Nonprofit organizations in Illinois are navigating new legal and funding risks due to federal executive orders and agency directives that have increased scrutiny of diversity, equity, and inclusion (DEI) policies, programs, and practices.

It is important to note that there is no single definition of DEI. Instead, “DEI” is often used as a catchall term. As a result, the legal risk surrounding a “DEI” policy, program, and practice depends on the specific activity and how it is administered.

The DEI Risk Assessment Checklist supports nonprofit leaders in identifying areas that may create legal risk or draw scrutiny from federal agencies, particularly for organizations that receive or seek federal funding. When an organization identifies areas of concern, the Checklist offers practical steps to reduce exposure and strengthen compliance.

It is important to monitor developments as the federal government continues to issue updated directives and guidance. The resources below offer additional analysis for nonprofits that want a deeper understanding of recent federal actions, the legal risks related to DEI programs, and additional recommendations for how to move forward.

Maintaining 501(c)(3) status requires ongoing compliance with federal tax law regarding organizational purposes and operations, governance, and reporting.  These rules can be complex in application and are not always intuitive.  Strong governance policies and practices help organizations comply with the rules and safeguard their status.  They also help organizations remain stable and better positioned to respond to questions from regulators or funders.

Common compliance issues include alignment among mission, activities, and IRS-approved 501(c)(3) purposes; adoption and enforcement of required policies and practices; accurate Form 990 reporting; and legally compliant employment practices. Regular review of these areas helps organizations identify risks early and strengthen internal operations.

A proactive approach to governance supports long-term compliance and organizational resilience.

Many federal agencies now require nonprofits receiving discretionary federal funding to certify compliance with recent executive orders, including those related to DEI and “gender ideology.” These certifications often appear in grant applications, renewals, or funding agreements, and the language can vary across agencies.

Signing a certification is not a formality. If an organization knowingly submits a signed statement that is not accurate in any respect, including affirming compliance with the recent executive orders, it may face legal risk under the False Claims Act, which allows the government to seek significant financial penalties.

Before signing, nonprofits should review grants applications, funding agreements, and contracts carefully and assess whether their current policies, programs, and practices comply with the requested certifications. Consulting with a lawyer is advisable to help organizations understand obligations and reduce risk.