This quote is taken from a www.BoardSource.org article discussing the newly effective Form 990:
For the first time in 30 years, the IRS has overhauled the form nonprofits use to report their activities and finances. The new Form 990, which must be used for fiscal year 2008 filings, is designed to give the IRS and the public a better understanding of how organizations carry out their missions.
What’s New about the New 990?
The changes cover topics that include governance, finances, fundraising, and program administration.
In regard to governance, the new 990 contains:
A new section that asks questions about the organization’s governance structure, policies, and disclosure practices. As part of the section, an organization is asked to indicate if it has policies and procedures addressing such issues as conflicts of interest and whistleblowers.
- A revised section on the organization’s mission statement.
- A revised section on executive compensation.
What Do the Changes Mean for Your Board?
While the IRS has no direct authority over the structure of a nonprofit’s governing body, it cites the relationship between governance and fiscal oversight as sufficient reason to ask questions about governing structure and managerial procedures. A board will want to ensure that the organization has the following policies in place, among others:
- Conflicts of Interest Policy
- Document Retention and Destruction Policy
- Whistleblower Policy
- Chief Executive Compensation Policy
If you sit on a nonprofit board I urge you to learn more about this new reporting requirement. You will want to know what is required and what information your organization plans to provide in response. You will likely want to also be sure you are comfortable with the governance policies that are in place before your organization files this report under the new rules.
The IRS is acknowledging what many of us have known for a long time – nonprofit boards have not paid attention to governance issues and the quality of board involvement in their organizations. Maybe it's time for you to become more proactive in this area. If you want to know how, call me. 310-645-1091.
As always, I welcome your comments.