Checklist: Has Your Non-Profit Completed

All Key Questions on New IRS Form 990?

By Karen A. Burns, CPA

Malin, Bergquist & Company, LLP

For non-profit and tax-exempt organizations which have not yet adopted the Internal Revenue Service’s new income tax reporting format, commonly known as Form 990, the year is growing short, and it is time to buckle down and complete the conversion. 

Effective for calendar year 2008, Form 990 was revamped by the IRS for the first time since 1979 to enhance transparency by providing a broader, more detailed picture of the non-profit organization, along with a basis for comparison with other organizations.  It also promotes compliance by more accurately reflecting the organization’s operations so the IRS may efficiently assess the risk of noncompliance.

All board members and executive officers of non-profits should be familiar now with the multitude of questions posed on Form 990.  Some especially important areas that need to be addressed for the first time may be found on Page 6, Part VI, Sections A, B and C – Governing Body and Management, Policies, and Disclosures. 

If your non-profit organization has yet to complete its first Form 990, it is critical that the following questions be answered, and that corresponding new policies and procedures be implemented by the next filing date.

• Question #10 - Was a copy of the Form 990 provided to the organization’s governing body before it was filed? 
  
  Governing Body is described as the group of persons authorized under state law to make governance decisions on behalf of the organization and its shareholders or members, if applicable.  Generally, this includes the board of directors or trustees.  A good practice is to have a copy of the return given to each board director to review prior to filing, address any questions, comments or changes arising from the review, making the appropriate changes and filing the return with the IRS.

• Question #12c – Does the organization regularly and consistently monitor and enforce compliance with the conflict of interest policy? 
  
  Assuming the organization has a conflict of interest policy in place, it is important to review the policy and monitor it on a regular basis (at monthly meetings for example) as opposed to having the document signed once a year and filing it away. 

• Question #15 – Did the process for determining compensation of the organization’s CEO, Executive Director, top management official, and other officers or key employees of the organization, include a review and approval by independent persons, comparability data, and contemporaneous substantiation of the deliberation and decision? 
  
  The recommendation is a committee, independent of the board of directors, which should annually review the performance of the personnel, look to other sources for comparability of wages and benefits (i.e. 990s of similar organizations via Guide Star, national office of the affiliate), document the information obtained and the recommendation made to the board regarding the compensation proposed.

Finally there is the question on Page 11, Section XI – Financial Statements and Reporting, Question 2c – If the organization’s financial statements have been compiled, reviewed or audited by an independent accountant, does the organization have a committee that assumes responsibility for oversight of the audit, review, or compilation of its financial statements and selection of an independent accountant?  A “Yes” or “No” response is required.  However, an explanation of the process is necessary and as is disclosure of whether or not the process has changed from the prior year.

Karen A. Burns is a member of the Not-for-Profit/Tax Exempt Organizations Group of the certified public accounting firm of Malin Bergquist (www.malinbergquist.com) of Erie and Pittsburgh, PA.