A source for tools, advice and training to control risks ... so you can focus on your nonprofit's mission

Proposed Changes to Form 990

The IRS recently introduced proposed changes to the Form 990, which is the annual report form that many nonprofits and all supporting organizations are required to complete and file with the IRS annually. (Private foundations file the IRS Form 990-PF, which the IRS has plans to redesign also.) The newly redesigned Form 990, which the IRS hopes will be in use by nonprofit organizations for their 2008 returns (filed in 2009), contains significant new questions about corporate governance. The IRS has stated that these questions were added because “in our view and experience, a well managed organization is likely to be a tax compliant organization.” The majority of the proposed questions on governance are located in Part III of the new form. The proposed new questions require a nonprofit to report:

the number of “independent” board members of the governing body;
whether the organization made any significant changes to the organization’s governing documents during the past year, and if so, to briefly describe the changes;
whether the organization has a conflict of interest policy, and if so, the number of transactions reviewed by the governing body under the conflict policy during the past year (This draft question has been challenged by several organizations as being impractical—but the gist of the IRS’s draft question is clear: “If you have a policy—are you using it, or is it collecting dust in a drawer?”);
whether the organization has a whistleblower policy;
whether the organization has a written policy on document retention and destruction;
whether the organization regularly documents the actions of the governing board and committees of the board, such as through board meeting and committee meeting minutes;
whether board members, or employees of the organization review and prepare the organization’s financial statements and whether an independent accountant provides any services such as a financial review or an independent audit; and
whether board members review the IRS Form 990 before it is filed.

The Center will be presenting two special Webinars that will provide board members, nonprofit advisors and staff the opportunity to learn more about risks arising from missteps in corporate governance:

October 3, 2007: “Outdated or Poorly Written Governing Documents: What Are the Risks and What Can You Do?”

November 7, 2007: “Mind the Paper and the Vapor: Document Destruction and Your Nonprofit”. For more information and to register, Click Here.

August 1, 2007

Corporate Governance Emphasized in the Redesigned IRS Form 990

Despite the dog days of summer, Congress and the IRS are turning up the heat on how charities govern themselves.

The IRS recently issued a redesigned draft of the IRS Form 990 and is seeking public comments on the draft through September 14, 2007. Be sure to take a look. The proposed form contains several new questions about governance (See the sidebar.) that signal both an increased focus by the IRS and charity regulators on nonprofit governance and also reflect the increased expectations of the donating public for nonprofit accountability.

To submit comments on the proposed Form 990 redesign: E-mail your questions and comments directly to the IRS at Form990Revision@irs.gov or send via USPS to:

IRS
Form 990 Redesign, SE:T:EO
1111 Constitution Avenue, NW
Washington, DC 20224

Last week the Oversight Subcommittee of the House Ways and Means Committee held hearings on “Tax-Exempt Charitable Organizations” during which representatives from the nonprofit sector, the IRS and the Government Accounting Office testified about continuing concerns with the lack of attention by boards to such governance matters as conflicts of interest, resulting in unreasonably high payments to insiders (including board members who are providing services to the charity), and to policies on the valuation of donations, continuing control by donors of gifts to nonprofits, commercial activities of nonprofits and more.

What is the Center doing about all this heat? We’re getting fired up!

The Nonprofit Risk Management Center wants to help you respond to your board members’ and stakeholders’ concerns about charity governance, and be ready to address the requirements of the new IRS Form 990. With this in mind the Center is designing new products and services such as workshops, Webinars and publications addressing charity governance issues. The Center is also pleased to introduce our newest staff member, Jennifer Chandler Hauge, whose over 15 years’ of legal experience lies in providing guidance to nonprofit boards on corporate governance and employment law issues.

Don’t forget that our publication, Pillars of Accountability: A Risk Management Guide for Nonprofit Boards contains helpful information on corporate governance. The book is a perfect “refresher course” on board roles and responsibilities for that first board meeting in the fall.

To view information on the book, visit: http://nonprofitrisk.org/store/pillars.shtml.

PLUS our online Risk Management Resource Center provides you with sample policies that, as highlighted in the proposed new IRS Form 990, nonprofits are expected to have in place, such as a whistleblower policy and document retention/destruction policy. The Center will be adding to our online library of sample policies in the coming months, so if there is a sample policy you’d like to see, please contact us.

Best wishes from all of us at the Nonprofit Risk Management Center for a cool August. Remember—we’re here to help you beat the heat!

October 3, 2007 Webinar

Outdated or Poorly Written Governing Documents
What Are the Risks and What Can You Do?

2–3 pm EDT

Bylaws, board minutes, codes of conduct, and other governance policies need to be clearly written and reflect how your nonprofit operates or they are of little value in protecting the organization. Their purpose is to provide commonality of behavior, which gives direction to the leadership and protection by intent in the event of a dispute, insurance claim or lawsuit.

Give them a common platform from which to evaluate the adequacy and effectiveness of current governing documents.
Provide a framework for addressing updates and other improvements to the documents.
Divide the task into manageable steps and create a schedule for review and revision.

October 23–25 — 2007 Summit for the Nonprofit Sector

This 2.5-day event offers a unique training, educational and networking opportunity for leadership of the nonprofit sector. Here’s a sample of what’s in store for you.

Oct. 25 — Working with a Broker or Agent and Putting Your Insurance Program Out to Bid

This session is ideal for nonprofit leaders who want to improve or maximize the services they receive from an insurance professional, typically an agent or broker who places coverage for the nonprofit. Attend this session to find out how you can take your relationship with an insurance advisor (agent or broker) to the next level. The presenters will also discuss possible strategies you might pursue when you realize that putting your program out to bid is in order. What factors support the decision to put your program out to bid, and what methods are most effective in selecting the best qualified providers?

READ about more Risk Management Sessions.