Compliance is one of the hardest nonprofit risk management tasks. As nonprofits grow, they are subject to local, state, and national laws, plus grant strictures and other compliance tasks. This week’s post in this series asks the popular AI program ChatGPT to note common compliance risks.
The Nonprofit Risk Management Prompt
We seeded ChatGPT with the following prompt about nonprofit risk management:
Acting as a journalist, describe common risks that nonprofits face relating to compliance.
ChatGPT’s Answer
As a language model AI, I don’t have personal experiences, but here’s a list of common planning risks that nonprofits face based on my training data:
- Failure to comply with tax laws: Nonprofits must comply with tax laws, including those related to exempt status, tax reporting, and lobbying activities. Failure to comply with these laws can result in fines, penalties, and loss of tax-exempt status.
- Failure to comply with fundraising regulations: Nonprofits must comply with regulations related to fundraising, including those related to disclosure, reporting, and donor privacy. Failure to comply with these regulations can result in fines, penalties, and harm to the organization’s reputation.
- Failure to comply with employment laws: Nonprofits must comply with employment laws, including those related to hiring, compensation, and benefits. Failure to comply with these laws can result in fines, penalties, and legal consequences.
- Failure to comply with health and safety regulations: Nonprofits must comply with health and safety regulations, including those related to working conditions, hazardous materials, and emergency preparedness. Failure to comply with these regulations can result in fines, penalties, and legal consequences.
- Failure to comply with data protection laws: Nonprofits must comply with data protection laws, including those related to the protection of personal information and data privacy. Failure to comply with these laws can result in fines, penalties, and harm to the organization’s reputation.
- Failure to comply with financial reporting standards: Nonprofits must comply with financial reporting standards, including those related to auditing, financial statements, and donor disclosure. Failure to comply with these standards can result in fines, penalties, and harm to the organization’s reputation.
- Failure to comply with grant requirements: Nonprofits that receive grants must comply with grant requirements, including those related to spending, reporting, and evaluation. Failure to comply with these requirements can result in loss of funding, fines, and penalties.
- Failure to comply with laws related to program delivery: Nonprofits must comply with laws related to program delivery, including those related to licensing, certification, and accreditation. Failure to comply with these laws can result in fines, penalties, and harm to the organization’s reputation.
Notes and Questions Based on This Answer
How many of these compliance issues affect your nonprofit? Compliance often shows up on nonprofit risk registers. Why? Staff consider their first priority to be serving clients and often view compliance as a series of stupid rules that interfere with getting the job done efficiently. Instead, compliance needs to be viewed as the guardrails on your nonprofit: you move most swiftly and with least danger when you follow the rules of the road.
What other compliance risks should be on your radar? In my book, Managing Your Nonprofit for Resilience, I provide 19 other questions to ask about compliance, as well as a 5-page compliance checklist for nonprofits (Appendix 4).
If you are thinking about how to incorporate AI into your risk management planning to help address some of these risks, reach out to me here at Risk Alternatives for suggestions, including resources for getting better results when using AI. Alternatively, you can create a ChatGPT account for yourself to begin exploring how AI could impact your organization.
(As previously noted, all of the art for this series on common nonprofit risks was generated by Midjourney, another AI program. I asked that program to generate images about compliance risks in the style of Vincent Van Gogh.)