June 2nd, 2009 Nancy
If you’ve worked at all with the 2008 Form 990, or if you’ve talked with any nonprofit accountant about it, you know that it’s been greatly rearranged, redesigned, and made much longer. While the balance sheet and statement of activities haven’t changed all that much, there are new sections full of questions that seem to be causing a great deal of worry and flurry, and this seems to be true most of all of Part VI: Governance, Management and Disclosure. If management hasn’t gotten around to passing and instituting a whistle-blower protection policy, a conflict of interest policy, or a document retention and destruction policy, they feel concern at answering “no” to those questions.
I offer you some soothing words about this section. First, remember that your organization will only need to file the full-length Form 990 for 2008 if its gross receipts hit $1,000,000 in the fiscal year that began sometime in that year and its total assets exceed $2.5 million on the last day of the year. The alternate form for smaller organizations, the 990 EZ, doesn’t include the section on Governance, Management and Disclosure, which is not to say that it won’t in the future. (Remember, though, that the filing threshold drops next year to $500,000 and again the year after, to $200,000 where it stays. The total asset threshold drops, too.)
Secondly, in its 2009 Work Plan, IRS explains that it is conducting five compliance initiatives, and Governance is one of them. Form 990 Part VI makes it very clear that the policies being asked about are not required by the Internal Revenue Code – it says so in parentheses right after the title. So why is IRS asking about them?
In the description of their “compliance initiative”, they say they “will begin identifying Form 990 governance questions that could be used in conjunction with other Form 990 information in possible compliance initiatives, such as those involving executive compensation, transactions with interested persons, solicitations of noncash contributions, or diversion or misuse of exempt assets.” I understand that to mean they are gathering information about the best questions they could ask to uncover abuse in these arenas. They have made it clear that there will be no negative consequences to organizations that answer “no” to these questions when it seems that “yes” should be the only acceptable answer. At least for the time being.
That said, the advice I heard from more than one presenter at the Not-for-Profit Conference I attended earlier this month is that each and every organization should take these issues seriously, putting the policies and practices in place in the coming year. For some organizations, this will not be easy due to lack of interest on the part of management or to understaffing or to board meetings spaced months apart, so I encourage you to read Part VI Sections A & B and make a work plan now to address each issue.
Two issues that will require more than simply passing a policy are conflict of interest and the process for setting executive compensation. Line 12a asks about a written conflict of interest policy and 12b asks “Are officers, directors or trustees, and key employees required to disclose annually interests that could give rise to conflicts?” Further, 12c asks “Does the organization regularly and consistently monitor and enforce compliance with the policy? If yes, describe in Schedule O how this is done.” Questions about the process for setting executive compensation are in 15 – 15b and they are equally specific.
Start now to get these policies and procedures in place, if you haven’t already. The effort of getting any needed changes underway will bear fruit soon and leave you feeling good after filing your next 990 rather than wishing you could hide under your desk.
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October 21st, 2008 Nancy
Have you looked at the new Form 990, the one for years beginning in 2008? Last summer, three issues of the Not-for-Profit Accounting Help newsletter were devoted primarily to the financial sections of the 990, but I think you’ll agree that the biggest changes to the form are in the non-financial parts. IRS has taken it upon itself to gather a lot of information about how exempt organizations are governed, and there’s a fair amount of discomfort with that decision among my professional colleagues.
Whether you agree that it’s a good move or think that IRS should stay out of these areas, you’ll be faced with preparing the form – or assisting your auditor or accountant in preparing it - sooner or later. The task will require that you understand thoroughly the structure and authority of the board and its committees as well as the organization’s policies in more depth than you may otherwise have the need to.
Completing the 990 may be more of a challenge than you would like if your organization hasn’t completely achieved good governance yet. Do you know where the board policies are? I hope they’re collected safely in a binder that’s kept in the office, given to each new board member, and recorded digitally as well. Has your board passed a whistleblower policy or a conflict of interest policy? Has it written a job description for its members?
If you believe you’re not completely prepared, here’s a resource. Friends of mine, Randa Cleaves and Jonathon Abramson, are partners in Avenue2possibilities LLP. They provide planning, development and training services to non-profit organizations. They have put together a workbook and checklist of actions “to ensure that your nonprofit organization will be ready” for the changes in the 990. And they are making this wonderful tool available to you on their website. www.accga2p.com/materials takes you directly to the page you’ll want.
“IRS Form 990 Revisions Made Easy” will lead you through those tasks you may have been putting off for months, such as finding the version of your mission statement that was submitted to the IRS with your application and making sure it’s up-to-date, or drafting a record retention policy for your board to pass. Each section discusses an issue thoroughly, giving background and a description of what IRS believes constitutes good governance, and then poses questions, suggests actions, and makes related recommendations.
Topics it covers include organizational documents, governing body, governance and management policies, investments, fundraising, conflicts of interest, and more. All the sources are footnoted so you can go to the original material if you want to for any reason.
In addition to the workbook, you’ll find examples of entire policies, such as fundraising, and whistleblower protection. If your board or management team has found the task of crafting policies to be difficult, these should be a great help.
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July 9th, 2008 Nancy
The IRS has mostly completed its project of revamping the Form 990, the one most nonprofits file each year. It’s now got a main form of eleven pages and a checklist of required schedules with 37 questions on it to determine how many of the possible 18 schedules you’ll need to complete. It’s MUCH longer than the old one.
The good news for accountants, boookkeepers and finance managers who work for nonprofits is that the basic accounting required to complete the form hasn’t changed much. I’ve been digging into the detail lately; you can read my newsletter on the Form 990 at www.NFPAccountingHelp.org - go to Free Resources from the home page.
What about this new form worries you? Have you updated your accounting system to make it easy to pull the numbers you’ll need when you prepare this form? What have you figured out - or not - about the new 990?
Post a comment and tell us about your experience so far!
Nancy
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