I recently toured the Museum of Communism on vacation in Prague, Czechia. The museum’s exhibits document the Soviet occupation and the steps that allowed the Soviets to gain control of nearly every aspect of Czech life. One of the steps to that autocratic control was a crackdown on and, ultimately, a virtual elimination of voluntary associations.
As the political landscape shifts in the United States, nonprofits must be prepared to defend not only their missions but also their very existence and ability to operate. Lessons from authoritarian regimes around the world reveal that civil society organizations don’t always face direct shutdowns; rather, governments often deploy legal, financial, and bureaucratic tactics to stifle dissent. These include audits, lawsuits, frozen bank accounts, and loss of tax-exempt status. The best defense is preparation.
Here are some strategies to strengthen nonprofits’ infrastructure to withstand potential attacks and continue their crucial work:
1. Explore Alternative Legal Structures
Nonprofits are particularly vulnerable due to their extensive reporting and compliance requirements. To mitigate risk, strategies include:
- Consider setting up alternative legal entities, such as LLCs, in different states or countries.
- Ensure that these entities can continue receiving funds and paying staff if the nonprofit encounters legal trouble.
- Encourage funders to support entities that lack 501(c)(3) status and offer legal assistance for structuring alternative organizations.
2. Strengthen Financial Security
Financial attacks, such as accusations of money laundering or financial mismanagement, can paralyze organizations. To safeguard against these risks:
- Ensure books and financial records are audit-ready by working with trusted accountants.
- Open multiple bank accounts and establish partnerships with intermediary organizations that can help manage funds.
- Plan for alternative ways to pay staff and cover expenses if accounts are frozen, such as consultancy agreements or fiscal sponsors.
- Consider the use of prepaid cash cards or cryptocurrency for emergency financial transactions.
3. Secure Communication and Information Systems
A breach of sensitive communications or donor records could severely damage an organization. To prevent this:
- Use encrypted messaging services like Signal for internal and external communication.
- Train staff and partners in secure digital practices.
- Conduct a digital security audit to ensure all systems are protected.
- Review data retention policies and eliminate unnecessary information that could pose risks in case of a subpoena or hack.
- Use extra security protocols for the organization’s most sensitive data.
4. Increase Unrestricted and Emergency Funding
Nonprofits often struggle with restrictive funding that limits their ability to respond to crises. To build resilience:
- Encourage funders to provide unrestricted operational funding, which is essential for legal defense, security, and compliance.
- Establish emergency funds that can be accessed quickly in case of audits, legal battles, or cybersecurity threats.
- Work with intermediary organizations that can distribute emergency funding efficiently.
- If there is an endowment, consider approaching donors for unrestricted gifts and review old small funds that may be eligible to be unilaterally modified under state law. Quasi endowment funds (board-restricted endowments) can be unrestricted by the Board.
5. Foster Collaboration and Knowledge Sharing
Resistance to change is common, but sharing strategies and resources can strengthen the sector as a whole:
- Engage in cross-sector collaboration between program and operational staff to develop risk mitigation strategies.
- Encourage funders and nonprofits to share best practices on crisis preparedness.
- Advocate for a sector-wide shift toward proactive risk management rather than reactive crisis response.
Conclusion
Nonprofits are among the last checks on unchecked power, making them prime targets for suppression. Rather than reacting to crises as they arise, organizations must act now to protect their ability to operate. Investing in preparedness today will ensure long-term resilience and the continued defense of civil society’s essential role. The time to act is now.
Ellis Carter is a nonprofit lawyer with Caritas Law Group, P.C. licensed to practice in Washington and Arizona. Ellis advises nonprofit and socially responsible businesses on federal tax and fundraising regulations nationwide. Ellis also advises donors concerning major gifts. To schedule a consultation with Ellis, call 602-456-0071 or email us through our contact form.Â