Compliance. Ew.
Written by Anita Rodgers, NWHF Director of Finance & Operations
In my last blog I wrote about the importance of understanding and embracing nonprofit financials. As I said in December, by understanding what is happening with our finances, we take back our organizational power. While the operations that keep our nonprofits going may have a reputation for being boring and opaque, the truth is that they're essential to meeting our missions. So now, on to part two of this series: compliance.
Just like nonprofit finance is a fundamental racial justice and equity issue, so is nonprofit compliance. I know…compliance…ew. Wouldn’t you rather talk about anything else? Just bear with me here. I promise it will be worth your time.
Formal nonprofit structures were not built to help racial justice and equity organizations succeed. They subject us to hundreds of rules and requirements, which get even more complex if we have both a C3 and a C4. Still, we use these structures for good reason. They offer significant funding advantages, allow us to operate in spaces we wouldn’t otherwise have access to, and offer a measure of legal safety.
As racial justice and equity organizations using these structures, we have a duty and incentive to comply with the rules. Because, the way those who want to thwart us will likely come after us is through our financial and administrative compliance with IRS rules, state and local regulations, labor laws, donor restrictions, and Financial Accounting Standards Board (FASB) guidelines.
Pablo Picaso famously said “learn the rules like a pro, so you can break them like an artist.” Now, I am not advocating that we break the rules, but I am saying that understanding the rules and restrictions placed on our nonprofits gives us the skill and creativity needed to find ways to meet both our programmatic goals and our fiscal and administrative responsibilities. To do this well requires finance, admin, development and program teams to work together in creative, meaningful, values-aligned partnerships to achieve our missions and protect our nonprofits from attack.
What prevents our teams from working together in the values-aligned partnerships we need? Frustration with each other, right? Okay, I know it’s more nuanced than just frustration with each other, but boiled down to the simplest terms, we all experience some variation of “Why does Finance and Admin have so many rules?!?” and “Why won’t Program and Development follow the rules?!?” Until we name and address our challenges with compliance and “following the rules,” we are not well positioned to take bold action to achieve our organizational goals.
So, why do finance and admin have so many rules? The answer is usually because some outside entity - like the IRS, the state, funders, or FASB - is requiring us to have those rules. Can’t use funds for food or childcare? That’s a constraint in a government contract. Have to collect W9’s from your consultants? That’s an IRS rule. Can’t use existing grant funds for a new program? That’s a funder restriction.
So, why don’t program and development staff always follow the finance and admin rules? The answer is often because they don’t know why the rules exist, the restriction is limiting their ability to provide their constituents with what they need, or the requirement is preventing them from achieving their programmatic goals. Program staff are often working in wildly challenging situations. Remembering to grab a receipt after a lunch meeting with a community member who is in crisis may be the last thing on a program staff person’s mind. Getting a W9 from a program participant who doesn’t have a tax id # isn’t feasible. Not providing food or childcare at a community meeting is just bad organizing.
The solution to both these realities starts with understanding everyone’s perspective and building good problem-solving practices. It may be that there is other funding available for food and childcare. Or the W9s may not be needed if we pay program participants differently. But to figure out the solutions, we have to work together well.
Program and development staff, remember that your finance and admin coworkers are not an obstacle to work around but a partner in the work for justice. They are likely just as frustrated by some of the rules as you are. Share your work goals and challenges. Can’t figure out how to pay for what you need in your program? Engage your finance team in a solutions brainstorm. Turn in your receipts and timesheets on time (seriously, this alone will go a long way in building good relations with finance staff). And, read your grant agreements and contracts so you don’t have to rely on someone else to understand the restrictions placed on the funding for your programs.
Finance and admin staff, remember to center the organization’s mission and constituents in your work. Where possible, make it easier to follow the rules. Explain the reason behind your rules. If you don’t know the reason, find out. It may be that the goal of the rule can be accomplished in a different way. Learn the rules like a pro, and let your creativity shine by looking for solutions when faced with an unusual situation or request from program staff. Need help? Get advice from your lawyers, accountants, peers and government resources.
Our communities are relying on us to be even more effective in achieving our missions and strategic goals. To succeed requires our entire organization to be aligned in both our programmatic and development goals and our finance and admin infrastructure. By working together and knowing the rules like a pro we can take bolder action in service to our communities.