Governance Issues Related to theForm 990May 12, 2011                      Douglas Boedeker, CPA, CMA                      ...
Course Outline   Form 990 Background                 g   Overall Good Governance Themes   Compensation Policies – Sched...
Background on the Federal Form 990 Publicly available document, easily accessed via www.guidestar.org Significant redesi...
Overall Themes of Good Governance per the 990 The Organization’s best interest is always top priority. Have an engaged, ...
Compensation – Schedule J     4                            © Copyright Tate & Tryon 2011
Compensation – Schedule J Part I of Schedule J performs two functions:  -   Increases Transparency of Executive Perks  - ...
Schedule J – Let’s Talk Intermediate SanctionsIf an “Excess Benefit Transaction” takes place…..I. Initial 25% excise tax i...
Things to watch on Schedule J, Part I Line 1a: Be sure the organization can support why these benefits are  “reasonable”....
Schedule J – Governance Considerations Understand your organization’s compensation practices. The creation of a board-le...
Form 990, Part VI – The Governance Centerpiece     9                                                 © Copyright Tate & Tr...
Form 990, Part VI - Most Talked About Policies Section B, Line 12a, b, & c: Conflict of Interest  -   Is annual disclosur...
Form 990, Part VI – The Annoying Questions Section A, Line 2: Family & Business relationships with Board members and  key...
Form 990, Part VI – The Trap Questions Section A, Line 1b: The number of “independent” voting Board members Section B, L...
Schedule L – Transactions with Interested Persons     13                                                    © Copyright Ta...
Schedule L – Things to Consider Another “intermediate sanctions” trap! Disclosure is the key thing, not everything repor...
Grants and AssistanceSchedule F – Outside USA   Schedule I – Inside USA    15                                             ...
Grants & Assistance Key concept is whether the entity maintains records to document:  1.    The amount of the grants and ...
Schedule M – Noncash Contributions     17                                     © Copyright Tate & Tryon 2011
Schedule M – A few things to consider Line 30 is designed to help detect valuation errors on the part of donors.  -   Be ...
Schedule C – Political Campaign and Lobbying Activities     19                                                  © Copyrigh...
Schedule C – Political Campaign and Lobbying Activities Remember, for 501(c)(3)’s, POLITICAL activity is prohibited. Lob...
Form 990, Two other points to watch Part IV, Line 36: For 501(c)(3) organizations, “Did the organization make any  transf...
Form 990 – Checklist of Required Schedules Read this on the very first day of  each quarter. This can be an excellent to...
Good Luck!    23             © Copyright Tate & Tryon 2011
Upcoming SlideShare
Loading in …5
×

Form 990 Update

519 views

Published on

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

Published in: Business
0 Comments
0 Likes
Statistics
Notes
  • Be the first to comment

  • Be the first to like this

No Downloads
Views
Total views
519
On SlideShare
0
From Embeds
0
Number of Embeds
1
Actions
Shares
0
Downloads
9
Comments
0
Likes
0
Embeds 0
No embeds

No notes for slide

Form 990 Update

  1. 1. Governance Issues Related to theForm 990May 12, 2011 Douglas Boedeker, CPA, CMA g Dboedeker@tatetryon.com 202-419-5106
  2. 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. 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. 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. 5. Compensation – Schedule J 4 © Copyright Tate & Tryon 2011
  6. 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. 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. 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. 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. 10. Form 990, Part VI – The Governance Centerpiece 9 © Copyright Tate & Tryon 2011
  11. 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. 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. 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. 14. Schedule L – Transactions with Interested Persons 13 © Copyright Tate & Tryon 2011
  15. 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. 16. Grants and AssistanceSchedule F – Outside USA Schedule I – Inside USA 15 © Copyright Tate & Tryon 2011
  17. 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. 18. Schedule M – Noncash Contributions 17 © Copyright Tate & Tryon 2011
  19. 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. 20. Schedule C – Political Campaign and Lobbying Activities 19 © Copyright Tate & Tryon 2011
  21. 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. 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. 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. 24. Good Luck! 23 © Copyright Tate & Tryon 2011

×