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Annual Nonprofit Compliance Checklist

Submitted by Jonathan S. Blum, Counsel, Polsinelli

With the mission as top of mind for every nonprofit executive, it can be difficult to think about compliance issues.  However, we all know that good governance is an important part of running a nonprofit, and sometimes a checklist can make the process a bit easier.  Here is a list of compliance topics that are important to review at least annually.

  • Conduct an Annual meeting of members (if applicable) and of the Board of Directors (per state law, articles and bylaws)
    • Elect officers and directors
    • Review committee assignments
    • Review committee charters
    • Ratification of any acts not previously approved by the Board of Directors
    • Update or adopt policies – conflict of interest, document retention, donor acceptance, endowment, travel, whistleblower, etc.
    • Review and approve annual budget
  • Review/update insurance requirements; confirm policy limits and appropriate levels of coverage; obtain director & officer liability coverage.
  • Review major contracts for termination dates and deadlines for notice (e.g., must provide thirty days’ prior notice to terminate or the agreement renews automatically).
  • Update on status of financial statements.
  • Select audit firm for annual audit; prepare for annual audit.
  • Review plan for IRS information return (Form 990) and other federal tax filings (e.g., W-2, 1099s).
  • Prepare for applicable state filings (annual reports, charitable registrations/co-venture filings) and review applicability of sales and property tax exemptions.
  • Trademarks – consider whether any brand materials should be considered for a trademark application on a state or federal level. Consider other intellectual property like patentable inventions.
  • Licenses, permits and registrations – confirm that all required licenses, permits and registrations needed on a state or local level are obtained for every jurisdiction where the organization operates and for each activity that requires it. For example, consider whether permits for raffles or fundraising events, state charitable registrations in expanded fundraising areas or licenses required for new services or activities are needed.
  • Review employee handbook/benefit programs for compliance.
  • Review comparison data for compensation to ensure all salaries are reasonable.
  • Review lobbying activities to confirm they are not a substantial part of the organization’s activities.
  • Confirm levels of public support (if applicable) to maintain public charity status.
  • Review conflicts of interest as part of annual reporting for the Conflict of Interest Policy.
  • Review income sources for potential unrelated business income that would require paying federal tax and the filing of a 990-T.
  • Review any joint ventures for legal compliance issues.

Many of these topics implicate your most important asset, your ability to keep your tax exempt status.  In some cases, you may need the help of an attorney or an accountant familiar with the issues of nonprofit organizations to work through any issues.  Although sometimes hard to do, this process will reinforce your organization’s ability to fulfill its mission.

Jonathan Blum is an attorney at the law firm of Polsinelli PC where his focus is nonprofit organizations.  He can be reached at jblum@polsinelli.com or 214-661-5576.