A recurring theme on the campuses of North American Universities every academic year, Fraternity members or the constituency Chapter(s) find a way to garner national media attention for minor infractions, violation of college policy, or outright disregard for the rule of law. An effective compliance program of a contemporary non-profit organization is more of an anomaly, rather than the standard and Fraternities and their constituency Chapters are no exception.
It seems Fraternities are utilizing a “compliance by crisis” approach to risk management for the entire membership organization. Constituency chapters would only comply when their hand was forced or the host University become involved. This leads to the second most disturbing observation, Fraternities leave compliance with the rules, regulations, and some form of code of conduct up to the host Universities. The Universities do not have the obligation to the members, as members, but rather as students. Fraternities abandoning its responsibility to its member leaves them to the mercy of the host University when a crisis does occur.
Another observation is when constituency Chapters are not aware of the tax-exempt obligation to file a Form 990 with the Internal Revenue Service (IRS) on an annual basis. For example, a particular constituency Chapter having their tax-exempt status revoked by the IRS, may not be aware they may have to file alternate tax forms to remain compliant with IRS rules.
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A subsequent observation was made in the area of education and training for Chapter members, and the entire membership in the area of compliance. It is interesting to note, Fraternities provide Risk Management (RM) training on a small scale. For example, RM training consists of how not to violate the FIPG rules as it related to hosting parties, hazing or alcohol use. FIPG is known as the Fraternal Information and Program Group known to Fraternities as the Insurance Company. A number of fraternal organizations belong to FIPG in order to acquire coverage in the insurance market as a special risk. So it would be easy to ascertain that the RM training does not rise to the level of compliance training required of a national membership organization.
The specific focus of this discussion is to present the business case for the establishment of an effective compliance program for Fraternities to meet, not only emerging statutory requirements, but be better equipped to handle risk management or compliance issues as they arise. The reason for this undertaking was clear when Fraternities lack of having an established program, guidelines, policies, or other procedures in place to mitigate the outcomes of constituency Chapters failures or prevent and detect deficiencies. A Fraternity would need the following policies; Code of Conduct, Records and File Management, Whistleblower and Retaliation, Education and Training, and Financial Management, just to name a few.
An effective compliance program should be required, since Fraternities have become more complex enterprises. Policy development is essential in mitigating risk, providing legitimacy, self-preservation, holding their members accountable, transparency in actions, and building confidence with stakeholders. An actionable strategy to address compliance concerns presently would place Fraternities ahead of the wave of legislative mandates being considered for the non-profit sector. Federal laws that apply to companies are being considered for expansion to non-profits to address conduct, retaliation, records and training of staff, volunteers, members, consultants and agents. Fraternities should not be given the exception to the rule. The strategy should be not values based, but rather a standards approach to compliance to provide objective and meaningful benchmarks for operations, management and financial functions of a Fraternity.
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