News from the IRS

For those of you who don't subscribe to the IRS's Exempt Organization Update here are some highlights:

1. Nothing revolutionary but they seem to have reorganized some of their existing resources into a new spot. Seems to be a bit better laid out, all in one place.
2. Commissioner Miller's latest remarks about nonprofit governance can be found here, a PDF of his remarks at the Western Conference on Tax Exempt Organizations in November 2008.
3. The IRS's 2009 Exempt Organization Work Plan. Read this PDF to find out what the Internal Revenue Service will be up to in 2009 with regards to nonprofits.

More Resources

Two more resources and links that I remembered I said I would share with all of our workshop participants.

The first is the the organization called BoardSource, a nonprofit dedicated to helping and improving nonprofit governance. They have a nice series of short books on governance, called the New Governance Series that touches on topics such as board organization, structure and financial management.

The other resource asked for was a sample gift acceptance policy which the new form 990 asks us for. It seems like those are pretty unique to the nonprofit but here is a list of ones that can be found on line from the Foundation Center. These could be used to help us get started crafting our own. If anyone has other sample policies they would like to share let me know and I will put them up here too.

New 990 To Do List

Even if your nonprofit is lucky enough to have a November 30 year end there is still plenty of stuff you need to be doing right now to get ready for this new reporting form. Thanks to Brian for this great list, it has been something I have been meaning to do for CAN as well as share with everybody. This is a work in progress, some things will be added as we go through this stuff but here is where it is so far:

THE NEW 990:
WHAT DO WE NEED TO DO RIGHT NOW?

Required Policies

• Conflict of interest policy
• Whistle blower policy
• Document retention and destruction policy
• Joint venture policy
• Expense reimbursement policy
• Non-standard gift acceptance policy
• Written debt collection policy (hospitals)

Practices & Procedures

• Need to prepare a written document which sets forth the procedures by which the Board of Directors will review the Form 990 before it is filed
• Document compensation reasonableness processes
• Professional fundraisers agreement
• Documentation regarding eligibility to receive grants

To Do List

• Estimate the total number of volunteers utilized during the year
• Identify any new program service activities conducted during the year
• Identify revenue and expenses for three largest program service activities
• Ensure that filing all 1099s when required to do (non-employee services in excess of $600)
• Prepare documentation to support classification of independent contractors
• Ensure that organization is preparing Form W-2G when required
• Make sure register with California Attorney General if conducting raffles and make sure undertake backup withholding if necessary
• Identify non-cash contributions in excess of $5,000 for which public charity disposed of within 3 years after receiving
• Document meetings of Board of Directors committees with authority to act
• Write-up re how satisfy public disclosure requirements
• Identify all key employees under the expanded definition
• Break out the revenue and expenses from gaming activities from the general fundraising activities
• Update Chart of Accounts (and audited financial statements) to include the expense categories listed on Part IX of the redesigned Form 990

Even if the phrase, "new 990" wants to make you stick your finger in your ears and say, "lalalalalalalalalalala" you can still go through this list and make sure your organization is more prepped than it is right now for the big event.

And please let me know if you think anything is missing from the list!

More Boot Camp Questions & Answers

Q: Where do I find out about raffles and raffle registration in California?

A: The California Attorney General's Office is where you get the forms and the CAN website has a nice FAQ section on raffles.

Q: Our organization collects funds and items from donors to give to another organization. How do we handle these transactions in our accounting system?
A: It sounds like these might be considered pass-through transactions and subject to SFAS 136 rules. For a clear description of these rules and how to handle them check out this link for more information and here to buy the book.

Q: How do we prove that the board has reviewed our 990 before we submit it?
A: [The new form 990 has a yes or no question as to weather or not the the governing body of the nonprofit has reviewed the form 990 prior to submission. Can you guess what answer they want to see here?]
From the Independent Sector's guide to the new 990:

The organization must explain (in Schedule O) the process, if any, it follows to have officers, board members, committees, or management review the prepared Form 990, when that review happened, and the extent of the review. The instructions clearly say “If no review was conducted, state ‘No review was conducted.’ ” The IRS does not require or recommend any particular procedure for reviewing the Form, but most organizations will want to ensure that their senior staff managers and/or the board committee responsible for overseeing financial policies and procedures have a chance to review the Form before filing.

The New 990 - Financial Accountability Resources

I'm going to start off an occasional series about the new form 990. As we move closer to the end of 2008 and closer to the time when we have to start using this form it is important to look at our organizational and financial systems and make sure they are able to give us the information we need so we can fill out this report or get the right information in a timely fashion to those who will fill it out for us.

An important aspect of what the updated form 990 is looking for is financial accountability. There are several questions in the governance section (pdf) of the form that ask us about our governance practices. Do we have the minutes of Board of Director meetings? Do we have a document retention and destruction schedule? Is there whistle blower policy at our nonprofit? Not sure what some of the term s mean exactly, or wonder if the IRS has a different meaning for a word? Check out their handy Appendix and Glossary (both pdf's). Both excellent resources.

Much of this is similar to what for-profits have to have because of the Sarbanes Oxley-act of 2002. A great resource for implementing policies like those asked for can be found here on the National Council of Nonprofit Associations website. I encourage you all to read about what information the new 990 will ask to keep track of and have on hand before we or our auditors have to fill this out. Preparation will save us time and money

Questions and Answers

Thanks to everybody who came to any one of the six workshops I presented at in the last month. Nonprofits from Orange County to Maine all seem to be interested in nonprofit accounting, governance issues, risk management and the new form 990.

I get asked a lot of questions at these events and the ones I can't answer I look up and respond to here. Unless I loose the paper with the questions on it.* To that end let me begin with the first one:

1. What is the difference between a Commercial Fundraiser and Fundraising Council? What are the rules that tell us how to work with them?
   In a nut shell a Commercial Fundraiser hold the funds they solicit on your behalf and then gives them to your organization less any fee. Fundraising Council does not hold the funds for you. Contracts between CA nonprofits and commercial fundraisers need to be approved by the California Attorney General's office. For all the details please see the overview of 2004's Nonprofit Integrity Act (pdf).
2. How do we change our nonprofits name?
   Need to file updated Articles of Incorporation with the state and let the IRS know and anywhere you have registered to solicit funds. This guy has the goods.
3. This came up during a discussion of the new Schedule M (pdf) of the updated form 990 which talks about listing and valuing donated non-cash items (if you get more then $25,000.00 of them). The question was:
   If we have a special event to raise funds and receive proceeds from a silent auction, where do we report the income?
   In part VIII of the core form with the revenue and in any of the appropriate schedules. Schedule M is sole concerned with the valuation of the donated items. The IRS wants to make sure donors are not inflating the value of items donated to the nonprofit. For more on valuing donated items and how to book these please click here.
4. Boards of Directors
   No specific questions here but clear from the tone of the comments and question at these events that many of us have an occasional issue with our boards. For an interesting study on this I would direct you here to the Urban Institute. For resources to help Boards out I would direct you to start with these folks.
   

*Sorry if I missed your question. Please email me or post a comment here if you want me to look up an answer for you.

IRS Round Up

Here is a list of recent stories and information from the Internal Revenue Service that affect our sector:

1. Not exactly recent but a timely reminder nonetheless about the restrictions placed on advocacy by 501(c)3's. We can and should lobby but we need to make sure we do it the right way.
   
2. Gotta beef with a nonprofit? Want to file a complaint? Here is where to do it and what the process is like.
   
3. Audit? Compliance Check? Examination? Whats the difference and why is it happening to my organization? Find out here.
4. Despite the fact that we file a "tax" return to them, one of the main goals of the 990 and the IRS's Exempt Organizations Division is governance and making sure we are serving a charitable purpose. They have made some changes to their good governance guides and resources, see the update here.

Nonprofit Audit Committee Toolkit

Does your organization have and audit committee? Is it supposed to have one? Even if the answer is "no" I do recommend you have one in addition to your Finance Committee. The nice folks at the AICPA have put together a tool kit just for your audit committee to help them get there job done. From the website:

Audit committees have a big job to do in an organization—tough when the members have other responsibilities and the audit committee role is a part-time job with huge accountability. The AICPA Audit Committee Toolkit: Not-for-Profit Organizations is the needed help for audit committees to do the job they need to do as effectively and efficiently as possibly.

You can find the kit here with details on all of its elements. For those of you who don't want to download all this info you can buy it as well.