Nonprofit Blog

Welcome to the Nonprofit Blog hosted by the professionals at Armanino, CPAs & Consultants. This blog is set up to inform nonprofit organizations of trends, rule changes, best practices and free educational offerings that we have built to support nonprofit organizations. Our professionals bring you their insights from an accounting and organization perspective to help nonprofits reach their goals. We support our clients with advice, direction and best practices.

Wednesday, August 1, 2012

Email and Internet Users Beware

Posted by Armanino Nonprofit Team

Like most organizations, email and internet usage in non-profit organizations has steadily been on the rise for the past couple decades. It is therefore, important for non-profits to develop comprehensive email and internet usage policies for employees to address various business risks. Email usage risks include inappropriate conduct, discriminatory remarks and excessive use. Likewise, non-profit organizations must be careful to not to violate the Electronic Communications Act, which prohibits eavesdropping on employees unless there is a valid business purpose for doing so. If such a purpose does exist, employees must be apprised that their email might be subject to review under certain circumstances. For most small to mid-sized non-profits that have, at most, a one-person IT department with an IT Director solely responsible for all email, internet and IT operations, there can be a significant underlying risk to the organization if the IT Director is “eavesdropping” through employee email communications without an appropriately communicated “business purpose” policy permitting such review. See Privacy Compliance and Litigation in California, Chapter 8 (Cal CEB 2008). Employees should also, always ensure heightened care is exercised before transmitting sensitive or confidential information via email.

Non-profit organizations also rely heavily on the internet to obtain information, advertise products and/or services, and disseminate information. Non-profit organizations should be advised that basic legal principles, including intellectual property principles, apply to the internet. For example, copyright laws apply to material on the internet, and laws governing appropriate use of trademarks are enforced in electronic commerce as they are in ordinary commerce. Furthermore, organizations that sell goods or services through the internet may unwillingly subject themselves to the jurisdiction of other states under “long-arm statutes” if they engage in misleading advertising or otherwise violate other states’ consumer protection laws.

Charitable organizations under IRC Section 501(c)(3) must also be aware of various hazards of operating a website because of the risks that an organization might trigger unrelated business taxable income, engage in prohibited lobbying or potentially lose its tax-exempt status as a result of hyperlinks to other websites that have commercial or political content. Attorney Generals nationwide have been scrutinizing more severely the fundraising activities of non-profit organizations conducted in recent years on the internet.

For a discussion of some of the tax issues raised by fundraising and advertising on the internet, see IRS C Continuing Professional Education Exempt Organizations Technical Instruction Program for Fiscal Year 2001, pg. 161 or same for Fiscal Year 200, pg. 119 or IRS Announcement 2000-84.

With email and internet usage at an all-time high, non-profit organizations need to consistently remind themselves of the various risks that come with such usage and constantly revisit their related policies and procedures with legal counsel to address the ever-changing legal climate that revolves around the internet, company websites and email usage.

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