Standard question on just about every audit is whether the organization is breaking any laws or regulations. Most perceptive response I ever received was “none that I know of, and that’s what worries me.”
It’s the laws and regs you don’t know about that can cause really serious trouble. That is even more the case in the nonprofit community. In addition to the employment and general corporate laws every business has to deal with, NPOs must obey a host of tax rules.
Katie Thomas, CPA, discusses this in her post You Don’t Know What You Don’t Know at the Nonprofit GPS blog. She mentions just a few things – raffle tickets, withholding on raffle prizes, non-deductibility of tickets to special events, the risk of turning volunteers into employees by giving them too much of an appreciation gift, and tax reporting for donated cars.
Are you aware of the rules for each of those type of things? Tripping over those issues could cause lots of grief.
Read her article for more details.
I heartily concur with her closing comment, which is call your tax or legal advisor about these kinds of things. Any professional working with the nonprofit community would be glad to visit with you for a few minutes to explore whether you are headed towards trouble.