For Baltimore nonprofits, new 990 is more than just a tax form
Aug 24, 2009 | Download this article (.PDF)
You are being watched.
That’s right, if you are part of a tax-exempt nonprofit, your organization is being closely watched not only by the IRS, but also the general public.
Nonprofit executives should be aware by now that Form 990s are published on the Internet by GuideStar. This site is used frequently by individuals to view your annual results. With the increased disclosures now required by the IRS on the new Form 990, it is extremely important for each organization to demonstrate that it has instituted sound governance and is in compliance with IRS requirements and public expectations.
Once a relatively simple return to complete, the Form 990 has become more time consuming and requires active participation by management and the board to ensure complete disclosure and compliance. The IRS is accomplishing its goal of enhancing the usefulness of the Form 990 as a compliance mechanism for federal, state and public scrutiny of nonprofits.
Once upon a time, there was just the Form 990 and its accompanying Schedule A. Several years ago a second schedule, Schedule B, was added, which required a detailed listing of significant contributors. Today there are schedules that go through the alphabet to the letter O along with Schedule R.
That equates to 16 schedules, quite an increase and with even more required disclosures on each one. Every organization will need to determine which schedules are required based on their own set of facts and circumstances. The majority of organizations will be completing more than the two schedules from the past.
Completing Schedule A of Form 990, related to the public support test, has always been important. But to truly determine compliance with the appropriate IRS rules for maintaining an organization’s publicly supported status versus being reclassified as a private foundation, certain calculations had to be done outside of the form.
Unless you understood the mechanics, the majority of the general public could not determine if you were in compliance. Now these calculations are incorporated in the form and the results of compliance or noncompliance are right there on the form for everyone to see, including the IRS.
Make the burden of these additional disclosures a win for your organization. Institute the policies and procedures that Form 990 and its schedules now require and be sure to highlight in detail your accomplishments and mission.
In this electronic age, decision makers want readily available information and results. If you established a Web site, you already know this. Make the Form 990 part of your marketing and fundraising tools to demonstrate the transparency of your organization and to highlight your accomplishments. Society’s basic instinct is to support organizations that can demonstrate success and be trusted.
Here are some of the more significant questions and disclosures each organization needs to address:
1. Do you hold board and committee meetings and are written minutes produced?
2. Is the completed Form 990 provided to the governing board for review? A description of the review process must be provided.
3. Do you have a written conflict-of-interest policy with annual disclosures, and is it consistently monitored and enforced? A description of the monitoring process must be provided.
4. Do you have a written whistleblower policy and a document retention and destruction policy?
5. Do you have a compensation policy? Describe the process for determining compensation for management personnel, officers and other key employees. The definition of key employees has been revised, so additional employees will likely fall under this category.
What does a “no” answer to these questions really say about your organization? If you cannot describe in detail how you monitor compliance and determine compensation, for example, what impression do you think the general public — your current donors and prospects — will have about your organization, not to mention the IRS?
It is extremely important that all appropriate members of a nonprofit understand the impact of the new Form 990, from the board, to management, to program staffers and especially fundraising personnel.
The purpose here isn’t to provide instructions on completing the new Form 990 but to highlight the importance of understanding the new requirements and to determine what your organization needs to do now to be in compliance.
More importantly, make sure you are presenting to the public the best you can be. Take this opportunity to enhance your reporting. After all, you are being watched.
http://www.bizjournals.com/baltimore/stories/2009/08/24/focus2.html
Email