Colorado Nonprofit Board Handbook

501(c)(3) Board Handbook

For The Art of Drinking Water Foundation

Helping our board lead with clarity, integrity, and voice in the State of Colorado.

Prepared for
The Art of Drinking Water Foundation — Board of Directors
Based in Colorado

“Every story we share, every voice we lift, becomes part of the water we all drink from —
the collective renewal this Foundation stands for.”

Important Note: This handbook is for educational purposes only and does not constitute legal or tax advice. Board members should consult with qualified legal and tax professionals for specific questions about Colorado and federal requirements.

1. Introduction & Purpose

This handbook is designed to help the Board of Directors of The Art of Drinking Water Foundation understand the key legal, financial, and governance responsibilities of leading a 501(c)(3) public charity incorporated in the State of Colorado.

It is meant to be:

A practical reference you can return to throughout the year.
An onboarding guide for new board members.
A shared framework for how we steward our mission, our community, and our resources.

How This Handbook Connects to Our Mission

Our work is about voice, healing, and community. Good governance is the structure that protects that work. When we understand our responsibilities as a Colorado 501(c)(3), we create a container where stories can be held safely, funds can be stewarded responsibly, and our programs can grow with integrity.

Board Intention: As we read this handbook, we commit to approaching our responsibilities with curiosity, humility, and shared accountability.

What This Handbook Covers

What it means to be a 501(c)(3) public charity.
Key Colorado nonprofit and charitable solicitation requirements.
Board fiduciary duties and governance best practices.
Financial stewardship, reporting, and filings.
Fundraising, donor acknowledgments, and ethical practices.
Advocacy, lobbying, and political activity limits.
Core policies, risk management, and document retention.
Annual compliance checklist, calendar, and onboarding tools.

2. What It Means to Be a 501(c)(3)

Federal Tax-Exempt Status

A 501(c)(3) public charity is a nonprofit organization that has been recognized by the Internal Revenue Service (IRS) as exempt from federal income tax because it operates exclusively for charitable, educational, religious, or other qualifying purposes.

Key features of 501(c)(3) status include:

Exemption from federal income tax on eligible activities.
Eligibility to receive tax-deductible charitable contributions.
Eligibility for many grants and institutional funding opportunities.

Key IRS Requirements

The organization must be organized and operated exclusively for exempt purposes.
No part of the net earnings may inure to the benefit of private individuals (“private inurement”).
The organization cannot operate for the primary benefit of private interests.
Lobbying must be limited, and participation in political campaigns for or against candidates is prohibited.
Annual information returns (e.g., Form 990, 990-EZ, or 990-N) must be filed with the IRS.

Public Charity vs. Private Foundation

Most community-serving nonprofits, including The Art of Drinking Water Foundation, are structured as public charities. This generally means we receive broad public support, such as contributions from many donors and/or program revenue, rather than funding primarily from a small number of sources.

Board Reminder: Our decisions should always reflect that we are serving a broad public benefit, not personal, private, or narrow interests.

Colorado Legal & Compliance Overview

A high-level guide to state requirements for charitable organizations incorporated and operating in the State of Colorado.

As a Colorado-based 501(c)(3) public charity, The Art of Drinking Water Foundation is subject to both federal law and state-specific requirements. This section of the handbook highlights the core obligations that help keep us in good standing and able to serve our community with integrity.

What This Section Covers

How we are incorporated and recognized as a nonprofit in Colorado.
Annual state filings required to maintain active status.
Charitable solicitation registration for fundraising in Colorado.
Key records and transparency expectations for the public.

Board Lens: You do not need to memorize every statute, but you should have a clear picture of what our obligations are, who is responsible for them, and when they are due each year.

3. Colorado Nonprofit Basics

Incorporation in Colorado

Colorado nonprofits are formed by filing Articles of Incorporation with the Colorado Secretary of State. This creates the legal entity. After incorporation, the organization adopts bylaws, appoints an initial board, and obtains an Employer Identification Number (EIN) from the IRS.

Annual Periodic Report

To remain in good standing with the Colorado Secretary of State, nonprofits must file an annual Periodic Report. This filing keeps the organization’s records current and prevents administrative dissolution. Due dates are typically based on the anniversary month of incorporation.

Charitable Solicitation Registration

Most Colorado charities that solicit contributions are required to register annually with the Colorado Secretary of State’s Charitable Solicitations Program. This helps ensure transparency for donors and the public.

Other Colorado Considerations

Sales and use tax exemptions may be available for qualifying purchases.
State employment and payroll rules apply if the organization has staff.
Local business licenses or registrations may be required in some municipalities.

Board Action Idea: At least once per year, review our Colorado Secretary of State record to confirm that our registered agent, mailing address, and contact information are all current.

4. Governance & Fiduciary Duties

The Board’s Core Legal Duties

As directors of a Colorado 501(c)(3), board members have three key fiduciary duties:

Duty of Care – Act with the care that a reasonably prudent person would use in similar circumstances. Prepare for meetings, ask questions, and make informed decisions.
Duty of Loyalty – Put the interests of the organization above personal or private interests. Disclose and manage conflicts of interest.
Duty of Obedience – Ensure that the organization follows applicable laws, its governing documents, and its mission.

Board vs. Staff Roles

The board focuses on governance, mission, and oversight.
Staff (including the Executive Director) lead day-to-day management and operations.
Board members support staff without micromanaging the daily work.

Effective Meetings

Meet on a regular, agreed-upon schedule (e.g., quarterly or bi-monthly).
Circulate agendas and materials in advance.
Record accurate minutes, including decisions and key votes.
Use committees where helpful (e.g., Finance, Governance, Programs).

Culture of Voice: In alignment with our mission, we value meetings where questions, concerns, and reflections can be voiced without fear. Healthy governance welcomes honest conversation.

5. Financial Stewardship & Reporting

Board Responsibility for Finances

While staff or bookkeepers may manage daily transactions, the board retains ultimate responsibility for the organization’s financial health and integrity.

Key Board Financial Responsibilities

Review and approve the annual budget.
Monitor financial reports at regular meetings.
Ensure proper internal controls (e.g., separation of duties where possible).
Oversee preparation and filing of IRS Form 990 or 990-series return.
Review any audits or financial reviews, if applicable.

IRS Form 990

Most 501(c)(3)s must file an annual information return with the IRS (Form 990, 990-EZ, or 990-N). This filing:

Provides transparency about the organization’s finances and governance.
Is publicly accessible and must be made available upon request.
May be required by funders as part of grantmaking due diligence.

Transparency & Public Access

Certain documents, including recent 990 filings and the IRS determination letter, must be made available to the public upon request. Transparent financial practices build trust with donors and the community.

Board Practice: At least once a year, dedicate part of a board meeting to a deeper dive into finances, including reserves, sustainability, and alignment of funds with mission priorities.

6. Fundraising & Charitable Solicitation

Ethical Fundraising

As a board, we are responsible for ensuring that fundraising practices are honest, respectful, and aligned with our mission and values.

Colorado Charitable Solicitation

Most organizations soliciting contributions in Colorado must be registered with the Secretary of State’s Charitable Solicitations program.
Registration typically must be renewed annually.
Professional fundraisers or fundraising counsel may have separate registration requirements.

Tax-Deductible Donations

To allow donors to claim a tax deduction, donation acknowledgments should include:

The organization’s name and tax-exempt status language.
The date and amount of the contribution.
Whether any goods or services were provided in return (and a good-faith estimate of their value, if applicable).

Board’s Role in Fundraising

Support fundraising by sharing the mission, making introductions, and thanking donors.
Consider making a personally meaningful annual gift, as circumstances allow.
Help cultivate a culture of gratitude and stewardship.

Voice & Philanthropy: Our fundraising is an extension of our storytelling. We invite people into a shared narrative of healing, reflection, and community care.

7. Advocacy, Lobbying & Political Activity

What Is Allowed

As a 501(c)(3), the Foundation may engage in some advocacy, including educating the public about issues aligned with our mission. Limited lobbying may be permitted if it does not become a substantial part of our activities.

What Is Not Allowed

We may not support or oppose candidates for public office.
We may not coordinate with political campaigns.
We must avoid activities that could be viewed as partisan political intervention.

Colorado Considerations

Colorado may require additional reporting if lobbying activity exceeds certain thresholds. Organizations engaging in significant lobbying should seek legal guidance and consider tracking such efforts carefully.

Board Takeaway: We can use our voice for education and awareness, but we must stay nonpartisan and mindful of IRS and state rules when engaging in advocacy.

8. Core Board Policies

Certain written policies help protect the organization and clarify expectations for board and staff. Common policies for Colorado 501(c)(3)s include:

Conflict of Interest Policy

Defines what counts as a conflict, requires disclosure, and establishes procedures for handling situations where board or staff members have personal or financial interests in matters before the organization.

Whistleblower Policy

Encourages reporting of concerns about illegal or unethical conduct and protects individuals from retaliation when they raise concerns in good faith.

Document Retention & Destruction Policy

Outlines how long the organization will retain various records (e.g., financial statements, minutes, personnel files) and how documents should be securely destroyed when appropriate.

Gift Acceptance Policy

Helps the organization decide which gifts it can accept, and under what conditions, especially for non-cash gifts, restricted funds, or complex assets.

Board Action Idea: Schedule a Governance review once per year to confirm that core policies are in place, up to date, and understood by board and key staff.

9. Risk Management & Document Retention

Common Nonprofit Risks

Misuse or misallocation of funds.
Inadequate internal controls over finances.
Lack of clear policies or board oversight.
Failure to file required reports or returns.
Inadequate insurance coverage.

Insurance Considerations

D&O (Directors & Officers) insurance to protect board members acting in their official capacity.
General liability insurance for events, programs, or physical spaces.
Professional liability or cyber coverage, where appropriate.

Document Retention

Colorado nonprofits should retain key documents for specific periods. While detailed schedules vary, common retention guidelines include:

Governing documents (Articles, bylaws) – permanently.
Board minutes and resolutions – permanently.
Tax returns and financial statements – typically 7 years or more.
Payroll, personnel, and grant records – according to legal and funding requirements.

Board Practice: Once a year, review insurance coverage, major contracts, and document retention practices with staff or advisors to ensure they still fit our size, risk profile, and activities.

10. Annual Compliance Calendar & Checklist

Annual Compliance Checklist

File Colorado Periodic Report with the Secretary of State.
Renew Colorado Charitable Solicitation registration, if required.
File annual IRS Form 990, 990-EZ, or 990-N.
Review and approve annual budget.
Confirm and update list of board members and officers.
Review core policies (Conflict of Interest, Whistleblower, Document Retention, Gift Acceptance).
Conduct at least one board self-evaluation or governance check-in.

Sample Annual Calendar (High-Level)

Q1 (Jan–Mar)

Board meeting: review prior year, approve Form 990 (if ready).
Confirm grant and fundraising priorities for the year.

Q2 (Apr–Jun)

Review program impact and outcomes.
Check status of Colorado registrations and good standing.

Q3 (Jul–Sep)

Begin planning for next year’s budget.
Board development: training, retreat, or strategic discussion.

Q4 (Oct–Dec)

Approve budget for next year.
Review key policies and board roster.
Year-end fundraising and donor stewardship.

Board Practice: Customize this calendar to our actual fiscal year, filing deadlines, and program cycles, then revisit it at least annually.

11. Board Onboarding Checklist

This checklist can be used each time a new board member joins The Art of Drinking Water Foundation.

Documents to Share

Bylaws and Articles of Incorporation.
IRS determination letter and recent Form 990.
Most recent annual report or program summary.
Current budget and latest financial statements.
Board roster, officer list, and committee descriptions.
This Colorado 501(c)(3) Board Handbook.

Orientation Topics

Mission, vision, values, and story of the Foundation.
Overview of programs and key partnerships.
Board roles, expectations, and meeting rhythm.
Financial overview and budget basics.
Fundraising expectations and culture of philanthropy.
Review of key policies (Conflict of Interest, etc.).

Board Member Commitments

Attend and participate actively in board meetings.
Stay informed about the organization’s work and environment.
Honor confidentiality and ethical standards.
Support fundraising and community outreach as able.
Live our values in how we represent the Foundation.

Voice of Welcome: Onboarding is more than paperwork. It’s an invitation into the story, the community, and the shared responsibility of this work.

12. Key Terms & Resources

Glossary of Common Terms

501(c)(3): Section of the Internal Revenue Code that grants tax-exempt status to qualifying charitable organizations.
Articles of Incorporation: The founding document filed with the state to create the nonprofit corporation.
Bylaws: Internal rules that govern how the board and organization operate.
Form 990: The annual information return that most tax-exempt organizations file with the IRS.
Periodic Report: Annual filing with the Colorado Secretary of State to maintain good standing.
Charitable Solicitation Registration: Registration required for many organizations that ask the public for donations.
Fiduciary Duties: Legal responsibilities of board members, including duties of care, loyalty, and obedience.

Useful Resource Types

While specific links may change over time, these are the types of resources board members can look for:

Colorado Secretary of State – business and charity filings.
IRS – exempt organizations, 501(c)(3) rules, and Form 990 instructions.
Colorado nonprofit support organizations and associations.
Legal and accounting professionals experienced in nonprofit law.

Ongoing Learning: Nonprofit law and best practices evolve. Board members are encouraged to attend trainings, workshops, or webinars on governance, finance, and nonprofit leadership.