form 990: making it work for your organization

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Form 990:

Making It Work for Your Organization

Harmon Burstyn

August 8, 2012


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Advising nonprofits in:

• Strategy

• Planning

• Organizational Development

www.synthesispartnership.com

(617) 969-1881

[email protected]

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Harmon Burstyn CPA

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The Not so New Form 990: Make It Work for Your Organization

Harmon Burstyn, CPA

[email protected]

www.irs.gov

www.guidestar.org

Attorney General

Secretary of State

www.foundationcenter.org

www.boardsource.org

Harmon Burstyn, CPA 5


The Not so New Form 990: Make It Work for Your Organization

Form 990 had not been significantly revised since

1979.

Exempt organizations (EO) have increased in size,

diversity, and complexity.

Emphasis on the EO governing body, governance

and management policies, and its disclosure

practices.

More schedules, no attachments.

Form structured to allow EO to tell their story.


Exempt organizations have increased in size, diversity, and complexity.

Nonprofit groups account for 5% of the U.S.

gross domestic product

Contribute $666 billion to the economy

through their actions

Many charitable nonprofit organizations have

international operations

Multiple revenue streams

Form 990 Filing Phase-In

Form 990:

2008—Gross receipts ≥ $1,000,000; total assets ≥

$2,500,000

2009—Gross receipts ≥ $500,000; total assets ≥

$1,250,000

2010—Gross receipts ≥ $200,000; total assets ≥

$500,000

Form 990EZ—All others above $50,000 average

Form 990N—Gross receipts $50,000 or less



Emphasis on governance, management policies, and its disclosure practices.

Sarbanes-Oxley’s impact

Sen. Charles Grassley, Senate Finance

Committee

Sarah Hall Ingram, Commissioner, Tax

Exempt and Government Entities, IRS

Mismanagement, fraud, unrelated business

income tax (UBIT)


More schedules, no attachments

“Core” Form 990 is 12 pages

16 “possible” schedules

No attachments (Schedule O)


16 Schedules

A – Supplementary Information

B – Schedule of Contributors

C – Political Campaign and Lobbying Activities

D – Supplemental Financial Statements

E – Schools

F – Statement of Activities Outside the United States

G – Supplemental Information Regarding Fundraising or

Gaming Activities

H – Hospitals


16 Schedules - Continued

I – Grants and Other Assistance to Organizations,

Governments and Individuals in the United States

J – Compensation Information

K – Supplemental Information on Tax-Exempt Bonds

L – Transactions With Interested Parties

M – Non-Cash Contributions

N – Liquidation, Termination, Dissolution or Significant

Disposition of Assets

O – Supplemental Information to Form 990

R – Related Organizations


Form 990 structured to tell your story.

Part I, Line 1

Part III, Line 1

Part VI

Schedule “O”

Direct users to EO website

Form 990, website, marketing materials all

compliment each other


Redesigned Form 990 Required Policies

Conflict of interest policy – Part VI, Line 12

Whistleblower policy – Part VI, Line 13

Document retention and destruction policy – Part VI,

Line 14

Joint venture policy – Part VI, Line 16

Expense reimbursement policy – Schedule J, Part 1,

Line 1


Redesigned Form 990 Practices & Procedures

Prepare a written document setting forth the procedures by which the Board of Directors will review the Form 990 before it is filed – Part VI, Line 11

Document compensation reasonableness processes – Part VI, Line 15

Obtain/retain professional fundraisers agreement – Schedule G, Part I, Line 2

Documentation regarding eligibility to receive grants – Schedule I, Part 1, Line 1


Redesigned Form 990 To Do List

Estimate the total number of volunteers during the year – Part I, Line 6

Identify any new program service activities conducted during the year – Part III, Line 2

Ensure that all 1099s are filed when required (non-employee services of $600) – Part V, Line 1a

Prepare documentation to support classification of independent contractors

Ensure that organization is preparing Form W-2G when required – Part V, Line 1b

Register with Attorney General if conducting raffles and undertake backup withholding if necessary – Part V, Line 1c


Redesigned Form 990 To Do List

Document meetings of Board of Directors and committees with authority to act – Part VI, Line 8

Document how organization satisfies public disclosure requirements – Part VI, Line 19

Identify all key employees under the expanded definition ($150k compensation)

Document an allocation policy for indirect costs – Part IX

Update Chart of Accounts (and audited financial statements) to include the “new” expense categories - Part IX

Automatic Lose of Tax-Exempt Status

Beginning in 2007 EO’s were required to file a return with the

IRS, even if revenues were under $25,000.

No filings for 3 consecutive years led to automatic lose of tax-

exempt status.

As of October 2010 275,000 EO’s lost their exempt status.

IRS believes the vast majority of these are defunct.

EO’s with $50,000 or less in gross receipts can re-apply for tax-

exempt status retroactive to the date of revocation.

Application (Form 1023) fee reduced to $100.


Common Mistakes

“Weak” program service accomplishment descriptions.

Not filing the RRF-1 with the Attorney General.

No careful review of the 990 prior to filing.

Board not understanding the 990 and its importance.

Non/late filing of the SI-100 with the Secretary of State.

Taking “risk” with pro bono preparation.

Not tracking volunteer hours.

Not tracking expenses for each program.



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