But I am most surprised when I receive an answer along the lines of, “We are not a corporation since our mission is to serve our community, not a group of shareholders.” This has been said so forcefully that you would think “corporate” is a four-letter word! But it’s not. Yes, nonprofits serve a public purpose and do not provide financial benefit to shareholders like a for-profit corporation does. But this does not mean nonprofits should not be concerned about corporate compliance. In fact, it’s the law. In Oregon, nonprofits must adhere to ORS 65, including ORS 65.771 regarding corporate records. And another matter of great concern is the matter of trust.
Trust is a critical asset for any nonprofit organization, and yet in the United States the level of confidence in nonprofits has dropped (see the Edelman Trust Barometer for 2018). This may not be a surprise, especially since a simple search of the internet reveals numerous stories of nonprofits behaving badly. Unfortunately these bad actors cast doubt upon the vast majority of nonprofits who run an honest business and deliver much needed services to the public. So what can an organization do to obtain and maintain a reputation of being responsible, accountable, and trustworthy?
A good way to develop trust is by starting with a corporate compliance plan that ensures:
• The organization adheres to state and federal legislation and regulations,
• Corporate records are up-to-date,
• Governance policies are in place and regularly evaluated, and
• Sound financial management policies, including internal controls, are adopted and periodically reviewed.
Does your nonprofit have a corporate compliance plan? If your answer is no, why not? Is it because you are too busy with programming and fundraising? Does corporate compliance take time away from your important work? Please take a moment to consider the fact that corporate compliance is important work and neglecting it can have a very adverse effect on the health of your organization. Besides the legal consequences (and possible penalties), violations can also damage the public perception of your organization. This is a penalty no nonprofit can afford. On the other hand, a good corporate compliance plan can help demonstrate to the public (which includes donors) that your nonprofit is an ethical and responsible organization that can be trusted.
Corporate Compliance