Heard on the Web: Make Sure Your Board Complies With the New Form 990

Heard on the Web: Make Sure Your Board Complies With the New Form 990

News story posted in Compliance on 19 February 2010| 1 comments
audience: National Publication | last updated: 18 May 2011


According to a Live Discussion hosted by the Chronicle on Philanthropy, "Now that charities are required to fill out a new version of the Form 990 -- the informational tax return that organizations file each year with the Internal Revenue Service -- some organizations are beginning to get a better understanding of its new requirements. Yet too many charity trustees have not grasped that the new 990 makes substantial new demands on them, experts say."

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Form 990 Compliance

Philip S. Rovner, CPA, CLU - As the CEO of an umbrella community foundation which serves to raise funds on behalf of its affiliates, we are charged to file 17 From 990 and 990EZ. We are just completing our first wave of filings for FYE 6/30. I note the following from my current perspective and from that of having prepared tax returns in a prior career: * The Prepared by Client requirements have increased in size from 8 pages to 35 pages of information required as it relates to each of our entities. This is not expected to become any less in amount in subsequent years because we and our tax preparers recognize that things do change year-to-year. * The burden on staff is tremendous and I am concerned that staff in many charites may be unable to more fully comply with all the new requirements which may call for a host of new policies and procedures, all of which must be communicated and understood to/by the Board. * Form 990 remans a sizable return approximating 30 pages or more. Fully realizing that Board members are volunteers and are not themselves familiar with the tax code, we have elected to use our Audit Committee or selcted members of each of our Boards to review their respective return. To do otherwise would be a formidable and unworkable task that would cause further delay in filing for not very much benefit to anyone. We have the responsible committee or board members report out to their respective Board at the next regularly scheduled meeting. In some cases this may be many months in the future as some boards only meet annually. Calling a special meeting for this one purpose is truly non-productive. * Even with policies in place, one has to be an insomniac to consider fully reading and understanding Form 990. I create what amounts to an Executive Summary with some hope that I can communicate more easily and soundly with the reviewers. Again, based on time constraints, we handle most of this communication via email and require a response from those who are so charged with the review responsibility. And we respond to any questions. * The discussion which results in my response makes numerous references to using a "good accountant." The reality as it relates to many charities is that even good accountants are not yet fully familiar with the proper preparation of Form 990. We have invested considerable time educating the tax preparers. As is fairly normal with regard to the IRS, there is some disconnect between their instructions/regulations and what is experienced in the field. *Assuming, the concept of substance over form is still valid, I expect we will find many charities having to resort to proforma documents which will likely lose their import in successive years once the industry normalizes the preparation of Form 990. * I remain concerned that it will become increasing more challenging and difficut to secure willing Board members who are beginning to realize there is considerably more responsibility to becoming a Board member than simply showing up. Time will tell if this is good for non-profits or becomes an unworkable burden that curtails the ability of non-profits to fulfill their missions. * When you add the increased complexity of the Form 990 to the increased scrutiny and requirements associated with the preparation of audits, I remain concerned that the increased internal costs will overwhelm many charites capability to address their missions. * I fully support full disclosure but wonder what this is truly all about.

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