This article focuses on external audits performed by an independent third party. The most likely scenario where the law will require your organization to undergo an external, third-party audit is a state’s charitable solicitation registration law. Read on to find out what this means and how it might affect your organization.

While many nonprofits and businesses frequently hire with minimal contracts, or none at all, nonprofits should consider using written contracts for employees and independent contractors as soon as they have the resources to do so. Generally, written contracts can set boundaries, establish rules, clarify expectations, and protect confidential information. The existence of written contracts can prevent several types of harm to nonprofit organizations, from employment misunderstandings to, in the worst case, litigation). This whitepaper walks your organization through the basics.

Many nonprofits seek to fund their organization through charitable solicitation (seeking and receiving donations), but the legal consequences of fundraising can get confusing when an organization is receiving funds from different states with different laws governing charitable solicitation. Charitable solicitation registration requirements are how states regulate nonprofits’ fundraising and protect their citizens from swindlers. Basically, this means that to fundraise in a state, a nonprofit is often required to fill out an application or registration and be approved to solicit or receive funds within that state. Nonprofits must ensure the organization is following the laws in each state where they solicit or receive funds.

The danger of noncompliance is revealed in a recent federal Tax Court case called XC Foundation v. Commissioner, which presents a cautionary tale for nonprofit organizations. When an organization fails to do something as basic as remain in good standing in its state of incorporation, the consequences can be as severe as losing its ability to have standing in court, even losing its right to exist.

The Fair Labor Standards Act is a federal law requiring that employees be compensated at least the minimum wage of $7.25 per hour worked and that employees receive overtime pay of at least 1.5x their normal hourly pay if they work more than forty hours in any given week. There are six categories of employees who are exempt from these requirements. For any employees that fall into at least one of these categories, their employers do not have to pay them minimum wage or overtime pay. This whitepaper walks through the components of each of the six exemptions and what they mean for your nonprofit organization.