Principles Practices Guiding Nonprofit Excellence in Maine Our sincere thanks to Healey and Associates for their generous sponsorship of this fourth edition of the Guiding Principles + Practices for Nonprofit Excellence in Maine.

Copyright © December, 2012 by the Maine Association of Nonprofits. This work is made available under the terms of the Creative Commons Attribution-NonCommercial-NoDerivs 3.0 License, http://creativecommons.org/licenses/by-nc-nd/3.0/.

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Guiding Principles + Practices for Nonprofit Excellence in Maine © 2012 Table of Contents Introduction page 3 Purpose Applicability History What’s New Definitions Related Programs + Tools How to Use this Guide Legal Accountability Closing Thoughts Overview of Guiding Principles page 7 Public Benefit + Accountability page 9 Governance + Leadership page 11 Public Policy + Advocacy page 15 Evaluation page 17 Strategic + Operational Planning page 19 Strategic Alliances page 21 Financial Management page 23 Staff + Volunteer Management page 27 Resource + Fund Development page 29 Marketing + Communications page 31 Technology page 33 If You Suspect Fraud or Misconduct page 35 Index page 37 About MANP page 44

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www.NonprofitMaine.org Introduction Purpose Nonprofit Excellence in Maine This is the most provides a planning The nonprofit sector is and assessment continually challenged to be framework that raises comprehensive more transparent, efficient the bar for nonprofit and effective. Guiding performance. It is intended as a tool for nonprofits to list of nonprofit “best Principles + Practices live up to the challenge for Nonprofit posed by Stephen Covey and practices” that you will Excellence in Maine is other thought leaders: “Begin with the end in a tool to help mind.” find anywhere in the nonprofits evaluate country. A commitment to and address issues Most nonprofits will of capacity and not demonstrate full aligning your nonprofit’s accountability as adherence to all policies and procedures they strive to build Guiding Principles the foundation for immediately, nor will around these best practices true mission they have every Guiding achievement. Practice reflected in their operations. The Principles helps to advance your and Practices should provide Capacity generally refers a basis for each organization to an organization’s level of (board, staff and other organization’s ability to achieve its stated constituents) to make a mission. Many factors affect conscious comparison and mission and contributes capacity, including the life determination of what will cycle stage of the best move them forward in significantly to long-term organization, a sudden ensuring that the increase or decrease in organization operates with funding, skill level of staff, integrity and its programs sustainability. changes to staff or and services are of the governance, and a variety of highest possible quality. —Douglas Woodbury, other factors. In addition to this tool, MANP Board Member, Accountability generally many national umbrella refers to an organization’s organizations, sub-sector Retired CFO, ability to answer questions networks, and professional MANP Member Organization regarding appropriate networks have developed expenditure of funds and/or support materials targeted service impacts and to their individual outcomes that demonstrate constituencies. It is worth progress toward its mission. your time to identify key resources and industry Adherence to Guiding standards for your field of Principles + Practices for focus. Nonprofit Excellence in Maineis not mandatory, though specific practices are Applicability of required by Maine or federal Principles + law, and are noted as such. There is no certification or Practices accreditation process; it is not designed as a report Because most members of card. Simply, Guiding the Maine Association of Principles + Practices for 3

Guiding Principles + Practices for Nonprofit Excellence in Maine © 2012 Nonprofits are 501(c)(3) Practices for Nonprofit Excellence in Maine and the Definitions public charities, these Basic Infrastructure Checklist guiding Principles and and to promote their usage. Practices are tailored to the MANP contracted with a  A “Principle” is a broad statement that particular needs of those Maine-based lawyer to defines a suggested ethical or organizations. Other kinds review the tools and make managerial direction for a nonprofit of organizations, including appropriate adaptations 501(c)(4)s and 501(c)(3) based on Maine law. Once organization. private foundations, are the necessary legal changes subject to somewhat were made, MANP identified  A “Practice” is a suggested method to different legal requirements. over fifty content experts achieve the principles. Therefore, although much of throughout the state and the content of the Guiding contacted them to request Principles + Practices and the their assistance with the  Whenever the term “must” is used, companion Maine Basic adaptation of the tool. federal or Maine state laws exist that Infrastructure Checklist apply Participating experts require all 501(c)(3) nonprofit to these latter organizations provided useful feedback as well, extra care should be and recommendations for organizations to conform to that taken to ensure compliance how to ensure that the tools practice. Throughout this document, with all relevant laws and truly met the needs of legal requirements are denoted with a regulations. Maine’s nonprofit sector. star (*) followed by ME for Maine law or US for federal law or ME/US for both. History In the fall of 2006, MANP published the Guiding Principles + Practices for  The term “should” means that the In 2005, the Maine Nonprofit Excellence in Maine practice is not required by law, but is Association of Nonprofits and Basic Infrastructure (MANP) began researching Checklist. MANP has generally recommended depending potential models for developed complementary upon the nature, resources, and nonprofit standards. After resources described on page developmental stage of the nonprofit an extensive review of six, and the original tools organization. existing tools, MANP decided have now been revised in that the Principles and 2007, 2009, and 2012 to Practices for Nonprofit reflect changes in the  In this guide the terms “charitable Excellence, first created by the nonprofit environment, organization,” “nonprofit organization” Minnesota Council of enhancements by other and “nonprofit” are used Nonprofits and later adapted state associations, and the by the Michigan Nonprofit feedback of local partners. interchangeably to refer to nonprofit Association, not only organizations that qualify for tax provided the appropriate guidance to assist Maine’s What’s New? exemption under 501(c)(3) of the nonprofits in building their Internal Revenue Code. internal capacity, but also mirrored MANP’s philosophy In this fourth edition, we regarding standards have expanded the Practices programs. Both in all Principle areas to organizations generously reflect emerging best granted their permission for practices, added a new their documents to be used Principle called “Public as models for the creation of Benefit and Accountability,” Maine’s own nonprofit integrated Practices from a standards. previously included Principle area entitled “Transparency + Accountability” into other In 2006, the Maine areas of the document, and Community Foundation re-titled some Principle agreed to share in the areas to better reflect their developmental funding of content. the Guiding Principles + 4

www.NonprofitMaine.org We have restructured compliance, risk Related Programs + Tools management, strategic the Practices within planning, and organizational each Principle to development.  The Basic Infrastructure Checklist more clearly addresses accountability requirements delineate those that Here are some suggestions for all 501(c)(3) public charities are legally required. for maximizing these resources to assess your incorporated or operating in Maine. This Many Practices relate to organization: resource serves as a desk-top reference more than one Principle for accountability, providing a area, and we now cross- reference Practices where  Complete the Maine framework of nonprofit legal relevant, and encourage Basic Infrastructure Checklist requirements as well as recommended thorough review of the to make sure your records, practices in management and document, rather than filings and policies are up to duplicating Practices across date and in order. recordkeeping. sections.  Review this document,  Guiding Principles + Practices: Some readers use this Guiding Principles + Practices Organizational Self-Assessment document to determine for Nonprofit Excellence in Workbook is a version of the Guiding whether an organization is Maine © 2012, with your Principles + Practices for Nonprofit operating legally, so we have board and staff. Keep in also incorporated mind that this publication is Excellence in Maine in workbook information about what to focused on excellence; the format, to help your management team do if you suspect fraud or Principles and Practices do and/or board reflect your organizations wrong-doing by a Maine not represent minimum nonprofit. standards, other than those practices, identify areas for delineated as legally improvement, and plan next steps. required. The value of How to Use this adopting any practice  MANP’s Online Resource Library should be measured against Guide the time and effort it would is an extensive collection of guides, links, take to create, implement articles and tools to support nonprofits in Aspiring toward greater and maintain that practice. working towards best practices. The efficiency and effectiveness If appropriate, make a long- term commitment to adopt Resource Library is organized by the will bring credibility to an organization in the eyes of the Principles and to develop same Principle topic areas outlined in the public, funders, a plan to institute the this document. community partners, staff, Practices. volunteers, and the  MANP Education Programs are built on audience it serves. MANP  Use the Guiding the foundation of these Principles + encourages Principles + Practices Organizational Self- Practices, and our education programs nonprofits to Assessment Workbook with are grouped by the same Principle develop a thoughtful key staff and board leaders topic areas. and strategic process to reflect on your current practices, identify priorities for organizational and develop an action plan  MANP has a variety of member benefits self-assessment, and for improvement. As part of and organizational partners to provide hopes that Guiding Principles this process, consider your members with nonprofit management + Practices for Nonprofit organization’s Excellence in Maine and developmental stage, and support, and pro bono legal, related tools can be valuable how work toward specific accounting and risk management resources in this process. Principle areas relates to assistance. For more information please Keep in mind that there are short and long term a variety of lenses through strategic goals for mission visit www.NonprofitMaine.org. which an organization can achievement. see and use these publications, such as legal 5

Guiding Principles + Practices for Nonprofit Excellence in Maine © 2012  Visit the MANP website (www.NonprofitMaine.org) to Legal Accountability find supplemental resources, articles, guides, training opportunities and All nonprofit organizations operating in the more. state of Maine should be aware of and in compliance with all legal requirements Remember that pertaining to nonprofit management, excellence is a reporting and governance. As noted journey, not a earlier, throughout this document, legal destination. Establish a plan requirements are denoted with a star, for ongoing evaluation and reflection to make sure your followed by ME for Maine law or US for organization continues to federal law or ME/US for both. These move forward. designations were accurate as of the publication of this document, but laws do Closing Thoughts change and nonprofits are encouraged to stay abreast of legislative actions that may Guiding Principles + Practices impact operations. for Nonprofit Excellence in Maine will continue to Visit the following websites for a summary evolve and change as of applicable laws, links to helpful we learn more about resources, and to download forms: nonprofit effectiveness and discover promising ways for nonprofits to adapt and Maine Attorney General advance in our dynamic www.maine.gov/ag culture. Maine Department of Labor We value the voice www.maine.gov/labor and experience of our nonprofit Maine Department of Professional and partners in maintaining Financial Regulation the integrity and utility of www.maine.gov/pfr Guiding Principles + Practices for Nonprofit Excellence in  Maine and encourage you to Maine Secretary of State Bureau of share your thoughts as you Corporations put theory into practice in www.maine.gov/sos/cec/corp/ your daily work. Comments nonprofit.html and questions can be directed to MANP’s Executive Director at (207) Internal Revenue Service 871-1885 or www.irs.gov/charities ExecutiveDirector@ NonprofitMaine.org.

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www.NonprofitMaine.org Overview of Guiding Principles

Public Benefit + Governance + Public Policy + continually improve the quality of processes, Accountability Leadership Advocacy programs and activities.

Nonprofits have a special Nonprofit boards of directors Nonprofit organizations play Strategic + ability to organize the energy are responsible for defining a central role in the and ideas of a community in the organization’s mission, democratic process by Operational order to achieve together vision and values and for providing a means for public Planning what individuals cannot providing overall leadership participation and promotion achieve alone. By tapping and strategic direction to the of the common good. To the into the values, interests and organization. They are extent possible, nonprofits Strategic planning is a relationships of individuals, responsible for maintaining should engage in public cyclical process that defines nonprofits can mobilize their the ethical and legal policy and advocacy a nonprofit’s overall supporters and the larger integrity of the organization. activities to promote direction, and the activities community to realize their Nonprofit boards actively set community interests. In and strategies to be vision, while also building policy and ensure that the addition, nonprofits should employed in fulfilling its trust between communities organization has adequate encourage and support mission. Operational and bridging relationships resources to carry out its constituent participation in planning is a process that among diverse mission, and that its these efforts. Open details measurable constituencies. Nonprofits activities and expenses align communication and objectives, specific activities are most effective when they with mission focus. consultation between policy and budget. Nonprofits lay are flexible and responsive to Nonprofit boards have a makers and constituents of the groundwork for mission change, and actively responsibility to evaluate nonprofit organizations sustainability when they engaging constituents as their own effectiveness, as contribute to the creation have a clear vision and goals thought partners. Unlike governing bodies, in and effective for the future, include input government entities, upholding the public implementation of well- from constituents, and form nonprofits can focus on very interest(s) served by the informed policies. specific strategies for local, specific or new matters organization. reaching these goals. and need not wait for community-wide consensus Evaluation to begin their work. The effectiveness of a nonprofit depends in large Strategic part on the board’s ability to As entities that serve the Alliances Nonprofits have an ethical recruit a talented and public, nonprofit obligation to understand visionary professional to fill organizations have an their role as entities that the role of chief executive, obligation to demonstrate Strategic alliances can take engage and inspire and on a collaborative their value to the public many forms, including both individuals and communities relationship between the good. The public has a stake informal arrangements for for public benefit, and to board of directors and this in nonprofit performance sharing information and conduct their activities with chief executive. Mission- and is entitled to resources, strengthening transparency, integrity and achievement requires strong information regarding policy initiatives, and accountability. Nonprofits communication and a organizational results. increasing operational should engage in ongoing balance of power and Nonprofits should regularly efficiency, as well as more efforts to openly convey authority between the board measure their performance formal arrangements such information to the public of directors and the chief both in terms of as joint ventures, about their missions, executive. The Board effectiveness, such as partnerships, consolidations, activities and decision- requires the power and outcomes and results of or mergers with nonprofit making processes. This independence to carry out services, and efficiency, such and for-profit entities. information should be easily its legal and fiduciary as service delivery systems, Informal and formal accessible to the public and responsibilities and to and should share such alliances can help to should create external oversee and evaluate the information with their strengthen individual visibility, public performance of the chief constituents and the general nonprofit capacity and the understanding and trust in executive. The chief public. Nonprofit evaluation capacity of the sector as a the organization, while executive needs sufficient should be appropriate to the whole. Nonprofits should protecting sensitive or authority to manage the size and activities of the seriously assess strategic confidential information. organization and exercise organization, and evaluation alliances with public, leadership in the broader data should be used to private, and charitable community. organizations for viability 7

Guiding Principles + Practices for Nonprofit Excellence in Maine © 2012 and risk prior to engaging in should reflect internal equity and activities. Internal an alliance. Nonprofits and external communication is essential should initiate and promote competitiveness within the to motivate, inform, and cooperation and organization’s financial counsel employees and coordination whenever means. Nonprofits have an volunteers and to set the feasible to maximize the obligation to adhere to stage for excellent external resources available to the ethical, legal employment communications. External communities they serve. practices and to provide a communication is necessary safe work environment. to attract and retain Nonprofit organizations constituents and to raise Financial should establish specific public consciousness, policies and practices that understanding, response to, Management promote accountability, and funding of the collaboration and results organization. that lead the organization to Nonprofits have an the achievement of its obligation to act as mission. responsible stewards in Technology managing their financial resources and must always A nonprofit manages comply with all legal Resource + Fund information with regard for financial requirements. They Development confidentiality/openness, should adhere to sound safety, accuracy, integrity, accounting principles that reliability, cost-effectiveness, produce reliable financial Nonprofit organizations play and legal compliance. A information, ensure fiscal an important societal role in nonprofit should invest in responsibility and build serving as the vehicle by appropriate technology to public trust. Nonprofits which philanthropy occurs. enhance capacity and should use their financial They act as the intermediary improve its efficiency, resources to accomplish between donors and efficacy, and accuracy in the their missions in an beneficiaries and have an achievement of its mission. effective, efficient manner ethical obligation to ensure A nonprofit should also and establish clear policies proper handling of funds to ensure the security of and practices to regularly carry out their missions. sensitive or confidential monitor how funds are used. Nonprofit fundraising should information, and ensure its be conducted according to document retention and the highest ethical standards destruction policy with regard to solicitation, Staff + Volunteer adequately protects acceptance, recording, information. Management reporting and use of funds. Nonprofits should adopt clear policies for fundraising Effective management of activities to ensure human resources is essential responsible use of funds for for creating successful designated purposes, and organizational results. open, transparent Consistent, fair, human communication with donors resources management and other constituents. enhances staff morale and promotes cooperation. Nonprofit organizations should exercise fair and Marketing + equitable human resource Communications and volunteer management practices that attract and retain qualified individuals – Effective marketing and paid and unpaid – capable of communications is central implementing its programs to the success of an and services. Compensation organization’s mission, goals 8

www.NonprofitMaine.org Public Benefit + Accountability Please note: There are other documents, and regular Principle sections in this document that check-ups of the reliability include Practices relevant to this of the system. The policy topic. Be sure to review the should list all categories of Nonprofits have a special ability to entire document. documents and the specific organize the energy and ideas of a retention period for each. community in order to achieve together Although a document Legally Required retention and destruction what individuals cannot achieve alone. By policy is not a state or tapping into the values, interests and Practices federal legal requirement, relationships of individuals, nonprofits can the IRS now asks whether an mobilize their supporters and the larger 1) A nonprofit must meet all organization has such a federal and state policy on the Form 990, and community to realize their vision, while also requirements for public a negative answer is a building trust between communities and disclosure. Federal law potential trigger for closer bridging relationships among diverse requires a 501(c)(3) nonprofit scrutiny. to provide the IRS Form 1023 constituencies. Nonprofits are most and the last three years’ 2) A nonprofit should use its effective when they are flexible and information returns (IRS resources responsibly for the responsive to change, and actively Form 990 or its variants, purpose of serving the redacted to maintain donor public interest. engaging constituents as thought partners. confidentiality). Disclosure Unlike government entities, nonprofits can requirements under state focus on very local, specific or new matters law vary according to 3) Nonprofits have a and need not wait for community-wide whether the organization responsibility to establish has members. *ME/US and regularly measure consensus to begin their work. clearly defined levels of performance in their Nonprofits have an ethical obligation to 2) A nonprofit must preserve activities and to share those certain records pertaining to understand their role as entities that results with the public. A federal or state nonprofit should provide engage and inspire individuals and investigations or pending or multiple means for the communities for public benefit, and to current lawsuits, and public to contact the destruction of such records conduct their activities with transparency, organization to request may be a violation of federal information or provide integrity and accountability. Nonprofits criminal and civil law. See input. should engage in ongoing efforts to openly related Practice of Excellence concerning convey information to the public about document retention policy. 4) A nonprofit should their missions, activities and decision- *US produce annually a making processes. This information should publically-available report as an exercise in be easily accessible to the public and 3) A nonprofit must be organizational reflection and should create external visibility, public aware of and comply with transparent communication. any licensure requirements understanding and trust in the organization, The format and formality of that govern services it this annual report (different while protecting sensitive or confidential provides. *US/ME from the Annual Report filed information. with the Maine Secretary of State) should be consistent Practices of with available resources and Excellence may vary significantly among organizations of different sizes. Items to 1) A nonprofit should have a include: written document retention and destruction policy, which includes guidelines an explanation of the for handling electronic files organization’s mission, and voicemail, back-up activities, and results; procedures, archiving of 9

Guiding Principles + Practices for Nonprofit Excellence in Maine © 2012 an explanation of how of emerging leaders and individuals can access provide opportunities for programs/services; individuals and the community as a whole to sharpen and strengthen overall financial The tool was very leadership skills. information, including income and expense useful in helping us statements, balance sheet, and functional expense organize our thought allocation; and process, identify areas for a list of board members, management staff, operational improvement, supporters and donors. and frame some 5) A nonprofit should ensure that information regarding fees and services is readily important strategic available to the public. When charging for services, for us to work nonprofits should price questions equitably and take into account the consequences on. of denial of services due to an individual’s inability to pay. — Christopher St. John, Executive Director, 6) A nonprofit should ensure confidentiality and MANP Member Organization nondiscriminatory service to its volunteers, constituents, and donors.

7) A nonprofit should adhere to the established industry standards for its sector, subsector and particular activity area(s). Nonprofits should review and consider “Codes of Ethics” for their industry, and consider formal adoption of a particular code or the development of a hybrid code unique to their organization.

8) A nonprofit should conduct its activities with procedural fairness when making decisions that impact constituents and the community.

9) A nonprofit should encourage the development 10

www.NonprofitMaine.org Governance + Leadership Please note: There are other Legally Required Principle sections in this document that include Practices relevant to this Practices topic. Be sure to review the Nonprofit boards of directors are entire document. responsible for defining the organization’s 1) A nonprofit corporation must have a governing mission, vision and values and for providing Summary of board of at least three overall leadership and strategic direction directors, including a to the organization. They are responsible for Legal president (or chairperson), a Responsibilities secretary, and a treasurer. maintaining the ethical and legal integrity *ME of the organization. Nonprofit boards of Nonprofit actively set policy and ensure that the Boards 2) A nonprofit’s board of organization has adequate resources to directors must ensure carry out its mission, and that its activities compliance with all legal It is the job of a board and other required reporting and expenses align with mission focus. member to ensure that the procedures and should Nonprofit boards have a responsibility to organization is faithfully periodically review this fulfilling its charitable compliance. *ME/US evaluate their own effectiveness, as purpose. Board members are governing bodies, in upholding the public responsible for governing interest(s) served by the organization. the organization. Maine law 3) A nonprofit’s board of imposes two primary duties directors or its designees on board members, which must review and approve would be used in court to the overall salary structure The effectiveness of a nonprofit depends in determine whether a board for the organization. All large part on the board’s ability to recruit a member acted improperly: compensation must be deemed as reasonable talented and visionary professional to fill within industry standards. the role of chief executive, and on a Duty of Care: The duty of See related Practice of care describes the level of Excellence #25. *US collaborative relationship between the competence that is expected board of directors and this chief executive. of a board member: by Mission-achievement requires strong Maine law, a board member 4) A nonprofit that annually must act with such care as compensates any director or communication and a balance of power an ordinarily prudent person officer more than $250,000 and authority between the board of would employ in a similar and receives more than 25% directors and the chief executive. The position and under similar of its budget through public circumstances. *ME funding must publically Board requires the power and publish such compensation. independence to carry out its legal and *ME Duty of Loyalty: This duty fiduciary responsibilities and to oversee and is a standard of faithfulness, evaluate the performance of the chief and by Maine law means 5) No more than 49% of the executive. The chief executive needs that a board member must individuals on the board of directors of a public benefit sufficient authority to manage the act in the best interests of the organization. This corporation may be organization and exercise leadership in the means that a board member financially interested broader community. can never use information persons, as defined in the obtained as a member for Maine Nonprofit Corporation personal gain. By Maine law Act. *ME officers of the board must act in the best interests of 6) A nonprofit board must the organization and its abide by its Bylaws (and in members. *ME the absence of an applicable Bylaws provision, the Maine Nonprofit Corporation Act) regarding meetings and decision making procedures, 11

Guiding Principles + Practices for Nonprofit Excellence in Maine © 2012 such as what constitutes a reside with should be institutional memory. Board roles and responsibilities. quorum and when and how compensated by the recruitment should align Each committee should have voting without a meeting is organization as an employee with and support a charter or other clear acceptable. *ME or independent contractor; achievement of the statement of its authority have their compensation organization’s strategic plan. and purpose. determined by individuals Term limits for board 7) A nonprofit with members who are compensated by the members and officers should must hold a member 10) A nonprofit’s board organization; or receive, be considered. meeting at least annually should establish an effective, directly or indirectly, and comply with all laws systematic process for material financial benefits regarding what constitutes a 7) A nonprofit organization educating board members to from the organization, quorum and when and how should strive for board ensure that each member is except as a member of the votes can be cast. *ME representation that reflects equipped with the nonprofit class served by the the organization’s information needed to carry organization. constituents and the out oversight functions, act 8) A nonprofit must not community it serves. In on all legal, ethical and make any loans to directors 4) If staff membership on a addition, board members fiduciary responsibilities, or officers. *ME nonprofit’s board is deemed should value cultural and be knowledgeable of all necessary, inclusion should competency, diversity, and programs and activities of Practices of be limited to the chief inclusiveness as essential to the board. executive, who should not improving the organization, serve as the Chair, Vice- and should endeavor to Excellence: 11) A nonprofit’s board Chair, Secretary or build their capacity for should engage in substantive Nonprofit Boards Treasurer. Staff members culturally competent dialogue about mission who serve on boards are responsiveness and equity. impact in order to typically ex-officio members 1) A nonprofit should hold strengthen the without official voting board meetings at least on a 8) A nonprofit should provide organization’s programs and status. quarterly basis and regular board members with a job services, including attendance should be description with clearly determining which programs expected. 5) A nonprofit’s board should stated expectations, are consistent with the be comprised of individual orientation to the history organization’s mission and 2) A nonprofit’s board should volunteers who are and the current programs monitoring their at a minimum of every three committed to representing and issues affecting the effectiveness. to five years review the the best interests of the organization, governing and organization and its mission, planning documents, organization’s Articles of 12) A nonprofit’s board and who have the diverse policies, and an overview of Incorporation, bylaws, should review and approve skills, background and board responsibilities. Board corporate policies, and new or revised fiscal and experience to meet the members are responsible for mission, vision and values governance policies. statements and amend as nonprofit’s needs. The board fully understanding their needed to reflect should include at least one legal and fiduciary organizational growth and individual with financial responsibilities to the 13) A nonprofit’s board development. expertise (not necessarily a organization and to the assumes overall CPA). Periodically the board public. responsibility for ensuring should review its size, sufficient funds are raised to 3) Although Maine law composition, and carry out the organization’s 9) A nonprofit’s board allows for fewer members, a operational structure to mission, meet budgets and members should carry out nonprofit’s board should be ensure it is best able to maintain adequate reserves. their responsibilities in the made up of at least five support the organization’s areas of: strategic planning; persons unrelated to each goals and objectives. other or to staff, to ensure policy approval; hiring of, 14) A nonprofit should appropriate deliberation and supervising of, and annual outline clear expectations diversity. Furthermore, a 6) A nonprofit’s board should performance review of the and/or a policy for board substantial majority (at least establish a process for chief executive or member giving, as well as two-thirds) of a nonprofit’s selecting new board equivalent; setting of personal solicitations and board members should be members that will ensure it compensation structure; relationship-building to independent – that is, has the necessary skills and fundraising; and financial support fund development. neither they themselves, nor abilities and an adequate oversight. Larger boards To demonstrate personal anyone related to them (as a infusion of new ideas and should organize committees stake in the organization, a spouse, sibling, parent or community perspectives, or task forces as needed to nonprofit’s board members child), nor anyone they while preserving effectively structure their should volunteer their time, 12

www.NonprofitMaine.org Governance + Leadership assist in raising external 18) A nonprofit’s board efforts of the organization, immunity for board funds, and make financial should have documented and monitoring the plan’s members’ personal liability. contributions to the rationale for the chief goals. nonprofit. One hundred executive’s total 25) A nonprofit should percent of board members compensation and stay 22) A nonprofit’s board document meetings and should give financially to the informed of compensation should conduct a regular actions of the governing organization to the best of levels of other key risk assessment and body and any committee their ability. personnel. A nonprofit establish appropriate risk with authority to act on board’s process for management strategies, behalf of the governing body determining compensation 15) A nonprofit’s board including the purchase of and, as appropriate and of top management should should annually review and appropriate levels of required by law, provide include comparability data approve an annual budget insurance, to prudently information to the public and substantiation of the for the organization, manage organizational that describes any decisions process, and as salaries rise, ensuring that expenditures liabilities. Funding agencies and decision-making nonprofits should consider are in alignment with sometimes require various processes. an independent review. mission focus. While each insurance policies. If an Although an executive board must determine the organization has one or compensation policy is not a 26) To institutionalize legal appropriate budget needed more employees, a Directors state or federal legal compliance, a nonprofit to achieve its mission, and Officers policy that requirement, the IRS now should establish a clear various industry includes Employment asks whether an conflict-of-interest policy benchmarks provide target Practices Litigation coverage organization has such a that requires disclosure of ranges of 65-80% of is especially useful. policy on the Form 990, and relationships, nepotism, and expenditures for programs, a negative answer is a interested-party and 20-35% for potential trigger for closer 23) A nonprofit’s board transactions. The policy administration, fundraising scrutiny. members’ responsibilities should include a disclosure and evaluation. should extend outside the form to be signed annually board room. Board members by board members and staff 19) A nonprofit’s board 16) A nonprofit’s board should act as liaisons or volunteers with decision- should annually conduct a should review and approve between their organization making authority, and formal performance review financial reports at least and the community on a procedures for managing of the chief executive, and a quarterly, review and regular basis to enhance the conflicts of interest and summary of the results of approve year-end financial organization’s public handling situations in which the review should be statements, and review and standing by sharing public and private interest communicated to the entire approve federal and state information about the intersect. The policies board. The chief executive’s filings. The board should mission and program should include an obligation performance should be also review and approve outcomes, garnering support of each individual to disclose assessed in light of significant financial from the community, and all material facts and organizational transactions, contracts and soliciting input from relationships and refrain accomplishments. The board leases, and ensure that community constituents from voting on any matter should ensure that the chief appropriate financial about needs and when there is a conflict of executive has the moral and controls are in place. expectations of the interest. Although a conflict professional support he or Although board review of the organization. of interest policy is not a she needs to further the Form 990 prior to its state or federal legal goals of the organization. submission is not a federal requirement, the IRS now 24) A nonprofit’s board legal requirement, the IRS asks whether an members (who are not asks on the Form 990 20) A nonprofit’s board organization has such a employees) should receive whether such a review has should establish an policy on the Form 990, and no monetary compensation occurred, and a negative organizational transition or a negative answer is a from the organization, answer is a potential trigger succession plan to maintain potential trigger for closer except reimbursement for for closer scrutiny. daily operations in the event scrutiny. reasonable out-of-pocket of a change in executive or expenses. If compensation is board leadership. 17) A nonprofit should strive paid, it must be reasonable 27) A nonprofit’s board to maximize operational in amount (see Legally should regularly evaluate efficiencies in order to 21) A nonprofit’s board Required Practices section itself with an eye toward reduce environmental should ensure effective above). Board member ensuring the effectiveness of impact and increase cost- organizational planning, compensation may void the board while also savings. actively participating in and applicability of federal and improving governing approving strategic planning state statutes providing practices. 13

Guiding Principles + Practices for Nonprofit Excellence in Maine © 2012 28) A nonprofit’s board and chief executive should create clear expectations and shared understandings of mutually supportive and Participating in the complementary roles. MANP Principles + Practices of Practices program was Excellence: an Nonprofit Chief enlightening Executive experience for us... 29) A nonprofit’s chief executive should provide an Honestly, some members of organization and staff with vision and leadership, which should stem from a strong our Board wish we had commitment to mission. this document years ago! 30) A nonprofit’s chief executive should develop future leadership, both on —Benjamin Burden, the staff and board, and also Board President, cultivate external relationships, serving as an MANP Member Organization organizational representative and advocate.

31) A nonprofit’s chief executive should exercise responsible financial stewardship, providing leadership to and management of fundraising, following the highest ethical standards, ensuring accountability and compliance with the law, managing operations, overseeing staff and ensuring the quality and effectiveness of programs.

32) A nonprofit’s chief executive should support board members in fulfilling their responsibilities, engage the board in planning, and take the lead on implementation.

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www.NonprofitMaine.org Public Policy + Advocacy Legally Required Practices of Principle Practices Excellence Nonprofit organizations play a central role in the democratic process by providing a 1) A nonprofit must not 1) Nonprofits should assist engage in more than their staff and means for public participation and insubstantial lobbying constituencies in developing promotion of the common good. To the activities. A nonprofit must skills and learning about extent possible, nonprofits should engage know and understand the opportunities for public and tax law limits on the civic engagement. in public policy and advocacy activities to amount of permissible promote community interests. In addition, lobbying. Organizations that 2) Nonprofits should engage in lobbying activities nonprofits should encourage and support promote nonpartisan efforts should be aware of the IRC constituent participation in these efforts. to encourage voting and 501(h) election. *US Open communication and consultation other participation in federal, state and local between policy makers and constituents of 2) Nonprofits that engage in policy making. nonprofit organizations contribute to the lobbying activities may be subject to state and federal creation and effective implementation of 3) Nonprofits whose reporting requirements. If constituencies are affected well-informed policies. so, the nonprofit must file by government actions accurate and timely reports should provide nonpartisan on their lobbying activities resources, information and and comply with all laws public forums for discussion governing politics and about the effects of various elections. *ME/US policy choices.

3) Federally funded 4) Nonprofits should ensure nonprofits that engage in board, staff and volunteers lobbying activities must who act on behalf of the organize their legislative organization are well aware work so that no federal of the federal, state and funds are used for this local laws governing purpose. *US lobbying, advocacy, and electioneering. 4) A nonprofit receiving funds from the state must 5) A nonprofit should abide by any contractual encourage board members, restrictions on lobbying or staff, volunteers, and friends advocacy activity. *ME to act as advocates and ambassadors for the 5) A nonprofit must not organization and the entire make a contribution or charitable nonprofit sector. expenditure in connection A nonprofit should ensure with a candidate, a political that individuals authorized committee that supports or to act as ambassadors have opposes a candidate, or a appropriate knowledge political party and must not about the programs and engage in any activity that activities of the organization promotes or discourages a and are prepared to speak vote on behalf of any on its behalf when individual candidate. *US appropriate.

6) Nonprofits should maintain a sound understanding of the 15

Guiding Principles + Practices for Nonprofit Excellence in Maine © 2012 current public policy statements made by a environment in their activity board or staff member. area and the resulting impacts on the communities 11) Information provided to they serve. policy makers, the media In my role as an and the general public 7) To the extent allowed by becomes a matter of public interim director, I have tax law and funding record. Therefore, a restrictions, a nonprofit nonprofit should ensure that brought these should participate in and the information is timely support the formation and and accurate, and that the amendment of public policy social and political context foundational consistent with the of the information is clear in organization’s mission. order to avoid documents to each client Nonprofit organizations misunderstanding or should take appropriate manipulation of the public positions on relevant message. while working to ensure a issues while working and communicating with other successful leadership 12) Nonprofits should join organizations to inform the together around policy public about these issues. issues to strengthen their transition and building impact on public policy. 8) If engaged in public policy and advocacy activities, the organization’s nonprofits should adopt a written policy to guide the capacity to be a scope and focus of the work and the time and resources to be allocated to those strong voice for their activities. constituents. 9) A nonprofit should build relationships with elected officials, community leaders, —Jim Pierce, and other nonprofits in order to strengthen their Contracted Interim Executive ability to effect community change and impact public Director + Nonprofit policy. However, these Consultant relationships should be carefully scrutinized to ensure there is no expressed or implied endorsement of a candidate for public office or the attempt to influence legislation outside the permissible limit.

10) A nonprofit should ensure that board and staff distinguish between personal opinion and organizational positions. This is especially important when publishing information online or in print. A nonprofit may be held accountable for 16

www.NonprofitMaine.org Evaluation Legally Required communities they serve. Principle Practices 5) A nonprofit should take As entities that serve the public, nonprofit into account and respond to organizations have an obligation to There are no laws the experience, needs and specifically governing satisfaction of stakeholders, demonstrate their value to the public nonprofit evaluation such as clients, community good. The public has a stake in nonprofit practices, however there are members, board, staff, and performance and is entitled to information applicable legal funders. The input should be requirements listed in the inclusive of a broad range of regarding organizational results. Nonprofits Public Benefit + views and perspectives and should regularly measure their performance Accountability and should play an integral role both in terms of effectiveness, such as Governance + Leadership in the organization’s outcomes and results of services, and sections, and there are decision-making process. A Practices throughout this nonprofit should have a efficiency, such as service delivery systems, document that relate to this grievance procedure to and should share such information with topic. Be sure to review all address complaints. their constituents and the general public. sections. Nonprofit evaluation should be appropriate 6) A nonprofit should determine performance to the size and activities of the Practices of measurements in advance organization, and evaluation data should Excellence to allow for adequate be used to continually improve the quality infrastructure and involvement to create an of processes, programs and activities. 1) A nonprofit should always environment for successful strive to improve processes, review. A nonprofit’s programs and results to performance measures increase its impact relative should be realistic, specific, to its mission, and should measurable and appropriate have defined, ongoing and to the mission, size and sustainable procedures in scope of the organization’s place for evaluating its activities as well as reflect programs, procedures, and the interests of its outcomes in order to best constituents. serve its constituents.

7) When possible, a 2) Evaluation should be used nonprofit’s evaluation to inform planning measures should reflect processes, including those generally accepted strategic planning, and to within the field, allowing for justify expenditures as local comparisons against appropriate. benchmarks established from rigorous studies. 3) A nonprofit should develop a thorough 8) A nonprofit’s performance understanding of the measures should be community in which it appropriate to the activity operates, and consider the being assessed, and tracked value of a periodic formal over time to inform efforts community needs and for continuous assets evaluation to achieve improvement. Measurement this aim. should include:

4) A nonprofit should information on conduct evaluations in ways effectiveness, i.e. impact(s) that are culturally sensitive on identified community and appropriate to the (constituent) needs; 17

Guiding Principles + Practices for Nonprofit Excellence in Maine © 2012 information on the fidelity 14) A nonprofit should of the delivered share relevant lessons programming (was the learned with other programming delivered as nonprofits and funding planned; and, if not, why sources. We used the Guiding not?); 15) A nonprofit should Principles + Practices for information on the assess the usefulness and efficiency of the program; accuracy of current Nonprofit Excellence in evaluation practices and change them as needed in both qualitative and Maine to self-assess and order to establish more quantitative data, when successful processes to possible. improve program that has shown us effectiveness. 9) A nonprofit’s data collection practices should how we can continue protect individuals and the information collected from to strengthen our individuals, so as to never cause harm to those individuals. organization and

10) A nonprofit should increase its effectiveness. appropriate adequate resources to ensure that evaluation is ongoing. —Jane Morse, Nancy Nellis, Organization Committee 11) A nonprofit should seek guidance and assistance Co-Chairs, from independent, external MANP Member Organization evaluators when appropriate and feasible. These evaluators should follow the national Guiding Principles for Evaluators set forth by the American Evaluation Association.

12) A nonprofit should train its personnel in evaluation methods to improve their understanding and encourage their utilization of data developed from evaluation activities.

13) Evaluation results should be communicated to a broad range of constituents and stakeholders (staff, board, clients, foundations, public, etc.) in promotional or information materials at least annually. 18

www.NonprofitMaine.org Strategic + Operational Planning Please note: There are other board and of the Principle sections in this document that organization. They should include Practices relevant to this be periodically reviewed by topic. Be sure to review the the board to consider Strategic planning is a cyclical process that entire document. societal and community defines a nonprofit’s overall direction, and changes. This review should the activities and strategies to be determine whether these Legally Required statements are still relevant, employed in fulfilling its mission. and/or whether they should Operational planning is a process that Practices be adapted to address details measurable objectives, specific evolving needs of its target activities and budget. Nonprofits lay the 1) A nonprofit must report constituents and the world any material changes to its at large. groundwork for mission sustainability when organizational purpose and they have a clear vision and goals for the activities to the IRS (via the 3) A nonprofit’s board of future, include input from constituents, and Form 990, if applicable). directors and staff should be Additionally, a nonprofit able to articulate a shared form specific strategies for reaching these must report changes to its goals. vision and goals for the Articles of Incorporation to organization that can guide the Maine Secretary of State. the establishment of *ME/US objectives and strategies.

Practices of 4) In planning for and evaluating its activities, a Excellence nonprofit should solicit input from a variety of 1) A nonprofit should have a sources such as participants, clearly defined, written volunteers, donors, board mission statement that members, staff and other guides the overall aims and stakeholders, and should activities of the welcome new ways of organization. A nonprofit thinking about solutions. may also consider a vision statement and a value 5) A nonprofit should statement. consider issues within the context of larger A mission statement is a communities and systems. succinct expression of an organization’s core purpose: 6) A nonprofit’s planning what you do and why. should address the organization’s challenges A vision statement is a and opportunities and brief, motivating expression reflect on: the needs of of an organization’s constituents; changing aspirations and the impact it demographics; community will make. issues, trends and conditions; the funding environment; the political A value statement affirms and regulatory climate; best the principles that underlie practices; and emerging all organizational activities. technology.

2) Originally defined by its incorporators or its initial board, a nonprofit’s mission, vision, and value statements should guide the work of the 19

Guiding Principles + Practices for Nonprofit Excellence in Maine © 2012 7) A nonprofit should operation plans. See the periodically create a mission relevant sections of this -driven, written strategic document for further details plan to guide organizational on best practices related to growth and implementation these types of plans. The information we of activities. gained from using Guiding The plan should include overarching, measurable Principles + Practices for objectives that are reasonably attainable given Nonprofit Excellence in staffing, resources (financial, facility, etc.) and the scope of the plan and it is the Maine will enhance our board’s responsibility to ensure that the necessary resources are in place to strategic planning achieve them. process. The plan should be flexible enough to allow the —Rachel Phipps, board of directors and staff to adapt to unforeseen Project Director, changes and take advantage of unanticipated MANP Member Organization opportunities.

The plan should provide a framework for regular progress reports and should be reviewed annually and updated at least every three to five years.

8) A nonprofit should write an annual operating plan, which aligns with the strategic plan and is tied to the annual budget. The plan should clearly identify goals and performance measures, define specific activities and responsibilities, and provide a framework for regular progress reports and updates.

9) A nonprofit should create written plans for specific areas of work such as fund development, communications, technology, succession planning, risk management and disaster planning, or ensure these topics are addressed in strategic and 20

www.NonprofitMaine.org Strategic Alliances Legally Required 3) When appropriate, a Principle nonprofit should foster Practices relationships with state, Strategic alliances can take many forms, regional, and national associations, government including both informal arrangements for 1) If serving as a fiscal entities, and businesses to sharing information and resources, sponsor of another entity, a support the advancement of nonprofit must carefully strengthening policy initiatives, and its mission. A nonprofit establish and manage the should work to establish increasing operational efficiency, as well as relationship (preferably with communication channels, more formal arrangements such as joint a written agreement) so that mutual understanding and it has full discretion and natural alliances among the ventures, partnerships, consolidations, or control over the funds and mergers with nonprofit and for-profit government, nonprofit and does not serve as a conduit. for-profit sectors to take entities. Informal and formal alliances can *US advantage of the total help to strengthen individual nonprofit resources of the community. capacity and the capacity of the sector as Practices of a whole. Nonprofits should seriously assess 4) Nonprofits should be open Excellence to consolidating and/or strategic alliances with public, private, and merging their organizations charitable organizations for viability and risk 1) A nonprofit should pursue when it is in the best prior to engaging in an alliance. Nonprofits strategic alliances as a interest of the constituents, should initiate and promote cooperation means to help achieve goals, community or service area improve effectiveness and to avoid unproductive and coordination whenever feasible to efficiency, maximize the duplication of services and maximize the resources available to the impact of charitable to maximize available communities they serve. resources, strengthen resources. community connections with constituents and 5) A nonprofit should only others, and improve undertake responsibility of services. Strategic alliances fiscal sponsorship for should only be made another organization with between competent and board approval and full functioning organizations. knowledge of its legal obligations and liabilities. 2) A nonprofit should stay aware of and coordinate 6) Nonprofits should with other organizations carefully consider whether a providing similar or potential alliance is in line complementary services in with the strategic goals of their communities, and a the organization; the impact nonprofit’s board should on the brand and image regularly conduct an should be positive. A environmental scan of nonprofit should be sure it similar-service organizations has the internal capacity to to assess relationships and perform its agreed upon role discuss possible strategic prior to entering into a alliances. To promote strategic alliance. Strategic overall accountability within alliances should never be the sector, a nonprofit made purely to meet should openly communicate funding challenges. with other nonprofits to share and gather information on lessons 7) Nonprofits that have local learned and best practices to chapters, branches, or avoid duplication of affiliates should have services. written policies and procedures governing the 21 activities of these strategic

Guiding Principles + Practices for Nonprofit Excellence in Maine © 2012 allies to ensure operations are consistent with the umbrella organization’s mission, policies and procedures. Although this The Guiding kind of policy is not a state or federal legal requirement, Principles + Practices the IRS now asks whether an organization has such a helped us realize that we policy on the Form 990, and a negative answer is a potential trigger for closer can’t continue to exist in scrutiny. the same way we have in 8) A nonprofit entering into a partnership or strategic the past and it focused alliance should ensure that agreements are consistent with its policies, especially us on the need to around constituent and donor confidentiality. strengthen our

9) Nonprofits should carefully consider all collaborations and seek potential legal and financial risks that may result from out new partners. collaborative endeavors, such as challenges to exemption and —MaryBeth Sullivan, incorporation status, risks such as exposure to anti- Executive Director, trust laws and anti-kickback MANP Member Organization laws, and implications for contractual relationships, patient choice requirements, licensing requirements, employment laws, and unrelated business income tax (UBIT).

10) If applicable, a nonprofit should implement a written policy or procedure that requires the organization to evaluate its participation in joint venture arrangements under applicable federal tax law, and take steps to safeguard the organization’s exempt status.

11) Nonprofits entering into a collaborative arrangement should strongly consider whether legal counsel would be beneficial to educate and protect all entities involved. 22

www.NonprofitMaine.org Financial Management Please note: There are other cards as any such Principle sections in this document that transaction may constitute include Practices relevant to private inurement or an this topic. Be sure to review the excess benefit transaction Nonprofits have an obligation to act as entire document, with under the intermediate responsible stewards in managing their particular attention to Public sanctions rules. *ME/US financial resources and must always Benefit + Accountability and Governance + Leadership. comply with all legal financial 7) Nonprofits that solicit, requirements. They should adhere to sound accept, or obtain Legally Required contributions from the accounting principles that produce reliable public for any charitable financial information, ensure fiscal Practices purpose in the State of responsibility and build public trust. Maine must be licensed with the State Department of Nonprofits should use their financial 1) A nonprofit must comply Professional and Financial resources to accomplish their missions in an with all legal financial Regulation as either a obligations. *ME/US Review charitable organization or effective, efficient manner and establish the Basic Infrastructure clear policies and practices to regularly an exempt charitable Checklist to learn about organization and must monitor how funds are used. required and recommended update that license policies, procedures and annually. A fundraising reporting mechanisms. report is required with the annual filing for charitable 2) If the nonprofit is a public organizations. Nonprofits charity by virtue of the that solicit in other states public support test, the may face additional organization must ensure licensing requirements. *ME that it meets the requirements of this test 8) A nonprofit has a legal from year to year. *US and ethical obligation to expend grant and donor 3) A nonprofit must ensure funds responsibly and to that its assets are used ensure that funds are solely for the benefit of the dispensed according to the organization, and not for funders’ wishes and personal or other gains. *ME/ requirements, in accordance US with the Maine Uniform Prudent Management of Institutional Funds Act, as 4) A nonprofit must have a applicable. The nonprofit’s system in place that allows financial system must individuals to report support a segregation of financial misconduct, funds in order to track without harmful grants and donations with consequence for doing so. the corresponding expenses. See Financial Management *ME/US Practice of Excellence #4 for further recommendations. *US 9) A nonprofit must comply with all financial reporting and tax laws, including 5) A nonprofit must strictly withholding and payment of prohibit financial loans to federal and state income members of the board or to taxes and Social Security organization personnel. *ME payroll taxes. *ME/US

6) A nonprofit must not 10) A nonprofit’s board and/ allow personal use of its or the person responsible for funds or business credit 23 fiscal oversight within the

Guiding Principles + Practices for Nonprofit Excellence in Maine © 2012 organization should be inaccurate reporting to the familiar with and meet the greatest extent possible. filing requirements of the This system should be IRS Form 990 (or 990-EZ, 990 appropriate to the size of -PF or 990-N). Note: the organization’s financial The Guiding Although board review of and human resources. the Form 990 prior to its Principles + Practices for submission is not a federal 3) A nonprofit should have legal requirement, the IRS procedures to monitor, Nonprofit Excellence has asks on the Form 990 record, and report on assets whether such a review has received, held and occurred and a negative helped drive our expended. answer is a potential trigger for closer scrutiny. *US organization to a level of 4) In order to institutionalize legal compliance, a 11) A nonprofit organization nonprofit should have institutional must manage and invest written “whistleblower” funds prudently and in policies and procedures to compliance with conditions structure and establish procedures for attached to funding. *ME that is submission of concerns transparency 12) A nonprofit that receives regarding questionable Federal dollars, whether accounting matters; normally very difficult for directly or passed through another agency, must a small non-profit to comply with the Office of receipt, retention, and Management and Budget treatment of complaints (OMB) Circulars A-133, A-110 received; and achieve. By clearly listing and A-122. If a nonprofit expends more than $500,000 out legal requirements and protection from in Federal funds for its retaliation of those reporting operations, it must have a concerns. professional Single Audit. *US recommendations, MANP This policy is intended to Practices of encourage and enable employees, board members, allowed us to simply focus Excellence officers, and volunteers to raise concerns for on implementing those 1) A nonprofit should follow investigation and U.S. generally accepted appropriate action. Although policies and our accounting practices (known a written policy is not a as GAAP), especially those state or federal legal procedures. codified by the Financial requirement, the IRS now Accounting Standards Board asks whether an (FASB) and/or the organization has such a —Ian Yaffe, Governmental Accounting policy on the Form 990, and Standards Board (GASB) for a negative answer is a Executive Director, nonprofit entities. potential trigger for closer scrutiny. MANP Member Organization 2) A nonprofit should have written policies and 5) A nonprofit should procedures governing generate accurate, timely internal controls that ensure and relevant financial separation of financial reports which include the duties to serve as a checks comparison of actual to and balances system to budgeted revenue and prevent theft, fraud or expense, and which identify 24

www.NonprofitMaine.org Financial Management and explain any significant 10) A nonprofit should would be caused by losing a of the organization. The variances. The reports normally plan for a balanced significant amount of its chief executive and the should include a narrative budget. In the event that a funding from any one organization’s board are and clear, bulleted essential budget deficit occurs, the source. ultimately responsible for findings. These reports board should be aware of financial statements. should be provided to the this expected outcome and 15) A nonprofit should board of directors for regular should participate fully in monitor cash flow regularly The State of Maine and review and discussion, on a determining a plan to to avoid bank overdrafts and the federal government have quarterly basis at a identify resources to restore acquiring a reputation for their own audit minimum. the budget to a balanced improper management of requirements that state or meet cash flow funds. organizations should be demands. 6) A nonprofit’s board aware of when they receive members should receive funding. 16) A nonprofit with annual appropriate training on how 11) A nonprofit should plan, total revenues in excess of to read and interpret establish and maintain a $1,000,000 should subject its Organizations should also financial statements, financial reserve at a level financial reports to an be aware of any enabling board members to determined by the annual audit by a Certified requirements from donors. be actively engaged in organization’s management Public Accountant (CPA) reviewing financial and board to adequately with nonprofit experience. A statements, and providing support its operations, and 17) Larger nonprofits should nonprofit with total revenues fiscal oversight. should have a feasible plan establish contract in excess of $250,000 but for dealing with sudden management policies and below $1,000,000 should withdrawals of major procedures, including 7) A nonprofit should have a have a CPA provide at least funding sources. A bidding systems and written conflict-of-interest an annual review of its recommended target for evaluation and monitoring policy. See Governance + finances. The actual trigger reserves is three to six tools. Leadership Practice #26. for an audit is the Board’s months of operating decision and should be expenses. based on the internal 18) A nonprofit should 8) A nonprofit’s board of controls in place, the nature establish and implement a directors should review and 12) A nonprofit should of the types of funding policy that provides clear approve an annual budget consider bequests, planned sources received, technical guidance on the appropriate for the organization prior to gifts and non-written abilities of the accounting use of business credit cards. the beginning of each fiscal pledges when determining staff and level of board The policy should also year. While each board the annual budget, but oversight. provide consequences for should determine the should not include these unsubstantiated expenses appropriate budget needed dollars in budgeting for incurred and personal use of to achieve its mission, The board should meet in program expenditures until the credit card. Procedures consideration should be executive session with the the gift is realized. should be implemented that given to applicable industry auditor and should accept or give management oversight benchmarks for make a motion to approve of staff credit card expenditures on programs, 13) A nonprofit should fully the final audit report. Larger expenditures and board administration and understand “temporarily nonprofit organizations oversight of expenditures by fundraising. restricted” funds under should establish an audit the chief executive. Financial Accounting committee of the board that Standards Board (FASB) does not share members 9) A nonprofit should spend nonprofit accounting, and with and works 19) A nonprofit should the majority of its annual know when funds are independently of the finance establish and implement budget on programs in appropriate to be released committee. This committee policies that meet IRS pursuance of its mission. An for use in the budget to should meet with the auditor “Accountable Plan” organization should also offset expenses. separately from standards and that provide provide sufficient resources management staff and clear guidance on its rules for effective administration should accept the final audit for paying or reimbursing of the organization, 14) A nonprofit should work report. expenses incurred by anyone including evaluation and towards diversifying its conducting business or technology costs (funding funding sources as much as traveling on behalf of the technology depreciation), possible in an effort to Financial audits and organization, including the and, if the organization strengthen the reviews should be approved types of expenses that can solicits contributions, for organization’s sustainability by the organization’s board be paid for or reimbursed appropriate fundraising and public support ratio, and and accepted formally by the and the documentation 25 activities. to lessen the impact that executive director and CFO

Guiding Principles + Practices for Nonprofit Excellence in Maine © 2012 required. Such policies should require that travel and other expenditures on behalf of the organization be undertaken in a cost- So many of Maine’s effective manner. Although an expense reimbursement nonprofits are small; they policy is not a state or federal legal requirement, carry out their missions the IRS now asks whether an organization has such a policy on the Form 990, and without the support of a negative answer is a potential trigger for closer in-house human resources, scrutiny. finance, legal, marketing or 20) A nonprofit that accepts credit cards should comply planning departments. Yet, with PCI DSS (Payment Card Industry Data Security as public charities they Standards). The types of transactions and methods owe it to the public and used by the nonprofit will determine the level at which they need to comply. their constituents to

21) A nonprofit should operate at the determine if it is exempt from Maine Sales and Use highest standards Tax. MANP’s 22) A nonprofit with possible. investments should adopt and periodically review a Guiding Principles + sound investment policy. Practices for Nonprofit Excellence in Maine is an invaluable tool that every nonprofit leader and board member should revisit regularly. —Stephanie Eglinton, Program Officer, Maine Foundation

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www.NonprofitMaine.org Staff + Volunteer Management Please note: There are other 4) A nonprofit must Principle sections in this document that maintain certain personnel include Practices relevant to records for each employee this topic. Be sure to review the (and in some cases briefer Effective management of human resources entire document, with volunteer-specific records) is essential for creating successful particular attention to those and comply with rules organizational results. Consistent, fair, related to compensation policy regarding their in the Governance + Leadership confidentiality in storage human resources management enhances section. and access and which staff morale and promotes cooperation. outlines the terms under Nonprofit organizations should exercise fair which employees may and equitable human resource and Legally Required review or add to their contents. See Basic volunteer management practices that Practices Infrastructure Checklist for attract and retain qualified individuals – further details. *ME/US paid and unpaid – capable of 1) A nonprofit must comply with all local, state and 5) A nonprofit must implementing its programs and services. federal employment laws in Compensation should reflect internal equity accurately classify each hiring, promotion, worker as an employee or and external competitiveness within the compensation and discipline independent contractor for practices. This includes the purpose of Maine organization’s financial means. Nonprofits having a definitive equal have an obligation to adhere to ethical, unemployment tax, Maine opportunity statement and workers compensation law, legal employment practices and to provide Workers Compensation federal payroll taxes and a safe work environment. Nonprofit Insurance, among other Maine and federal income steps. See the Basic organizations should establish specific tax withholding Infrastructure Checklist for requirements. For nonprofits policies and practices that promote further details. *ME/US that offer stipends to accountability, collaboration and results workers, such as clients that lead the organization to the 2) A nonprofit must take receiving a stipend as a part achievement of its mission. steps to ensure that its of a work program, environment is safe from classifications may vary and preventable hazards that organizations should seek might result from working the opinion of the Maine conditions, the operation of Department of Labor in public facilities or practice classifying these workers. with potentially dangerous *ME/US clients. *ME/US 6) Every employer, including 3) A nonprofit must comply nonprofits, must ensure that with Maine and federal anti- if employees report an harassment laws. apparently illegal or Organizations with 15 or prohibited act, the more employees must (and complaint will be smaller organizations entertained on its merit and should) establish and that no retaliation will arise operate consistent with a out of reporting such an act. written harassment To institutionalize this prevention policy that compliance, a nonprofit defines harassment, should have a written provides examples, notes whistleblower policy. See how investigations are Financial Management conducted and explains how Legally Required Practice #4 employees can report for more detail. *ME/US suspected harassment. *ME/ US 7) Nonprofits must ensure that background checks on new hires are completed 27

Guiding Principles + Practices for Nonprofit Excellence in Maine © 2012 according to state and Medical and dental among other things, the 12) A nonprofit should solicit federal regulations and any insurance; history and mission of the and use input from paid and applicable funder contracts, organization, personnel volunteer personnel to protect vulnerable policies and procedures, regarding the organization’s Life and disability populations such as minor criteria for standards of activities and results on a insurance; children, the disabled or performance and all state continual basis. elderly service recipients. and federally mandated *ME/US Retirement plans; employee training programs. 13) Unpaid and stipend staff Group membership benefits; should be treated in the Practices of 9) A nonprofit should provide same professional manner Paid leaves: sick leave, staff and volunteers with as paid staff. The volunteer’s Excellence vacation time, personal clear, current job knowledge and experience time, and other paid time descriptions and the tools should be respected and off; they need to produce quality utilized in the same way as a 1) A nonprofit should have a work. They should also set paid employee. written conflict-of-interest measurable objectives with Unpaid leaves: Family policy that governs staff and realistic expectations, as Medical Leave, maternity, volunteers with decision- well as clear and legislative service and jury making authority, as well as consistently applied duty. board members. See procedures for evaluating Governance + Leadership performance. Nonprofits Practice #26. 6) A nonprofit should adopt a should have procedures in set of specific, but separate, place to fairly and legally 2) A nonprofit should have a policies and procedures for address performance staffing structure that personnel and volunteers concerns to ensure employee clearly defines the positions that are within legal conduct is competent and and the relationships guidelines, address effective respectful of both fellow necessary to implement the practices of risk employees and persons nonprofit’s goals, objectives management, and are served. A record of an and mission. approved by the Board. The employee’s evaluations, Basic Infrastructure along with employee’s Checklist contains a list of signature and comment, 3) A nonprofit should employ recommended policies and should be kept in the competent individuals who procedures. employee’s personnel are suitable for the positions records. they occupy (paid or unpaid) and committed to the 7) A nonprofit’s personnel mission, vision and values of policies should reflect the 10) A nonprofit should the organization. goals of the organization and support and encourage the the needs of employees. education and development Nonprofits should have a of paid and unpaid 4) A nonprofit should strive clear process through which personnel and should toward employing personnel policies are reviewed provide them with and engaging volunteers annually and approved by opportunities for personal who reflect the diversity of the board. These policies growth, skill development the community that they serve to provide guidance to and advancement to the serve, as appropriate for staff on the carrying out of extent possible with respect program effectiveness. their assigned duties and to budget limitations. Nonprofits should strive to help the chief executive to include diverse voices and ensure organizational 11) A nonprofit should have opinions in decision-making activities are consistent with a system in place for the and at all levels of the the best practice as succession of employees and organization. articulated by the board. volunteers to support consistency over time and 5) The board should 8) A nonprofit should have a organizational sustainability. establish policies on formal orientation program employee benefits, which for new employees and may include: volunteers which includes, 28

www.NonprofitMaine.org Resource + Fund Development Please note: There are other organization’s financial Principle sections in this document that statements and include Practices relevant to communications in this topic. Be sure to review the accordance with the donor Nonprofit organizations play an important entire document. or grantor wishes/ societal role in serving as the vehicle by stipulations. If an which philanthropy occurs. They act as the organization is unable or Legally Required unwilling to agree to the intermediary between donors and specific conditions set by the beneficiaries and have an ethical Practices donor, it must respectfully obligation to ensure proper handling of decline the gift. *ME/US funds to carry out their missions. Nonprofit 1) A nonprofit must comply with charitable solicitation fundraising should be conducted 6) A nonprofit must ensure laws in each state where it that any professional according to the highest ethical standards raises funds, including those fundraisers that work on its with regard to solicitation, acceptance, raised online. In Maine a behalf (employees of the nonprofit must file an nonprofit excepted) are recording, reporting and use of funds. annual charitable Nonprofits should adopt clear policies for licensed with the Maine solicitation registration (or Department of Professional fundraising activities to ensure responsible annual exemption and Financial Regulation, paperwork) and an annual and are classified use of funds for designated purposes, and fundraising activity report open, transparent communication with appropriately as employees with the Maine Department or independent contractors. donors and other constituents. of Professional and Financial See Legally Required Regulation. *ME Practice # 5 in the Staffing + Volunteer Management 2) A nonprofit that seeks to section. *ME/US raise money through gaming, auctioneering or 7) A nonprofit that raffle activities must comply collaborates with a for-profit with state and IRS rules and business to raise over laws related to these $10,000 in funds in a activities. *ME/US calendar year must ensure that it and the business 3) A nonprofit’s fundraising complies with the communications must commercial co-venture include clear, accurate, and provisions of the Maine honest information about Charitable Solicitations Act. the organization, its *ME activities and the intended use of funds, and should clearly identify the Practices of organization. *ME Excellence

4) A nonprofit must comply 1) A nonprofit should with written substantiation promptly acknowledge and and disclosure requirements thank donors for every gift, as outlined in IRS regardless of amount, Publication 1771. *US including in-kind donations.

5) A nonprofit must use 2) A nonprofit should have funds according to donor policies in place that govern intent. Donated funds must the receipt, be clearly categorized as acknowledgement, use and unrestricted, temporarily management of charitable restricted or permanently gifts, grants and in-kind restricted in the donations, and should stay 29

Guiding Principles + Practices for Nonprofit Excellence in Maine © 2012 current on any revisions 5) A nonprofit should vendors or processors to made to reporting standards establish appropriate ensure their capabilities can and forms. Nonprofit systems to collect and support other fundraising organizations should manage current, historical best practices, as well as to implement clear policies, and potential donor data, assess the stability of the based on the organization’s and consider maintaining a provider, and its ability to exempt purpose, to formal donor database. ensure the security of donor determine whether data. A nonprofit should also accepting a gift would evaluate the impact of 6) A nonprofit should compromise the ethics, outside vendors’ presence on diversify its funding sources financial circumstances, their brand. to reduce the risk associated mission focus, or other with the loss or reduction of interests of the organization, particular funding streams. and should decline funds that do so. Nonprofits should consider an additional policy 7) A nonprofit should regarding acceptance of regularly communicate with personal gifts from any donors regarding its constituent to staff activities and should make members, board members, such information available and volunteers. through multiple outlets, and in response to requests. 3) A nonprofit board and executive should be familiar 8) A nonprofit should with professional standards, balance publicly recognizing such as the Association of donors with maintaining Fundraising Professionals’ donor confidentiality. Code of Ethical Principles and Sharing or trading donor Standards of Professional names with others without Practice and A Donor Bill of permission is unethical. Rights and the ePhilanthropy Personal information about Code of Ethical Online potential donors collected in Philanthropic Practices, and prospect research should ensure that all fundraising remain confidential. professionals acting on behalf of the organization 9) A nonprofit should behave ethically. support the professional development of its resource 4) A nonprofit should development staff and prepare an annual Resource volunteers to ensure Development Plan that knowledge of traditional and involves research and innovative practices in consideration of all potential fundraising, philanthropy, sources of support (grants, and earned income donations, sponsorships, development. earned income, in-kind donations, etc.) and includes 10) A nonprofit should not fund development compensate fundraising techniques appropriate to personnel and consultants various programs, projects, based on a percentage of services and fund types. The funds or on other plan should include commission based formulas. measureable goals, appropriate staffing and resources to achieve these 11) A nonprofit that uses goals, and a process for online fundraising strategies monitoring progress toward should exercise due goals throughout the year. diligence in vetting and selecting any third party 30

www.NonprofitMaine.org Marketing + Communications Please note: There are other support the organization’s Principle sections in this document that strategic plan. Marketing include Practices relevant to and communication should this topic. Be sure to review the be integrated with all Effective marketing and communications is entire document. organizational planning, and central to the success of an organization’s should demonstrate mission, goals and activities. Internal accountability to Legally Required constituents and the public. communication is essential to motivate, inform, and counsel employees and Practices A nonprofit should have volunteers and to set the stage for clearly defined, written excellent external communications. 1) A nonprofit must comply marketing goals. These with the CAN-SPAM Act. *US External communication is necessary to goals should define measurable outcomes for attract and retain constituents and to raise response to the public consciousness, understanding, Practices of organization’s programs, response to, and funding of the Excellence services, volunteer organization. engagement, and fund development efforts. 1) A nonprofit’s organizational marketing and communications should A marketing and adhere to the highest ethical communications plan and professional standards, should include target as well as any industry audiences, key messages, specific standards that may pricing, distribution, exist, and should include customer service, transparency, fairness and communications tools and honesty, especially in an age techniques, and a means to of social media in which evaluate results. users inside and outside organizations generate Communications tools content together. These and techniques should take standards should be clearly into consideration target stated in writing and should audiences’ preferred be part of the orientation of methods of communication. all employees and volunteers. The plan should establish regular formal and informal 2) A nonprofit should strategies for gathering establish and promote a input from target audiences, clear brand. An community members and organization’s brand reflects key groups/organizations, its reputation, character and and identify how this input actions, and an will be considered and organization’s brand identify incorporated as appropriate. includes its logo, graphic standards, messaging, and tone. A nonprofit should The plan should also establish policies and ensure that an organization procedures governing the is making the appropriate use of its brand identity information available to the elements to ensure public and communicating consistency. in a clear and timely manner with those who request information. (See 3) A nonprofit should have “Public Benefit and plans for achieving its Accountability” for more marketing goals that information) 31

Guiding Principles + Practices for Nonprofit Excellence in Maine © 2012 The plan should be shared 7) A nonprofit should clearly information for those Individuals should be and regularly reviewed with define the line of individuals to use for provided with clear channels staff, board and key communication between internal and external for contacting the volunteers of the staff and the board of communications. All organization to request organization. directors, as well as internal constituents should information or provide appropriate methods for be aware of who the input. conveying information, spokesperson(s) is/are. It should be updated processes, concerns, and regularly to ensure the plan Constituents of nonprofits accomplishments, and stays current with the 12) A nonprofit should should be provided with orient staff and board organization’s priorities, encourage board members, ongoing opportunities to members about this topic. communication trends, and staff, volunteers and friends interact with the board and technological capabilities. to act as ambassadors and management regarding the 8) A nonprofit should have a advocates for the entire organization’s activities. clear process for developing organization and its position 4) A nonprofit should public statements and on issues, and should encourage internal 16) A nonprofit should positions on issues. A provide ambassadors with communication that respond promptly and nonprofit should ensure all concise messaging (an welcomes alternative respectfully to grievances or staff, board members and elevator speech) to facilitate perspectives, invites and complaints from other volunteers are aware their promotion of the encourages participation at stakeholders. A written of the nonprofit’s public organization. all levels, minimizes policy should be considered statements, positions and defensiveness, and builds to support this practice. media coverage, and and maintains camaraderie. 13) A nonprofit should encourage them to build Management should solicit consult copyright or awareness through word-of- 17) A nonprofit should actively, listen carefully, and trademark requirements mouth when appropriate. establish and implement a respond respectfully to the restricting use of others’ clear policy regarding views of internal work and should copyright confidentiality of certain constituents, including staff 9) A nonprofit should have a or trademark organizational communications, images, and volunteers. policy outlining expectations materials as appropriate, and personal information. for how board and staff including considering Sensitive, private, or distinguish between copyright commons. 5) A nonprofit’s internal confidential information personal opinion and communications should should not be shared organizational positions, include regularly scheduled 14) A nonprofit should seek without express consent. especially when publishing and attended meetings, technology solutions that information online or in regular printed and allow the greatest print. A nonprofit may be electronic informational segmentation and held accountable for updates, an understood personalization of messaging statements made by a board forum for suggestions, to the organization’s range or staff member. reports on meetings of the of target audiences. board of directors and its committees, recognition and 10) As a risk management 15) A nonprofit should make social events. Written strategy, a nonprofit should all non-confidential policies and procedures are have a written policy and information regarding its useful for creating procedure to guide external mission, program activities consistency and and internal and finances available to the accountability for internal communications in crisis or public. communication standards. emergency situations. All internal constituents should be aware of the policy and All basic information 6) A nonprofit should have in procedures. about the organization, place a social media use including the Form 990, policy that balances annual reports, information personal freedoms with 11) A nonprofit should regarding services and fees, recognition that staff identify key spokespersons contact information and members’ online presence that are authorized to make financial statements should impacts perception of the official public statements on be easily available on the organization. behalf of the organization, organization’s website and and ensure processes to by request. provide appropriate,

accurate and timely 32

www.NonprofitMaine.org Technology Legally Required media use policy that Principle balances personal freedoms Practices with recognition that staff members’ online presence A nonprofit manages information with impacts perception of the regard for confidentiality/openness, safety, There are no legally required organization. practices in this section, but accuracy, integrity, reliability, cost- please note that there are effectiveness, and legal compliance. A other sections in this 5) A nonprofit should ensure nonprofit should invest in appropriate document that include that secure or confidential Practices relevant to this information is appropriately technology to enhance capacity and topic. Be sure to review the protected and not taken improve its efficiency, efficacy, and entire document. from the organization in any accuracy in the achievement of its mission. manner unless expressly A nonprofit should also ensure the security authorized. To safeguard Practices of against these risks, a of sensitive or confidential information, and Excellence nonprofit should strongly ensure its document retention and consider written security destruction policy adequately protects policies that prescribe how 1) A nonprofit should have critical organizational information. information systems in information is gathered and place that provide timely, stored, how accuracy is accurate, and relevant maintained, how and what information to facilitate information is backed up, workflow. and who is authorized to view or manipulate that data. Written policies 2) In order to ensure cost- should address remote effective and appropriate access, if applicable. use of relevant technology, a nonprofit should integrate technology planning into its 6) A nonprofit should short and long-term designate responsibility for strategic and operational maintaining the plans and consider the value organization’s information of a separate more detailed systems to more than one technology plan. This staff person, volunteer, or planning should include an board member. One person assessment of what systems should be primary and at are needed to effectively least one should be back-up. meet the organization’s mission, as well as funds to 7) A nonprofit’s staff, make necessary, ongoing, volunteers and board technology upgrades. A members should all have nonprofit should fund current training to use those technology depreciation. technology and information systems that are relevant to 3) A nonprofit should have a their work and should know resourced and intentional to whom to report problems website and social media and ideas. Sufficient presence. resources should be allocated for this purpose. 4) As appropriate to its technology resources, a 8) A nonprofit that accepts nonprofit should have a credit cards should comply policy that addresses with PCI DSS (Payment Card personal use of the Industry Data Security organization’s information Standards). The types of and technology, and a social transactions and methods 33 used by the nonprofit will

Guiding Principles + Practices for Nonprofit Excellence in Maine © 2012 determine the level at which 14) In addition to those they need to comply. items listed above, minimum technology recommendations include: 9) A nonprofit should publish on its website its I have been struck by security and privacy policies virus protection (updated related to information regularly); how the Principles have gathered on its website. firewall; influenced my work. 10) A nonprofit should have off-site back-up of key data and anti-spyware. They have certainly and software information and should allow for remote and/or alternative access in spurred me to make the event of an emergency. This back-up should be to how we checked periodically to adjustments ensure it is functioning properly. operate as an organization (i.e updating our social 11) A nonprofit should create a catastrophic recovery plan that includes media plan ) as well as whom to call, hardware/ software vendor account take on the bigger numbers and contact information, insurance company information, and picture issues (i.e. hardware serial numbers, and should ensure that all developing and adopting a information technology support agreements are up- succession plan with our to-date and include disaster recovery protections. board). In sum, they 12) A nonprofit should invest continue to serve me and in appropriate telecommunications equipment (such as fixed my organization well. and mobile communication devices), compatible computer hardware and —Barbara Ginley, software, Internet access, Executive Director, website and email hosting and any other technology MANP Member Organization infrastructure deemed appropriate to enhance and streamline its ability to achieve its mission.

13) A nonprofit organization should develop computer networking and remote access strategies that are appropriate to the size of the organization. 34

www.NonprofitMaine.org Addressing Fraud or Misconduct Note: No one should rely on organization has a policy in Visit MANP’s Resource Many organizations create this guide as legal advice, and place and what procedures Library at a public annual report we encourage you to consult a may exist to help someone www.NonprofitMaine.orgto (different from the State of qualified attorney for advice on report a concern. find information about Maine Annual Report listed any particular situation. nonprofit legal compliance above) and make this Consulting with an attorney as well as a range of other available on their websites Learn About Appropriate will help you understand your resources that describe and and a few post their Articles Nonprofit Practices and rights and the options available support nonprofit of Incorporation and/or Resources to Prevent Fraud/ to you throughout each of the management best practices. Bylaws online as well. Misconduct steps described. It is important to recognize that actions by an Contact MANP’s Help For membership Before Reporting organization that one does Desk via our website, organizations, minutes, not agree with or approve of www.NonprofitMaine.org. Bylaws, and all books and are not necessarily illegal. MANP’s staff can suggest records of accounts of the Be cautious An important step in any resources to help one organization must be made Whether one is certain of case of suspected fraud or determine whether a available for inspection to wrong-doing or just suspects misconduct is to educate situation of concern is an any voting member for all misconduct, it is very oneself before making a instance of poor legitimate purposes. Good important to be thoughtful report. There are many management or illegal faith investigation of about how to address one’s resources available to help activity. suspected misconduct is concerns. nonprofit staff, leaders and generally considered a board members learn about legitimate purpose. legal responsibilities as well Gather information Be very careful about saying as best practices in nonprofit Public charities are required Fundraising-related anything in public, by email management. In addition to to make a number of records or online that might damage this document, the following organizational documents Most organizations that the reputation of the are helpful resources: public. While these organization or people who documents may not contain solicit contributions from work there. A person risks evidence of misconduct, it’s the public should be licensed both personal and legal The Maine Attorney worth reviewing them. If in Maine, and organizations challenges if his/her General’s office has someone finds the reports that solicit contributions in understanding of a situation compiled links to sections of are incomplete or other states may need to is wrong or cannot be Maine law relevant to nonexistent, or if they register in those as well. substantiated. public charities: http:// contain information that is Maine’s Charitable www.maine.gov/ag/consumer/ easily demonstrated to be Solicitations Act makes charities/laws.shtml. false or misleading, these publicly available a variety Understand available can be good starting points of fundraising-related protections. Federal and records that must be filed. Maine Attorney General’s for calling for official Maine law prohibits all These include an annual Guide for Board Members of investigation. Documents employers, including registration application, an Charitable Corporations that one may want to review nonprofits, from retaliating annual fundraising activity www.maine.gov/ag/consumer/ include: against employees who report, and contracts with charities/guide_charities.shtml “blow the whistle” on any professional fundraisers, This guide is meant to help suspected violation of law, Corporate filings which are available upon board members understand or on any practices that risk An organization’s Articles of request from the Office of their rights and someone’s health or safety. Incorporation and the Professional and responsibilities during In addition, Maine law corporation’s State of Maine Occupational Regulation. An service to a charitable provides that employees of a Annual Report (which individual can look up organization. nonprofit corporation may includes basic information charitable organizations that not be terminated for about the organization’s have filed for a license in contacting a Board director, Association of directors and officers) can be Maine at http:// and such contact between Fundraising Professionals requested by visiting the pfr.informe.org/almsonline/ employees and directors Code of Ethics Maine Bureau of almsquery/welcome.aspx to see cannot be prohibited. Many www.afpnet.org/Ethics/ Corporations “Interactive their license history and if organizations have a EnforcementDetail.cfm? Corporate Services” at any disciplinary action has “whistleblower protection itemnumber=3261 https://icrs.informe.org/nei-sos- been taken against them. policy” in place that applies icrs/ICRS and searching for to these concerns. Staff or the nonprofit by name. board members are advised There is a fee per document to determine whether their ordered. 35

Guiding Principles + Practices for Nonprofit Excellence in Maine © 2012 Federal records Addressing Your meeting of the Board (or of conflict of interest Certain federal tax records the members, if it is a transactions, board must be disclosed, and Concerns membership organization). composition problems, or copies must be provided for board members not a reasonable fee upon exercising appropriate “duty request (usually If after gathering Make a Formal Report of care.” immediately for in-person information concerns It may be more appropriate, request and within 30 days remain, there are a few or feel safer, to make a Violations of State in the case of written options: complaint or report to the Gaming Laws requests). These include the appropriate government Reports about violations of IRS Form 1023 (the original entity. Concerned parties Work to Solve the gaming laws (such as illegal application for 501(c)(3) may wish to consult with an Issue Internally raffles, gambling activities, status), the IRS’s 501(c)(3) attorney before doing so, to Concerned parties should etc.) should be reported to determination letter, and better understand the consider trying to raise the Maine State Police at the IRS Form 990 for the implications for them, the matters directly. The (207) 624-7210. three most recent years. organization, and any other Executive Director or Board These documents can be individuals involved in the President may be the most requested from the IRS suspected wrongdoing. The Federal Tax Law appropriate person to (usually for free, see IRS process for reporting a Violations approach, but any trusted Form 4506-A). Form 990s complaint depends on the If someone suspects board member or leadership are available on Guidestar type of misconduct one violation of federal tax laws, team member can be a good (www.guidestar.org) for free if suspects: such as unreasonable starting place. It is a good you register. More details on compensation, excess idea to request a private these federal disclosure Inappropriate Charitable benefit transactions (i.e., meeting and come prepared requirements can be found Solicitation transactions in which an with specific concerns and in IRS Publication 557, pages If someone believes the insider derives an undue any evidence that has been 13-15. In general the organization has violated the benefit), or excessive gathered. Those raising the disclosed information public trust in relation to lobbying or campaign issues should be clear that includes: the names and charitable solicitations activities, they can submit a they are doing so because address (can be work (activities related to asking report to the Internal they wish to see them addresses or simply the the public for money, selling Revenue Service (IRS) at resolved rather than because address of organization) of products, using the charity’s www.irs.gov/charities/ they are seeking to place the organization’s officers name to entice sales) they article/0,,id=131651,00.html. blame. Staff or board and directors; the names can submit a complaint to members should be sure to and compensation levels of the Maine Department of be familiar with any the top five employees paid Professional and Financial Share Your Experience organizational policies and more than $100,000 Regulation, Office of There are a number of procedures regarding the annually; gross income for Professional And charity and business submission of complaints the year; dues received from Occupational Regulation at watchdog organizations that and/or whistleblower members; expenses; the www.maine.gov/pfr/ allow members of the public protection. organization’s balance sheet; professionallicensing/ to submit comments about and total contributions, complaint_form.htm (under organizations, such as: including gifts, grants, and Seek a Change in licensing board, choose government contracts. Leadership “charitable solicitations”). GuideStar: However, for reasons of A common complaint in the www.guidestar.org/rxg/give-to privacy, charities are not nonprofit world involves an Violations of the Maine -charity/review-a-charity.aspx required to publicly disclose Executive Director or Board Nonprofit Corporation Act the attachment to the 990 President who is If someone suspects that includes an itemized list Better Business Bureau mismanaging the violations of the Maine of all contributions of over Wise Giving Alliance: organization, whether or not Nonprofit Corporation Act $5,000, or any trade secrets. www.bbb.org/us/Charity- fraud or misconduct is (Title 13-B M.R.S.) they can suspected. Board directors submit a complaint to the Complaints/ and organizational members Maine Attorney General’s have certain rights under Consumer Protection Charity Navigator: most bylaws and under the Division at www.maine.gov/ www.charitynavigator.org/ Maine Nonprofit Corporation ag/consumer/complaints/ (registered users may submit Act that can be effective in index.shtml. Common reviews) forcing leadership change, concerns include such as calling a special mismanagement of funds, 36

www.NonprofitMaine.org Index

Numbers Cynthia Savage, 501(c)(3)s, 5, 36 Indexer A [email protected] accountability, 3, 6, 7, 9–10 Accountable Plan standards, 25 accounting practices, 5, 24 advocacy, 7, 15–16 alliances. See strategic alliances American Evaluation Association, 18 annual budget, 13, 20, 25 annual reports, 9–10, 32, 35 annual Resource Development Plan, 30 anti-kickback laws, 22 anti-trust laws, 22 Articles of Incorporation, 13, 19, 35 assets, 17, 23, 24 Association of Fundraising Professionals, 30 auctioneering, 29 audits, 25

B background checks, 27–28 Basic Infrastructure Checklist, 4, 5, 23, 27, 28 bequests, 25 Better Business Bureau Wise Giving Alliance, 36 bidding systems, 25 boards, 7, 11–14, 32, 36 brand identity, 31 budget, 13, 20, 25 bylaws, 11–12, 13, 35

C CAN-SPAM Act, 31 capacity to achieve mission, 3 cash flow, 25 Certified Public Accountants (CPAs), 25 charitable organizations, licensing and reporting requirements for, 23 charitable solicitation, 29 Charity Navigator, 36 chief executives boards and, 7, 11, 12, 13, 14 compensation and, 11, 13 financial obligations of, 25 responsibilities of, 14 Code of Ethical Online Philanthropic Practices, 30 Code of Ethical Principles and Standards of Professional Practice, 30 Codes of Ethics, 10 committees, boards and, 12 communications, 8, 20, 31–32 community needs and asset evaluation, 17 compensation practices, 11, 12, 13, 27 confidentiality, 10, 33 conflict-of-interest policies, 13, 25, 28 consolidations, 21 constituents, 15, 18, 19, 21

37

Guiding Principles + Practices for Nonprofit Excellence in Maine © 2012 copyright requirements, 32 credit cards, 23, 25, 26, 33 cultural sensitivity and evaluation practices, 17

D data collection practices, 18 depreciation, 25 disaster planning, 20, 34 document retention and destruction policy, 9, 33 documenting meetings and actions, boards and, 13 Donor Bill of Rights, 30 donors, 29, 30 duty of care, 11 duty of loyalty, 11

E earned income development, 30 education programs (MANP), 5 electioneering, 15 employees. See human resources employment practices, 13, 22, 27–28. See also human resources ePhilanthropy, 30 equal opportunity statement, 27 evaluation practices, 7, 17–18 expenses and financial management, 25–26

F federal income tax, 27 federal law, 3, 4, 6, 9 federal tax law, joint venture arrangements and, 22 federal tax law violations, 36 fees and services, 10 Financial Accounting Standards Board (FASB), 24, 25 financial management, 8, 23–26 financial misconduct, 23 financial reports, 10, 13, 24–25 financial reserves, 25 financially interested persons, 11 fiscal and governance policies, 12 fiscal sponsorship, 21 Form 990 board review of, 13 document retention and destruction policy, 9 expense reimbursement policy and, 26 federal disclosure requirements, 36 fiscal oversight and, 23–24 as public information, 32 reporting material changes, 19 strategic alliances and, 22 Form 1023, 9, 36 Form 4056-A, 36 fraud, 5, 35–36 fund development, 8, 12–13, 20, 29–30, 35

G gaming, 29, 36 generally accepted accounting practices (GAAP), 24 38

www.NonprofitMaine.org Index

gifts, 29–30 governance, 3, 7, 11–14 governing bodies. See boards government entities and strategic alliances, 21 Governmental Accounting Standards Board (GASB), 24 grants, 29 grievance procedures, 17 Guide for Board Members of Charitable Corporations (Maine Attorney General), 35 GuideStar, 36 Guiding Principles + Practices for Nonprofit Excellence in Maine (MANP), 3, 4, 5, 6 Guiding Principles + Practices: Organizational Self-Assessment Workbook (MANP), 5 Guiding Principles for Evaluators (American Evaluation Association), 18 guiding principles overview, 7

H harassment prevention policy, 27 human resources, 8, 26, 27–28. See also employment practices

I income tax, 27 independent contractors, 27, 29 industry standards, 3, 10 information systems, 33, 34 in-kind donations, 29 insurances, 13, 27, 28 Internal Revenue Code (IRC), 4, 15 Internal Revenue Service (IRS), 6, 25, 36. See also individual IRS forms and publications investment policy, 26

J job descriptions, 12, 28 joint ventures, 21

L leadership, 7, 10, 11–14 legally required practices evaluation, 17 financial management, 23–24 governance + leadership, 11–12 marketing + communications, 31 public benefit + accountability, 9 public policy + advocacy, 15 resource + fund development, 29 staff + volunteer management, 27–28 strategic + operational planning, 19 strategic alliances, 21 technology, 33 licensing requirements, 22 litigation coverage for employment practices, 13 lobbying activities, boards and, 15

M Maine Association of Nonprofits (MANP), 4, 5, 6, 35, 38 Maine Attorney General, 6, 35, 36 Maine Basic Infrastructure Checklist. See Basic Infrastructure Checklist Maine Bureau of Corporations, 35 39

Guiding Principles + Practices for Nonprofit Excellence in Maine © 2012 Maine Charitable Solicitations Act, 29 Maine Community Foundation, 4 Maine Department of Labor, 6, 27 Maine Department of Professional and Financial Regulation, 6, 29, 36 Maine income tax, 27 Maine law, 3, 4, 6, 9, 11 Maine Nonprofit Corporation Act, 11, 36 Maine sales and use tax, 26 Maine Secretary of State, 9, 19 Maine Secretary of State Bureau of Corporations, 6 Maine State Department of Professional and Financial Regulation, 23 Maine State Police, 36 Maine unemployment tax, 27 Maine Uniform Prudent Management of Institutional Funds Act, 23 Maine's Charitable Solicitations Act, 35 MANP. See Maine Association of Nonprofits marketing, 8, 26, 31–32 member benefits Maine Association of Nonprofits (MANP), 5 mergers, 21 misconduct, 5, 35–36 mission, 3, 5, 7, 19 musts, definition of, 4

N national associations and strategic alliances, 21 nondiscrimination, 10 nonprofit organizations.See nonprofits nonprofits annual reports, 9–10, 32, 35 contact information, requirements for, 9 definitions of terms, 4 ethical obligations of, 7, 9 legal requirements, 5 special abilities of, 7 standards for, 4 unique role in community, 9

O Office of Management and Budget (OMB), 24 Office of Professional and Occupational Regulation, 35, 36 online resource library (MANP), 3 operational planning, 7, 19–20 organizational self-assessment, 5

P partnerships, 21 patient choice requirements, 22 Payment Card Industry Data Security Standards (PCI DSS), 26, 33 performance measures, 9, 17–18 personnel policies. See human resources planned gifts, 25 planning. See strategic planning pledges, 25 policies, boards and, 11, 12 political activity, boards and, 15 practices, definition of, 4, 5 practices of excellence

40

www.NonprofitMaine.org Index

evaluation, 17–18 financial management, 24–26 governance + leadership, 12–14 marketing + communications, 31–32 nonprofit boards, 12–14 nonprofit chief executives, 14 public benefit + accountability, 9–10 public policy + advocacy, 15–16 resource + fund development, 29–30 staff + volunteer management, 28 strategic + operational planning, 19–20 strategic alliances, 21–22 technology, 33–34 principles, definition of, 4, 5 private foundations, 4 pro bono legal assistance, 5 public benefit, 7, 9–10 public policy, 7, 15–16 public support test, 23 Publication 557 (IRS), 36 Publication 1771 (IRS), 29

Q quorums, 12

R raffles, 29, 36 record keeping. See document retention and destruction policy recovery plans for technology, 34 recruitment and selection of board members, 12 regional associations and strategic alliances, 21 representation of community, board members and, 12 resource development, 8, 29–30 resource library (MANP), 5 risk assessment, boards and, 13 risk management, 5, 20, 28, 32

S salary structure and board approval, 11 sales tax exemptions, 26 security policies and technology, 33–34 shoulds, definition of, 4 social media, 31, 32, 33, 34 Social Security payroll taxes, 23 staff management, 5, 8, 27–28 stakeholders, 17, 19 State Department of Professional and Financial Regulation, 23 State of Maine Annual Report, 35 strategic alliances, 7–8, 21–22 strategic planning board members and, 12, 13 definition, 7, 19–20 evaluation practices and, 17, 18 Guiding Principles + Practices for Nonprofit Excellence in Maine, 5, 20 marketing and, 31 technology and, 19, 20, 21, 33

41

Guiding Principles + Practices for Nonprofit Excellence in Maine © 2012 written plan, 20 succession planning, 20

T tax exemption, 4 tax law violations, 36 taxes, federal, 23 technology board members and, 33 communications and, 32 costs, 25 practices of excellence, 8, 33–34 strategic planning and, 19, 20, 21, 33 trademark requirements, 32 transparency, 4, 7, 9, 24, 31 travel expenses, 25–26

U unrelated business income tax (UBIT), 22

V value statements, 19 vision statements, 19 volunteers, 8, 12, 27–28

W watchdog organizations Better Business Bureau Wise Giving Alliance, 36 Charity Navigator, 36 GuideStar, 36 websites content recommendations for nonprofits, 33, 34 Internal Revenue Service (IRS), 6 Maine Association of Nonprofits (MANP), 35 Maine Attorney General, 6 Maine Department of Labor, 6 Maine Department of Professional and Financial Regulation, 6 Maine Secretary of State Bureau of Corporations, 6 whistleblower policies and procedures, 24, 27, 35, 36 Workers Compensation Insurance, 27 working conditions, 27

42

www.NonprofitMaine.org Acknowledgements The Maine Association of Chris Amann Jennifer Hutchins Peter Taylor Nonprofits would like to express its deep gratitude for the support and Liz Ashe Lisa Jepson Emily Trescot contributions of other state Wahlstrom associations in the Kevin Baack Ruth Vinal development and Meredith Jones enhancement of these Marya Baron Jeff Wahlstrom documents and tools. Anna Kent Michael Barndollar Deb Whitworth Guiding Principles + Practices Jodie Lapchick for Nonprofit Excellence in Cheryl Bascomb Doug Woodbury Maine © 2012 Maine Marjorie Love Association of Nonprofits is Suzanne Benoit Laura Young adapted with permission Principles and Practices Robert Levin from for Nonprofit Excellence in Tim Blair

Colorado © 2010 Colorado Carole Martin Bob Brown Nonprofit Association, Principles and Practices for Garrett Martin Nonprofit Excellence in Montana Kelly Cannon © 2008 Montana Nonprofit Peter Montano Principles and Association, Catherine Practices for Nonprofit Carabetta Jessica Noonan Excellence in Michigan © 2005 Michigan Nonprofit Craig Burgess Marianne Pinkham Association, and originally, Principles and Practices for

Nonprofit Excellence© 2005 Leonard M. Cole Ellen Pope Minnesota Council of Nonprofits. All rights Joanne Cathy Ramsdell reserved by their respective D’Arcangelo copyright holders. David Rappoport Tom Davis MANP also extends our Jane Richmond

appreciation to the many Carla Dickstein individuals and Dick Roderick organizations that contributed to the Cathy Fellenz development of the Guiding Cynthia Savage Principles + Practices for Peter Fellenz

Nonprofit Excellence in Maine Chad Sclove since its original publication. Gary Friedmann

All contributors are listed Greg Shea here, with those who helped Peter Gartland with this fourth edition Gary Stern bolded. Lesley Heiser Mark Swann Matt Holbrook 43

Guiding Principles + Practices for Nonprofit Excellence in Maine © 2012 About MANP

Mainers count on nonprofits and Maine nonprofits count on the Maine Association of Nonprofits (MANP). Since 1994, MANP has grown to be the state’s comprehensive resource for the tools, knowledge, and connections nonprofits need to be effective and well-run.

MANP is the voice of Maine’s nonprofit sector and convenes funders, government, and businesses to shape responses to pressing issues and opportunities facing Maine.

MANP provides nonprofit executives, staff, board members and volunteers with:

 Answers to nonprofit management questions;

 Workshops and in-depth leadership training;

 Connections to the statewide nonprofit community and updates on national trends;

 Data on the economic and social significance of the Maine nonprofit sector;

 Advocacy on issues and policies important to all nonprofits;

 Best practice standards, organizational assessment tools, MANP guidebooks and other recommended resources; and

 A high traffic job board for posting and finding jobs in the Maine’s nonprofit community.

To learn more about MANP, contact us at 207-871-1885 or visit us at www.NonprofitMaine.org. 44

www.NonprofitMaine.org www.NonprofitMaine.org