 Welcome. Happy Monday. We're so glad you're here for another episode of the non-profit show. Today we have with us Wendy Anderson. Wendy's an attorney and is going to get super nerdy with us as she talks to us about the top policies non-profits need to adopt. So Wendy, before we jump into this conversation with you, we want to make sure that our viewers and our listeners know who they're looking at or listening to. So Julia Patrick is here with me, of course. She's the CEO of the American Non-profit Academy. I don't know where I would be without you, Julia, and having this conversation each and every day. I'm honored to serve alongside you as your co-host. I'm Jarrett Ransom, the non-profit nerd, CEO of the Raven Group. And we are, you know, we keep saying that we're marching towards our 600 and we are, we haven't marked as this like August the 5th or something. So it's coming up soon. But we really have to say thank you to our presenting sponsors that keep the airwaves open and conversations like the one we're going to have today with Wendy. So I want to give a shout out to Bloomerang, American Non-profit Academy, fundraising academy, non-profit nerd, your part-time controller, staffing boutique, and non-profit thought leader. If you haven't checked these companies out, please make sure you do it. I want to remind you that it's best to do it in about 28 and a half minutes, not quite yet because we're going to have a fantastic conversation with our guest. But if you missed any of our episodes, you can find them. Don't you worry on Roku, Fire TV, YouTube, Bimeo, as well as podcasts. So if you're a podcast listener like I am, you can certainly tune in the non-profit show and listen to us if you're working out, driving, exercising, whatever that might look like. So again, we're just so thrilled to have these conversations each and every day. It has certainly grown my purview of the world and the sector. So today, as we talk about policies with an attorney, I'm really excited to have you on, Wendy. And I just want to say welcome. Thank you for being here with us. And yeah, just thrilled to have you here in the hot seat. So thanks for joining us, Wendy. Oh, good morning. I'm so glad to be here today. Yeah, we are thrilled to have you. So tell us a little bit about Law Office of Wendy Anderson. You are Wendy Anderson. So just so thrilled to have you sharing your valuable time and expertise with us. What type of law do you practice? I practice all types of business law. So I work with small business owners on everything related to their business and related to any employment practices. So helping to sort of make sure that everybody's workings behind the scene are in order so that my clients can focus on what they do best, which is their expertise, their business, and they don't have to worry about sort of that back-end stuff because they know it's taken care of. Perfect. You know, one of the things Julie and I both have said with another attorney on and it's been been quite a while is, you know, you're not going to a podiatrist to check out your hearing. And so it's really important to know what type of law firm to seek out and legal advice to seek out. So your business background in this and you helping with policies for nonprofits, you know, again, I just want to remind everyone nonprofits are a business. So if you've not looked at them that way, I'm going to say shame on you. I'm just going to throw it out there boldly and say shame on you because nonprofits are a business. They're tax executives, exempt status. So thanks, Wendy, for all that you do. Sure. So Wendy, I love that we can find somebody like you to answer some of these questions. And first of all, what is a policy? A policy really is simply generally a written document. I suppose it doesn't have to be written, but but having something written down clearly makes it so that everybody who's involved will understand what it is you are seeking to do. And policies can exist related to everything in your business. And it's really letting everybody know, here's how we do things. There's a right way of doing things, and that's how we're going to do them. And we're not going to do things that don't fit within this. And that really makes it so that everybody involved in the business, whether it's a board member, an officer, an employee, a volunteer, a contractor, or a donor, right, really understands how does this company run? How does this nonprofit run? What do we believe in? How do we do things? How do we document things? And how do we make sure that we are doing everything properly so that we don't jeopardize our tax exam status? Because that really is the goal, right? We've got to remain tax exempt. So we have to have these policies to make sure that we're doing things right so that we don't jeopardize that. Yeah. Can I ask you this question? When we have a policy, is it is it a best practice or is it imperative that we have our board members and officers sign that or endorse it in such a way? Or is that really overkill? What's your philosophy on that? My philosophy as an attorney always looking at minimizing the risk down the road is that if you have a policy and a group of people, whether it's the officers or the board in total, have agreed on something, put it in writing and sign it. Okay. Thanks. And I don't know that every board member has to sign it, but if you have a resolution, a board resolution that says the board met on this date and we agreed unanimously to this policy or to this document, then it's right there and we know and then everybody in the organization knows we're serious about this. You need to read this, you need to follow it. Okay. One more follow-up question to that, is a policy the same as a guideline? Because I hear that word being bandied about more and more and I'm curious, it seems to me like policy would be higher up on the hierarchy and that a guideline is... You know, there are two different words that probably refer to similar things, but to me, a policy would be something that is more ingrained in the organization whereas a guideline is, here's how you should do it. Yeah. We're doing it this way. I do see it as a little higher on the hierarchy, Julia. Thank you. I do too. I see it as like it's just a little bit more hefty, you know, because I hear around the board table all the time, well, what do our bylaws say, right? Or do we have a policy for that? So really kind of going back and forth. When I hear guideline, I think recipe because I myself, you know, I'm not a baker and that's because you have, I would say baking is more of a policy whereas a recipe for cooking is a guideline. Yeah, I agree. That's, I mean, that's the way I interpret it. I also feel like guideline is almost like a best practice, you know, that maybe it could be somewhat of a trend, right? Yeah. You know, it's kind of... Thank you, Wendy. I appreciate you bringing this forward because... I do too. Yeah. Well, let's talk about some of these policies that are prudent because I have to just witness to you, Wendy, and everyone who's watching and listening, right? I've been around the block long enough to know that so many board of directors and organizations, you know, they kind of are just like policy schmolicy and they don't really have, you know, a set policy or they don't revise them and revisit them on a certain cadence and I'm curious what that is. So what are these policies that we really need to like focus in on? Sure. Well, there are a few policies that every non-profit regardless of size, regardless of your annual income and your donor base that you really need to have and that's for IRS compliance. The first one, I don't believe you can get your tax exam status without telling them and showing them that you have a conflict of interest policy. The conflict of interest policy is something that the board members and the officers would sign individually saying, I will not sell something, I will not or I will not put something forward to the organization that I personally have a financial stake in. The board does not want to hire a company to manage an event that one of the board members owns without perhaps full disclosure, without perhaps that board member not voting on the decision, things like that. There are ways to do things, but you need a policy to determine how you're going to do things if you are looking at the non-profit spending its money with an entity that is owned or co-owned or managed by one of your officers or one of your directors. That's probably one of the most important things that the IRS wants to see that you have the policy and that you don't do any of that self-dealing as it's called. Yeah, I love that you bring that up and I have to say that is probably to me one of the most important ones. I know they're all really important, but the conflict of interest because the board members, we want to do business with people that we know, we like and we trust, but we also have an honor to do diligence with the mission. For me, anytime that opportunity arises, whether it's for marketing purposes, whether it's for HR services, whatever it might be, have we done our due diligence to get other requests for proposals to really take a look at apples to apples? Then you're right, Wendy, that board member, if this is a voting decision upon the board, that board member would have to recuse themselves so that they're not impacting the yay or the nay of that conversation. It's not that the entity can't decide to do business with that board member's company. They simply may have to show and prove to the IRS afterwards that, yes, they did have a fair process. They did solicit other bids for the same thing and that this truly was the best decision for the nonprofit regardless of how it impacted the board member. So having that in your written policy and having that signed by all of your board members and officers, that is critical. It is a personal pledge on everybody's part that they will not do that and harm the nonprofit at some point. Wendy, is this something that is executed when somebody is voted on to the board or should this be executed annually? Is it like a one-time for tenure or is it every year? The policy is sort of a one-time policy and everybody should sign it when it's adopted. New board members, new officers should sign it when they come on as a requirement and I say that the board can use its judgment as to when that policy should be reviewed. Take a look at it on an annual basis. It doesn't mean it needs to change at all. It's somewhat top of mind. Somebody, maybe the secretary of the organization sets a reminder annually to just read these policies, bring it up to the chairman of the board or the board in total and say are we good with all of these policies or do we need to change something? Talk to us a little bit about, I've been hearing more and more about this, about the whistleblower policy as it relates to accounting and I've got to say I probably haven't been hearing about this even for smaller organizations until like maybe the last 24, 36 months. Can you talk to us about that a little bit? Well, a whistleblower policy is something that I believe the IRS asks for that on your annual 990 and so you need to check the box that you have one of these and basically what that policy does is it encourages your staff and your volunteers to come forward if they witness or suspect an impropriety and illegality, somebody violating one of the policies and to tell the organization about that and the policy also protects that person from retaliation. A non-profit cannot take the risk that somebody is accounting improperly and not doing what they're supposed to do. I'm not an account and I don't know exactly how this is done but obviously there is a way to do it for non-profits that varies greatly from for-profit companies and as a non-profit you need to make sure that your books are reflective accurately of what you bring in, where you're spending it, how you're spending it and just everything. All of the financials need to be tracked carefully and if somebody believes that that accounting is not happening properly and they come forward with that, they need to be protected from saying something. So it's important to have that policy. First of all the IRS, you're going to have to have it, you're going to have to adopt it but you really need to live by it and you need to let your people know regardless of what level they are in the organization that if they see something wrong they need to report it, that it's very important and they will not be retaliated against. Yeah so I want to ask this curveball question, Wendy, is how much of this policy writing, creation, adoption can we do on our own and how much do we need to seek that legal support and advice on? Now I know you're an attorney so I don't mean to pull business away from you but really just to bring in the reality of this is when you engage with an attorney and this is maybe that best practice or what we need to do because Julia sent me an article not long ago about like 75 nonprofits that were using the same PO box that they were not a legit organization and that was just like shocking to me right like I don't know why it's so shocking but it's still pretty shocking. So when do we engage with an attorney? I think it depends right the legal answer to everything in my experience but I would say engaging with an attorney as you are starting your nonprofit to make sure that you set up correctly because that's the key if you don't set up correctly you will not get approved for your tax exam status so starting off correctly with your state registration whether to secretary of state or corporation commission whoever it is that's critical you don't need the attorney to necessarily do it for you if you have somebody in your organization that is able to do it some organizations do others don't they're like I raise funds I put on events I don't do legal documents right so just depending on who you have available you might be able to do that yourself but then also looking at these various policies and how you're going to do things you want to make sure that you are complying with the law and you are doing everything possible whether it's legal or not to keep you out of trouble right because there are policies that I recommend to my clients to adopt that are not anything that they're legally required to do not legally required to have a policy for your volunteers but I recommend you do. Yeah I was going to ask what are some of those policies? Some of those that aren't necessarily required would be certain employment policies although you are certainly subject to state and federal employment laws but not all of my clients put together a policy manual and for some of them that's fine and for others it causes a problem later on so as a nonprofit you have employees likely put together some policies for that but you're not required to you're not required to have policies for your volunteers you're not required to have a policy as to how you invest the nonprofits money right if you get two million dollars in donations you invested however you want whatever your donors are happy with having a written policy that you are going to improve invest that money prudently and according to a sort of the uniform standards is something that's going to make your bigger donors comfortable having that kind of policy you don't have to but it's great having a policy about travel and expenses right what gets reimbursed what doesn't get reimbursed policies for your fundraisers they have fundraisers that some may be employees some may be contractors but whatever they are and some may be volunteers you want them to follow certain guidelines as to how you raise money what's the documentation that you give to your donors is there a donor agreement you give them is there what sort of receipt what sort of information will you tell them how you're going to spend their donation or is it your policy not to do that and and they give money and you spend it how the organization sees best so putting these things down early on you don't have to do all of this before you're formed you know you you need the conflict of interest policy you probably need your whistleblower policy and you need a document retention policy for the IRS those are the three that are really really required the other ones you can work on as your board solidifies and as you get to know each other and you realize where are we in our life cycle do we need an investment policy or are we not there yet right too small we're not investing our money we're simply spending it prudently what is that retention policy i'm sorry jarrett no go ahead the retention policy yeah could you talk to us about that a little sure a document retention policy is a document that would a document talking about your documents and how long you keep them so as a nonprofit and as a business you have all sorts of documents you have the whole set of documents when you form your entity with your state uh corporation or secretary of state um organization you've got obviously your 1023 application and all your 990s those you need to keep forever right then you have things that you keep for seven or 10 years whatever it is um employment documents investment information and there's there's just a whole list of documents that I talked to my clients about and how long you should keep each of those but the IRS is going to want to know that you are you have a policy about this so that oh all of a sudden you're you're doing spring cleaning in the office the volunteer you gave to do that box doesn't spread your tax returns for the last 10 years that's right good advice one other thing that jarrett and I talked a lot about with a certain number of our guests those that are working in healthcare science um you know even um basically human services and that those are the HIPAA laws should that become part of the policy you know cash so to speak or is that something different yes um that's definitely something that should be in there and that's sort of in the the whole group of confidentiality okay so is is one of those policies that again is not necessarily required but is really a good idea and it's confidentiality for everything so yes if you have medical records of any sort fine but in any nonprofit you are likely to have in fact I almost guarantee you are going to have at least one donor's name address email address and phone number and that right there they're personally identifiable information name and address is confidential and you're going to have a lot more information than that at some point when they get up and going so confidentiality for all employees for all volunteers for your board members and if it needs to include HIPAA requirements because you've got some sort of medical information then absolutely that goes in there as well and that's very important for every organization you know what are the legal risk Wendy when we you know we talk about the policies that the IRS require you know with startup but then as we continue our organization and then really those policies that are prudent you know anytime I talk to an attorney I'm always like what is the legal risk in that so talk to us about you know kind of that if we don't dot our eyes and cross our t's what we're you know facing sure well the the primary thing with a nonprofit is that the IRS will come calling and saying we're questioning this and that I can almost guarantee nobody wants that call right no so anything that you can do to avoid that which is have these policies but live by them if there's a whistleblower complaint investigate it if there's any other sort of issue or problem going on do not sweep them under the rug address them right away and some of those may require a call to an attorney to say hey we've gotten um a complaint from an employee about a discrimination matter or a harassment matter and as much as you try to do as the leader of an organization you just can't control everybody who's down the ladder and something may happen and you you you just have to do something about it and you have to address it and you have to take care of it um right away that's probably the biggest risk is to avoid problems when they come up or suspected problems you may see something and you may say I'm not really sure I like how that's happening but I don't want to deal with it yeah and and that's when it's going to become a big deal and then when you have some sort of a complaint from a person whether it's to you or whether it's to um a governmental entity you know a state entity uh an industrial commission or the EEOC that's at the point that it's gone much further than it should have hopefully you would have nipped it before then and taken care of it and addressed it yeah so that's one of the big things is just don't don't ignore things that come up you know I just have to add and Julia you've probably heard this multiple times but when I come in and serve as a professional interim executive whether it's a COO CEO or chief development officer you know Wendy I see so many leaders um you know staff members as well as board members that have become complacent over their policies are complacent over how engaged they are in conversations and like you said kind of like sweeping it under the rug so I come in and I do an assessment and I my eyes start to get a little bit bigger and bigger and bigger right I document you know really just my observations where I'm seeing some gaps and some you know some some weakness in the foundation like the actual you know base if you will and um to me I feel that whenever there is a change in leadership that's often when we start to identify uh oh I don't think we've done our due diligence the best possibly could so better understanding these legal risk how best to you know address these policies um because I really I you know I want to drive home that you know being a board member is a privilege and it's a very large risk it is a big commitment I don't want to scare people from being of service in this way because it's such a a great thing that you do for our community but we have to take this seriously in these policies this conversation that you're you're bringing us today Wendy is so very important good thank you thank you yeah yeah it it just really is Julia I know you've served on many boards um I typically say thanks but no thank you because it's a conflict of interest you know but really looking at what are some of the things that you've seen Julia by way of policies or you know neglecting policies or adopting policies how can you speak to this from the board member sign yeah I mean I would say in 30 years of board service and I continue to serve on boards right now it seems to me and Wendy I you know maybe this is just human nature but it seems like we don't look at these until there's been a problem yeah and then we're like oh my gosh holy moly you know you should have had this and so um I recently we had I had a conversation with somebody and their advice was which I thought was brilliant and I had not thought of this was that every December or the month before your year turns gather all those policies together have them re-executed or have them re-discussed so that you are set for this upcoming year and that everybody's you know on the same page um even if it's just a refresher so that we so the organization knows that they're marching along because yeah it is it's such a problematic issue with the board members understanding that ultimately if a policy is not followed or that you didn't have it it comes back to the fiduciary responsibility of those board members and one of the most important things is is that the board members are not there day to day right their job is decision making a direction of the organization and maybe setting these high level policies the the employees that are there day to day are doing things the way hopefully they believe they should be done and hopefully doing them in a competent way but you've got things especially when you're dealing with the organization's finances you may have an employee who thinks I'm doing this correctly but really they're doing it in a way that may be risky and and it's something that the board should look at and say you know what as a board we should have you know a policy that two people sign every check we have a policy that we have maybe a few different bank accounts for different purposes so that we're not commingling different types of money and and those may be things that a board in general is saying that's that's day to day management for the officers but maybe there's some things like that especially when it comes to finances which is that that's the brand but are obviously of a nonprofit you don't want to get in trouble with the finances because then then you've really got an issue to deal with and so looking at those yes every December or once a year and maybe having the board members get a little into the nitty-gritty is not a bad idea I love that suggestion thanks Julia for for bringing it up you know I I have a feeling that we're going to have a lot of people going uh-oh what a what a we need to take a look at so Wendy Anderson thank you for joining us today with Wendy Anderson law or the law office of Wendy Anderson I apologize I'm so thrilled to have you here again you know your valuable time and expertise you know Julia and I again we I just have to bring it up we talk about this all the time right it's like you don't go to a podiatrist to check your hearing and so make sure that you are seeking your nonprofit business guidance from a you know an attorney a professional that is really focused in on this sector because there are some nuances and I think really important to know that you know often when we look at a board matrix and I know you've seen this too Julia there's always space for an attorney every board member wants to or every board I should say wants to have an attorney so it's really important to have you know the right representation there so thank you so much those of you that want to check out Wendy and find out a little bit more about policies that might be prudent for your nonprofit WendyAndersonLaw.com check out check her out and if you want to give her a call I know she would welcome your conversation thank you so much for having me yes you know it's been wonderful again I'm Julia Patrick been joined today by Jarrett Ransom the nonprofit nerd herself we make sure we thank all of our presenting sponsors from Bloomerang American nonprofit academy your part-time controller nonprofit nerd fundraising academy staffing boutique and nonprofit thought leader these are the folks that come to us day in and day out with these amazing conversations like we've had today with Wendy as we end all of our episodes we want to make sure that we say as we do every day stay well so you can do well thanks so much