Once you’ve navigated the various steps of creating a charitable nonprofit and are ready to begin your work (perhaps you already have), it is also very important to know what it means and takes to maintain that status and stay in good standing on both a state and federal level. Neglecting to do so can have dramatic and potentially negative consequences for your organization, its staff and board, and the communities who utilize your services.
Photo by Markus Winkler
In Minnesota, nonprofits are required to file annual renewals/reports with the Minnesota Secretary of State and Minnesota Attorney General in order to maintain their legal status within the state, demonstrating their continued existence and operations, and to comply with state regulations regarding transparency and accountability. This often includes providing details about their finances and fundraising activities. Failure to file can result in the loss of their good standing or even dissolution of the organization.
From a federal perspective, nonprofits must file an annual tax return with the IRS in order to justify and retain their tax-exempt status. By failing to do so, the organization risks losing tax-exempt status, which will be disruptive to its operations and to its donors and funders, in addition to potentially damaging the nonprofit’s credibility and potential financial loss to the nonprofit. Learn more about what it means to be a tax-exempt nonprofit and common threats to tax-exempt status.
In the pages to follow, we will highlight some common steps your nonprofit will need to follow in order to remain compliant and in good standing with the State of Minnesota and the federal government.
Nonprofit Compliance and Fraud Prevention: A Perfect Match
A nonprofit’s lack of compliance at the state or federal level may foster a perception of mismanagement, and in some cases, even fraud. Fraud poses a significant threat to all businesses, but it can be especially harmful to nonprofits, already under increased scrutiny by donors, funders, and government agencies.
Building out strong measures to prevent fraud at your nonprofit — as well crafting and implementing transparent and trustworthy processes for reporting suspect activities or practices — compliments your ongoing government compliance and builds trust from both inside and outside the organization.
Disclaimer: Information on this website is provided for informational purposes only and is neither intended to be nor should be construed as legal, accounting, tax, investment, or financial advice. Please consult a professional (attorney, accountant, tax advisor) for the latest and most accurate information. The Minnesota Council of Nonprofits makes no representations or warranties as to the accuracy or timeliness of the information contained herein.