1. TN Key Non Profit Regulations TVMA May 22, 2016

2. Strategic Planning

3. Charter (a) The charter must set forth: (1) A corporate name for the corporation that satisfies the requirements of § 48- 54-101; (2) One (1) of the following statements: (A) This corporation is a public benefit corporation; or (B) This corporation is a mutual benefit corporation; (4) The street address and zip code of the corporation's initial registered office, the county in which the office is located, and the name of its initial registered agent at that office; (7) A statement that the corporation is not for profit; (8) A statement that the corporation will or will not have members; and (9) Provisions not inconsistent with law regarding the distribution of assets upon dissolution.

4. By-Laws (a) The incorporators or board of directors of a corporation shall adopt initial bylaws for the corporation. The bylaws are the organization’s internal operating and governance rules.

5. Annual Reports Each fiscal year an annual report to the Secretary of State that contain: The name of the organization and the state under whose law it is incorporated The name of its registered agent in TN and the county and address of its registered office The address of the organization’s principal office The names and business addresses of the board members and principal officers

6. Board Makeup Tennessee has certain minimum requirements with respect to nonprofit officers and board members. Tennessee nonprofits must have at least three board members The state recommends at least seven directors, when possible Tennessee nonprofits corporations officers: President Secretary

7. Board Member Duties Duties Duty of good faith Duty of loyalty Duty of care Duty to disclose Examples care being honest with the nonprofit in seeking travel or expense reimbursement offering printing services to the nonprofit at market or below market rates voting against, or tabling, a fundraising contract for which you don’t believe the board has been provided information, and then actively seeking more information if you are aware of information that you believe could affect or require a board decision, you must share, unless you cannot legally do so (e.g., disclosure will violate ethical or confidentiality laws)

8. Fiduciary Duties Board members are responsible for directing the overall vision and mission and Board officers are responsible for the day – to – day management Attending board meetings and meetings of committees on which you serve. Make certain that you receive detailed information beforehand about matters that are going to be discussed and voted on at a meeting, especially the financial reports and financial statements Using your own judgment in voting and not simply following the lead of the chairperson of the board, or fellow board members

9. Fiduciary Duties Participating in strategic planning activities that assess and plan for the organization’s future Ask about the status of the internal controls and about written policies and procedures that protect the organization from error, fraud and embezzlement Inquiring about the status of a directors and officers liability policy and if it indemnifies its directors, officers, and volunteers from liability Reviewing board or committee minutes to make certain that the meetings and votes were properly recorded If there are errors in the minutes, ask for clarifications or changes

10. TN Nonprofit Organization Act Changes Signature now include manual, facsimile, conformed, and electronic Notice Requirements may be customized in the charter and bylaws so long as they are consistent with Title 48 of the Code. Also notice and other communications may be delivered by electronic transmission if the recipient consents. Unless otherwise agreed to by the sender and recipient, a notice or other communication must be in English. Member voting may be taken without a meeting and without written prior notice so long as members vote through a signed consent to the action. Electronic consent is allowed, so long as the date and member’s authorization is clear.

11. Tax – Exempt Status 1. An organization exempt from federal taxation must be organized and operated “exclusively” for charitable, religious, education, literary, or scientific purposes 2. Activities of a 501(c)(3) organization must not be for the benefit of an individual (outside the charitable class) and the IRS can impose fines on officers and directors who approve transactions that provide an “excess benefit” to an individual 3. A 501(c)(3) organization may not support, participate, or intervene in any election for public office 4. A 501(c)(3) organization may not devote a substantial part of its activities to lobbying, propaganda, or attempting to influence legislation 5. If unrelated trade or business activities are more than “insubstantial” (when compared to the organization’s exempt activities), the organization may lose its tax-exempt status

12. Charitable Solicitation The Division of Charitable Solicitations and Gaming in the Tennessee Department of State seeks to protect donors and charitable organizations in regard to charitable solicitation and giving. If your organization solicits contributions, it may be subject to registration requirements set forth in the Tennessee Charitable Solicitations Act, Tenn. Code Ann. §§ 48- 101-501, et seq. The Charitable Solicitations Act requires charitable organizations who solicit contributions from, or within, the State to register annually with the Division of Charitable Solicitations and Gaming. Registration involves the submission of an application along with: a summary of financial statement IRS Form 990 list of board members contracts with professional fundraisers an application fee professional solicitors (professional fundraisers) and professional fundraising counsel working on behalf or with charitable organization are also required to register

13. Charitable Solicitations Continued Registration fee of $50 Organizations soliciting donations within Knoxville city limits also must file with the Knoxville Solicitations Board

14. Board Engagement Establish annual budget Ensure required federal, and state reports, and tax reports are filed with the IRS and TN Department of State

15. Records Requirement Minutes for all board meetings; Records of board member actions taken without a meeting; Records of actions taken by board committees as delegated by the board; Appropriate accounting records, including annual financial statements; Membership lists, including the names and addresses of each member, in alphabetical order, and showing the number of votes each member is entitled to vote; The charter and all amendments currently in effect; The bylaws and all amendments currently in effect; Board resolutions relating to any class or category of members; Minutes of all members’ meetings and approvals for the last three years; Any written communication to the members for the last three years; The names and business or home addresses for current officers and directors; and The most recent annual report filed with the secretary of state.

16. Insurance  General Liability – Organizations should have, at a minimum, a general liability policy to protect the organization in the event that a third party claims that it suffered some sort of injury arising out of the organization’s premises, operations, or products  Board Liability / Errors and Omissions – Organizations should consider taking out a directors and officers insurance policy, which generally protects against “any actual or alleged act or omission, error, misstatement, misleading statement, neglect or breach of duty by an Insured Person in the discharge of his / her duties

17. Record Keeping: Minutes, Retention, Destruction State and federal law require that the following records be kept on file at the organization’s principal office: Charter (and any amendments) Bylaws (and any amendments) Current list of board members including names, addresses, and terms of office Permanent records of minutes of all board meetings, including resolutions and other formal actions Membership list Minutes of member meetings and records of member actions Accounting records, including annual financial statements that are either audited by a CPA or include a statement b the responsible party (President, Treasurer, etc.) that the statements are prepared on the basis of Generally Accepted Accounting Principles, or the basis on which they were prepared. These financial records should be saved for at least seven years Most recent annual report IRS Form 1023 (the application for tax-exempt status) Federal Tax Exemption Recognition Letter Form 990 (or 900 EZ or 990A) for each of the past three years Sales Tax Exemption Form

18. Many of these documents must be made available to the public upon request Proper minutes of all meeting and written actions taken should be kept Record Keeping: Minutes, Retention, Destruction

19. Conflict of Interest  Prior to joining a board, you must disclose any personal or business relationship that is in conflict with this duty of undivided loyalty, whether direct or indirect, actual or potential.  If a transaction is presented to the board in which you have a direct or indirect personal or business interest, you must disclose that conflict of interest to the board, remove yourself from any board discussion, and not vote on the matter.  Board chairs should ask their board members and officers to sign conflict of interest statements at the start of each year in order to document existing or potential conflicts.  We recommend that the board adopt a conflict of interest policy and review it at least annually.

20. Conflict of Interest Continued You must do what is in the best interests of the organization Before approving a conflict of interest transaction, take great care to ensure that the transaction is fair, that it is in the best interest of the organization, and that it furthers the organization’s mission. Make sure that the reasons for approving the transaction are well documented in the board’s minutes.

21. Conflict of Interest Continued If you vote to approve a conflict of interest transaction, you may be held personally responsible to the organization if the transaction harms it or is otherwise unfair. You also have the right as a board member to sue a conflicted party on behalf of the organization if the transaction is unfair or harmful.

22. Compensation Policy Warning: Generally, Tennessee law prohibits payments to:  any board member or nonprofit officer, except for compensation in reasonable amounts for services rendered, or reimbursement for reasonable expenses incurred on behalf of the organization  the state recommends using federal CONUS rates as an appropriate guideline for travel expenses  Tennessee law prohibits loans to board members or nonprofit officers. Examples of prohibited loans include payroll advances, or using corporate credit cards for personal purchases, even if the nonprofit is reimbursed at a later date

23. Document Retention and Destruction Policy A document retention and destruction policy should set out a list of the types of records and documents received or generated by the organization, with a specified minimum time frame for retention The policy should make clear that a document may be important whether it is in paper or electronic form

24. Whistleblower Protection Policy The Sarbanes – Oxley Act (“SOX”) applies to nonprofits so having a written policy to prevent an inadvertent violation of this requirement Note that SOX does not require that the organization have a policy for this purpose

25. Protecting The Assets Ensure that the organization is using its resources as directed in its articles of incorporation and bylaws Tennessee law requires written notice be provided to the Attorney General before certain extraordinary events, including: a merger of the organization; conversion of the organization to a different entity type (e.g., nonprofit corporation to for-profit corporation, nonprofit corporation to limited liability company, nonprofit corporation to partnership, etc.); a sale of substantially all of your nonprofit organization’s assets; or the dissolution of the organization

26. Next Steps Things to consider: Insurance Annual Audits Charitable Solicitations Other Organization Member Policy Schools Project

27. Questions and Answers