Sunshine laws govern public access to governmental records. At the federal level, the Freedom of Information Act details access, and each state also has its own set of rules. In addition, the Internal Revenue Service sets financial and board reporting rules and defines the requirements for charitable nonprofit status under IRC 501(c)(3). To determine whether your organization must maintain documentation for public review, you need to know the IRS rules for 501(c)(3) organizations and understand the sunshine laws for your state.
Because states model their laws after the Freedom of Information Act, some general guidelines are consistent in all states. For example, Florida's public access law, Florida Statute 286, says that any agency or officer of the executive, legislative or judicial branches of state government, the State Board of Education, the Board of Governors of the state university system, or the Public Service Commission are required to maintain documentation under the public access rules. Large municipalities like big counties or cities often adopt rules to comply with their state sunshine laws. Sometimes the local rules can be more stringent than the state laws. If there is a conflict in rules, your organization must follow the most restrictive of these rules.
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What You Need to Report
The documentation that must be made available to the public includes meeting minutes, biographical information of the members and budgetary information. In some states, a one-page abstract of meetings must be filed with the department of state. Both federal and state public rules have provisions to protect sensitive information. Officials of the judiciary have limited reporting requirements. Governmental information that would threaten public safety or give away proprietary information may be omitted or redacted. Banking information, Social Security numbers and other account information should be left out of the documentation.
Follow the Money
Your funding determines whether your nonprofit is governed by sunshine laws. Receiving money from governmental entities creates a fiduciary link under which the nonprofit is acting as an extension of that municipal body. In other words, by taking money from the government, your organization essentially becomes part of the government and must follow the same rules. Be aware of pass-through money. Oftentimes an organization may be contracted to manage the money and services of a state or federal organization. These are managed care organizations. The funds may pass through from the federal level to the state then to the county. The county may give it to the managed care organization that gives it to your nonprofit. Under this scenario, your nonprofit would have the same federal, state and county reporting and public access requirements.
Transparency and Clarity
Sunshine laws are not the only ones that require reporting. The IRS requires reporting that would make it clear that the nonprofit is following its exemption requirements. IRS Form 990, a required annual report for all nonprofits, must demonstrate that it is not distributing funds in such a way that the benefits are inuring to any single shareholder or individual. The completed Form 990 for each organization is made public by the IRS. Also after the Sarbanes-Oxley Act in 2002, there is a new trend of transparency in all organizations. Though this trend is voluntary for nonprofit organizations, it does set a new benchmark for transparency and accountability to potential donors.