Public Disclosure: Figuring Out What Documents To Make Available

Ironically, while politicians focus on what some nonprofits won’t share there are still tons of organizations struggling with what to share. In fact,  “what do I need to disclose to the public” is a question that, at least for me, comes up pretty often.

But disclosure is a tough topic. Primarily because there are so many different facets.  There are those active disclosures organizations must make (for example whether or not a donation is deductible).  Then there are the more passive disclosures such as what documents to make available to the public.  A few organizations have been asking about what to make available so that’s what I’ll talk about this time.

Thinking Through Public Disclosure And Availability

There are a few things to think through with availability:

  • How you ensure availability is just as important as what you make available.  Thought must not only be given to the documents, but the processes that allow for availability of those documents as well. Are your processes are transparent and succession proof? Has attention been paid to how documents are tracked, when they are updated and the vehicles used to make them available?  Availability becomes harder if your financials are kept in the Treasurer’s office, subject to getting lost or shuffled in with other papers, or  your 990’s are kept solely on a website that only the ED has a password to. 

  • Different federal, state and local entities require different types of availability.  To begin determining what your organization’s obligations are,  take a step back and think about what  jurisdictions it falls under  (i.e. who you report to).  As a foundation or charitable organization the IRS would be one. And as luck would have it,  the  IRS does have certain rules on availability. These require copies of annual returns, applications for exemption (including supporting documents) and letters sent from the IRS to be kept and made available (upon request) within certain periods of time. But note, the IRS also defers heavily to state requirements and these can differ greatly.  If you’re a charitable organization in Texas, in addition to the IRS requirements there are certain books and records that you have to make available at specific sites regardless of whether not someone asks for them. There can also be “industry” requirements. For example, those organizations in an industry dealing with health or financial information may be subject to certain federal statutes that have their own availability requirements.

  • Requirements may differ based upon the audience. What must be made available to members, where an organization is governed by members, could differ greatly from what the organization must make available to potential donors or other individuals outside the organization.

  • There’s a difference between legal obligation and industry expectation. It can become easy for organizations to confuse the two. There are documents that organizations are legally obligated to make available and there are those documents that groups and donors may “encourage” be made available. For example, the IRS largely defers to the states when it comes to the availability of bylaws (the only exception to this might be where someone is asking to view an exemption application and the bylaws constitute as “supporting documentation”). That means if the state(s) you operate in don’t require bylaws to be made publicly available then there may not be a legal obligation. But with so many rating sites, and watchdog groups, asking organizations to post a copy on profiles and websites you may feel slightly “encouraged” to do so. That, however, doesn’t make it a requirement. 

  •  Keep availability obligations in mind when developing policies. If the organization is required to make certain documents available, keep these obligations in mind when drafting policies.  Especially policies like document retention and destruction.  Policies must be written in a way that allows the organization to operate efficiently but also comply with state and federal law.


Why It Matters And Getting Started

The most important thing to remember is that where there are legal obligations to make certain documents available there can also be  penalties for failing to do so.

For example:

  • The IRS can levy financial penalties.
  • Some states will not only impose fines, but make the failure to comply  a criminal offense.
  • The failure could serve as a basis for a State Attorney General to investigate the organization.

You might even argue the biggest repercussion is a loss in trust and credibility.

I would definitely visit the IRS link above to get started.  It has a great questions and answers section specific to this issue. \For help in figuring out what state requirements might be, start with the National Council of Nonprofit Associations which will connect you to local nonprofit associations. These organizations are great in terms of resources and, more often than not, have direct links to the state nonprofit laws.


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