4 Things Your Nonprofit Could Be Doing Illegally

Snarky people may call a philanthropist or nonprofit staffer like you a goodie-goodie. It’s insensitive and unfair—not to mention completely ignorant of how much better the world is because of your work. But besides being unkind, it’s a misnomer for many nonprofit organizations. You’re not a goodie-goodie at all. In fact, you’re kind of a rebel.

Not that we condone this kind of behavior. Make sure your nonprofit isn’t walking into legal trouble you can’t afford. Read our list of four illegal activities you or your staff could be guilty of—then get back to being a goodie-goodie.

“Borrowing” money

Donors and foundations that support your nonprofit have a say in how you use their funds. Restricted funds have donor-imposed rules about how your organization spends them. Be careful about how your nonprofit spends temporarily or permanently restricted funds. After the restrictions on temporarily restricted funds have expired (or they’ve met their intended purpose), consider them unrestricted and spend as needed. Permanently restricted funds are less common but more prohibitory. They can never be transferred to your nonproft’s unrestricted reserve.

It is illegal to “borrow” money from funds restricted by donors. Don’t misspend restricted funds even if you intend to replace the monies. The Nonprofits Assistance Fund can help keep you in check.

“Sharing” photos

While misspending restricted funds can get you in trouble with the law and your donors, a lazy content strategy could burn bridges outside of your organization. I know we harp on you about engaging supporters with photos, but they must be your own. Purge your website and email templates of images that aren’t yours.

If photographers or photo licensing companies find one of their images in your nonprofit web design they could slap you with a big bill for licensing fees. Or a lawsuit. So feature pictures snapped by a staff member, volunteer or budding professional. Professional photographers sometimes donate their time and talent to be recognized on your site. Or, you can invest in a subscription to a stock photography site like Thinkstock or Photos.com. Work a bit harder for your picture content—the quality will be better and you’ll feel better too.


The IRS won’t care if an election or divisive political issue could ruin your nonprofit. If your organization is a tax exempt 501(c)(3) charity, you cannot engage in or comment on political campaigns. It’s a conflict of interest not worth getting tangled up in. There’s more leeway for individual staff interested in political advocacy.

“Welcome” emails

Some organizations take advantage of their donors’ email addresses. For example, a supporter who donates online may not have given you permission to email them unless it’s in regard to that particular donation.

Don’t nag your poor supporters. Clarify their preferences with a checkbox on donation forms to opt in or out of emails. Finally, it’s best practice to send a note to subscribers asking them to update their information. Be sure to thank them for their support while you’re at it.

We’re not accusing your nonprofit of committing any of the illegal activities outlined above. Although if you suspect your organization is guilty of any of them, reform your business practices before you get in hot water.

What does your nonprofit do to make sure its standard practices are perfectly legal?


Jill Havlat

August 22, 2012

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