No matter the industry you choose to work, they all have their share of good and bad. The nonprofit industry is no different. Just because nonprofit organizations are set up for charitable purposes, it doesn’t mean there aren’t people who run them with ill intentions.
There is a story that has been brewing here in Jacksonville, FL for the past year regarding a local nonprofit organization with national significance. The Wounded Warrior Project (WWP) was accused of misappropriating the funds raised for the programs they offer veterans.
I won’t get into the details of the story. Here’s the link to the article featured in the Nonprofit Quarterly –Senate Committee Finds Past Misrepresentation of Finances at the Wounded Warrior Project. I’m simply using it as a reference.
This story struck a chord with me because it’s cases like this that make me so passionate about making sure nonprofit organizations are set up correctly and that they function with the highest of ethics. Everything from selecting board members to raising funds needs to be intentional and all actions should be beyond reproach.
The Senate Finance and Judicial Committee found that WWP was not guilty of any illegal acts, but they were cited for deliberately misrepresenting the allocation of funds. Technically, what they did wasn’t illegal, but it blurs the ethics lines. Despite the great work they do for veterans this scandal has tainted their organization. Inevitably, this will affect their donations and the ability for donors to trust them.
The reason the IRS makes it so cumbersome for nonprofit organizations to form is because they need to ensure the organizations are legitimate and actually set up for charitable purposes. Every time an organization is brought into question, it makes it that much more difficult for all the organizations that come after them.
As there are hundreds of nonprofit organizations forming every day, you want to make sure you’re doing it for the right reasons and that you do it right. So, here are some suggestions to help you:
- Do what is legal, but also do what’s right. In the case of the WWP, they were technically within the law to appropriate their donated funds the way they did, but the intentions were wrong. Therefore, it became an ethics issue.
- Be selective about your board of directors and make sure they share your values. Have an effective recruiting and retention process for your board members.
- Have a set of checks and balances. Make sure to inspect what you expect. If you want excellence in your programs and your finances, make sure you inspect your systems, processes, and the people providing oversight.
- Be transparent. Keep donors informed of how you’re spending their funds and ensure you have a Certified Public Accountant and Chief Financial Officer who are accurately and routinely reporting income and donations as required by the IRS. Nonprofits are required to make their financial statements of public knowledge.
These are some basic fundamentals that will ensure overall success. Running a nonprofit organization is no different than running a for profit business. If you keep that in mind then you will be ahead of most people who start a nonprofit.
For more information about how to start a nonprofit organization and run it effectively, then you may want to register for my upcoming class on Tuesday, June 20th – “So, You Want to Start a Nonprofit”.