Legal compliance is not fun and is too often ignored until after a problem arises. You can prevent problems and protect your organization by doing a regular legal audit.
There are several steps in a legal audit. The first is to gather information, including a wide range of documents, such as articles of incorporation, bylaws, minutes of directors meetings, the most recently filed 990 or Attorney General Report, and employment contracts.
The next steps is to ask questions and review these documents. For example: Do the Articles of Incorporation and form 990 accurately reflect the organization’s mission? If not, you should amend the articles and, if necessary, file an amended form 990. At the least, make sure the next 990 reflects the changes. The review would include leases, insurance policies, and policies such as conflict of interest, document retention and whistleblower policies. It should also include a review of documentation to make sure your paid CEO’s salary is reasonable compared to similarly situated organizations.
The final step is to report back to the Board of Directors any recommendations you learn from the audit. You won’t protect yourself unless you take corrective action on any problem areas that you find.
As a final incentive, remember that it is much cheaper to prevent a problem than it is to solve one after the fact. Investing some time, even if just 1-2 hours, (and money if done by an outside adviser) in a legal audit can head off problems and allow you to focus on your mission. Call us if we can assist you.
