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Form 990 Update
Form 990 Update
Form 990 Update
Form 990 Update
Form 990 Update
Form 990 Update
Form 990 Update
Form 990 Update
Form 990 Update
Form 990 Update
Form 990 Update
Form 990 Update
Form 990 Update
Form 990 Update
Form 990 Update
Form 990 Update
Form 990 Update
Form 990 Update
Form 990 Update
Form 990 Update
Form 990 Update
Form 990 Update
Form 990 Update
Form 990 Update
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Form 990 Update

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Form 990 Update for all nonprofit organizations provided by nonprofit accounting & CPA firm, Tate & Tryon.

Form 990 Update for all nonprofit organizations provided by nonprofit accounting & CPA firm, Tate & Tryon.

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  • 1. Governance Issues Related to theForm 990May 12, 2011 Douglas Boedeker, CPA, CMA g Dboedeker@tatetryon.com 202-419-5106
  • 2. Course Outline Form 990 Background g Overall Good Governance Themes Compensation Policies – Schedule J Form 990, Part VI – The Governance Centerpiece Consideration of the other schedules Checklist of Required Schedules 1 © Copyright Tate & Tryon 2011
  • 3. Background on the Federal Form 990 Publicly available document, easily accessed via www.guidestar.org Significant redesign issued in 2008. The 990 now consists of a 12 page “core form” supplemented by various supporting schedules. Major focal points for the redesigned form are transparency regarding governance and compensation. The IRS believes that a well-governed organization is more likely to be a compliant organization. 2 © Copyright Tate & Tryon 2011
  • 4. Overall Themes of Good Governance per the 990 The Organization’s best interest is always top priority. Have an engaged, independent Board. Understand the regulations regarding tax-exempt organizations. Have written policies and p p procedures in p place whenever p possible. Transparency fosters compliance. 3 © Copyright Tate & Tryon 2011
  • 5. Compensation – Schedule J 4 © Copyright Tate & Tryon 2011
  • 6. Compensation – Schedule J Part I of Schedule J performs two functions: - Increases Transparency of Executive Perks - Helps the IRS Look for Likely Candidates for Intermediate Sanctions 5 © Copyright Tate & Tryon 2011
  • 7. Schedule J – Let’s Talk Intermediate SanctionsIf an “Excess Benefit Transaction” takes place…..I. Initial 25% excise tax is imposed on the disqualified person receiving the benefit. (Tax is levied on the amount of the excess benefit.)II. A 200% excise tax is then imposed on the disqualified person if the excess benefit is not corrected on a timely basis.III. Organization managers who knowingly participate in the excess benefit transaction are subject to a 10% excise tax. 6 © Copyright Tate & Tryon 2011
  • 8. Things to watch on Schedule J, Part I Line 1a: Be sure the organization can support why these benefits are “reasonable”. Follow written policies regarding payment of these perks! Line 2: Be sure to have a policy in place so that you can check “Yes” to this box. Line 3: The more boxes you check in this section, the better. Lines 5 & 6: These are potential traps – especially Line 6. Line 7: It is easier for the IRS to attack “non-fixed” payments Lines 8 & 9: If you can check these “Yes”, that’s a bonus! y 7 © Copyright Tate & Tryon 2011
  • 9. Schedule J – Governance Considerations Understand your organization’s compensation practices. The creation of a board-level Compensation Committee can help inject independence into the process. Written compensation policies and procedures can save a lot of potential angst. Remind folks that the potential excise taxes are levied on them! 8 © Copyright Tate & Tryon 2011
  • 10. Form 990, Part VI – The Governance Centerpiece 9 © Copyright Tate & Tryon 2011
  • 11. Form 990, Part VI - Most Talked About Policies Section B, Line 12a, b, & c: Conflict of Interest - Is annual disclosure required? - Does the entity monitor and enforce compliance? Section B, Line 13: Whistleblower Policy Section B, Line 14: Document Retention and Destruction Policy Section B, Line 10b: Do you have written policies governing the conduct of your chapters? Section A, Line 8a & b: Do you keep meeting minutes? 10 © Copyright Tate & Tryon 2011
  • 12. Form 990, Part VI – The Annoying Questions Section A, Line 2: Family & Business relationships with Board members and key employees - You only need to ask them, you can’t force them to respond! - Don’t forget the “in the ordinary course of business” exception. - Consider i C id incorporating questionnaire i t annual conflict of i t ti ti i into l fli t f interest policy t li certification. Section B, Line 11a & b: Have all members of the governing body received a copy of the Form before it was filed? And, how does the organization review the 990? 11 © Copyright Tate & Tryon 2011
  • 13. Form 990, Part VI – The Trap Questions Section A, Line 1b: The number of “independent” voting Board members Section B, Line 15a & b: Was compensation for CEO and other key employees set by independent persons? - Really more of a trap for the CEO’s compensation, many organizations answer “No” to Line 15b. S ti B Li 16 & b D you participate i j i t ventures with t Section B, Line 16a b: Do ti i t in joint t ith taxable bl entities? If so, do you have written policies to evaluate the allowability of such an endeavor? Section A, Line 5: Was there a “significant diversion” of assets? Part C, Line 18: Be sure to check at least one of the boxes! C 12 © Copyright Tate & Tryon 2011
  • 14. Schedule L – Transactions with Interested Persons 13 © Copyright Tate & Tryon 2011
  • 15. Schedule L – Things to Consider Another “intermediate sanctions” trap! Disclosure is the key thing, not everything reported here is necessarily “bad”. - An inadvertent omission can make something look much worse. Documentation and monitoring of these items is key. Involve the Board whenever possible. 14 © Copyright Tate & Tryon 2011
  • 16. Grants and AssistanceSchedule F – Outside USA Schedule I – Inside USA 15 © Copyright Tate & Tryon 2011
  • 17. Grants & Assistance Key concept is whether the entity maintains records to document: 1. The amount of the grants and assistance 2. The grantee’s eligibility for the grant or assistance 3. The selection criteria used to award the grants or assistance In addition, how does the organization monitor the use of grant or assistance funds? - Written d W itt documentation is always b t t ti i l best. Schedule F is subject to particular scrutiny. Concerns are private inurement, tax compliance, and illegal acts. 16 © Copyright Tate & Tryon 2011
  • 18. Schedule M – Noncash Contributions 17 © Copyright Tate & Tryon 2011
  • 19. Schedule M – A few things to consider Line 30 is designed to help detect valuation errors on the part of donors. - Be wary of entering into any such arrangement. Line 31, Gift Acceptance Policy, is a good idea. If you don’t have a written gift acceptance policy, consider i l t li id implementing one. ti Line 32a is designed to reveal improper fundraising arrangements. If you say yes t this question, you likely should b filli out S h d l G S to thi ti lik l h ld be filling t Schedule G, Supplemental l t l Information Regarding Fundraising or Gaming Activities. 18 © Copyright Tate & Tryon 2011
  • 20. Schedule C – Political Campaign and Lobbying Activities 19 © Copyright Tate & Tryon 2011
  • 21. Schedule C – Political Campaign and Lobbying Activities Remember, for 501(c)(3)’s, POLITICAL activity is prohibited. Lobbying for a 501(c)(3) organization is permitted, but it cannot be a significant component of the entity’s activities. Schedule C gives you ample space to admit your sins! It’s a great idea to have documented policies regarding what governmental affairs activity is permissible. 20 © Copyright Tate & Tryon 2011
  • 22. Form 990, Two other points to watch Part IV, Line 36: For 501(c)(3) organizations, “Did the organization make any transfers to an exempt non-charitable related organization?” - Be careful about the flow of funds between related entities. Make sure payments from a (c)(3) to a non-charity are for services rendered or cost reimbursements. Part XII, Line 2c: “Does the organization have a committee that assumes responsibility for oversight of the audit, review, or compilation of its financial s a e e s and selection of an depe de accountant?” statements a d se ec o o a independent accou a - Not a mandatory thing for IRS purposes, but often a great governance tool. 21 © Copyright Tate & Tryon 2011
  • 23. Form 990 – Checklist of Required Schedules Read this on the very first day of each quarter. This can be an excellent tool to provide a heads-up if new governance issues have arisen. Plus, it can make your 990 prep easier if you know what information you need to gather! 22 © Copyright Tate & Tryon 2011
  • 24. Good Luck! 23 © Copyright Tate & Tryon 2011

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