By Claude M. Millman and Daniel Q. Flesch
New York Nonprofit Media
July 2021
Virtually no non-profit executive welcomes an audit or investigation with open arms. If you’ve dedicated your life to bettering the world by fighting for a social cause, you might react to the snooping of a government agent with natural outrage and indignance. That irritation could morph into downright anger if (and when), in the course of responding to the governmental agency, you are compelled to slow down your vital work just to explain basic elements of that charitable work to a government employee.
Yet, if a government auditor or investigator comes a-knocking, it’s best to hold back that anger and tamp down any altruistic sense of fairness. For one thing, every not-for-profit’s mission implicitly includes the task of cooperating with governmental authorities seeking to ensure the probity and integrity of the non-profit’s work. For another thing, good faith responsiveness, lawfully and deftly managed, can limit the havoc that an audit or investigation might otherwise cause. Indeed, the scope of a governmental review may even be narrowed if the organization conveys to the auditor or investigator that the nonprofit’s mission is critical, that it is doing its best to comply with governmental requests, and that an unnecessarily broad probe will actually interfere with the charitable mission and hurt the public interest.
Thus, when faced with an audit or investigation, nonprofits should resist the temptation to reorient the entire organization towards fighting the government, and calmly develop an effective responsive strategy. Here are some of the elements that you should consider in developing the organization’s response:
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