Seminar for Not-For Profit Organizations Scott Rodgville, CPA Copyright, 2009
Core Form Changes Which Form do you have to file and when? Form 990-N, 990-EZ or 990 Phase in Schedule for revised Form 990 2008 threshold (Gross receipts >$1M or Total assets > $2.5M) 2009 threshold (GR > $500K or TA > $1.25M) 2010 threshold (GR > $200K or TA > $500K)
Core Form Changes Time for Action What does the IRS want? Time for Governance New Questions New Policies
Core Form Changes Changes to Page 1 Mission from page 3 to page 1 Number of Independent voting members new Number of volunteers new UBTI reconciliation new Fundraising expenses new Summary of Comparative Revenue and Expenses
Core Form Changes Changes to Page 1 Continued Summary of Comparative Balance Sheet Items Schedule O Blank Forms for supplement Many of the items identified above come from different parts of the Form
Core Form Changes Part III Reporting of new/changes programs or services Details reported on Schedule O
Core Form Changes Part IV A New Challenge IRS Alphabet Soup Old Schedules and Forms Schedule A and B and Form 990-T New Schedules Schedules C, D, E, F, G, H, I, J, K, L, M, N, O & R How do I know which schedules I am required to complete?
Core Form Changes IRS Alphabet Soup Part IV Questions 37 Reasons to complete a supplemental schedule Schedule A Public Charity (Question 1) Schedule B Contributors (2) Schedule C Political Campaigns (3) Schedule D Supplemental Financial Statements
Core Form Changes IRS Alphabet Soup Part IV Questions Schedule E Schools (13) Schedule F Foreign Activities (14) Schedule G Gaming Activities (17) Schedule H Hospitals (20) Schedule I Grants to Others (21) Schedule J Compensation (23) Schedule K Tax Exempt Bonds (24)
Core Form Changes IRS Alphabet Soup Part IV Questions Schedule L Interested Parties (25) Schedule M Non-cash Contributions (29) Schedule N Liquidation of Assets (31) Schedule R Related Organizations (33)
Core Form Changes Part V IRS Filings and Tax Compliance Based upon old Part VI New questions reconciling the 990 with other filings, (i.e. 1096, W-2G, W-3, etc.) E-filing of return may be required based upon this section
Core Form Changes Part VI Governance, Management and Disclosure Section A Governing Body & Management Board Members, Officers and Key Employee relationships Documentation of Meetings (i.e. minutes) Review of 990 prior to filing (document policy in Schedule O) Address of Board Members, Officers, etc.
Core Form Changes Part VI Governance, Management and Disclosure Section B Policies Written conflict of interest policy and ongoing monitoring of compliance Written whistleblower policy Written document retention and destruction policy Written process for determining compensation Policies on participating in activities with for profit entities
Core Form Changes Part VI Governance, Management and Disclosure Section C Disclosure States filing return Method of disclosure for 1023, 990 and 990-T Other organizational documents publicly available?
Form 990 Section VII Compensation Copyright, 2009
Line 1a Current Officers, Directors, Trustees Current key employees Five highest paid Former Officers, key employees and highly compensated Former Directors and Trustees
Line 1a.- Definitions Corporate Officer Key Employee $150,000 Compensation Responsibility Top 20 Reportable Compensation Employees: W-2 Box 5 Directors and Trustees: 1099 Box 7 Institutional Trustees: Amounts Paid
Definitions Continued Related Organizations 1. Disregarded entities 2. Related tax exempt entities 3. Related corporations 4. Related organizations taxed as partnerships 5. Subordinated organizations are not reported
Definitions Continued Estimated Other Compensation a) Deferred compensation b) Deferred bonus c) Employer contributions to qualified plans d) Defined benefit plan benefit accruals e) Contributions to non-qualified plans f) Employer paid health benefit premiums g) Non-taxable cafeteria plan benefits
Schedule J Compensation Part I Questions on benefits provided and procedures Part II Compensation report for those reported in Part VII Form 990 Detailed breakout of W-2 and other income Calendar year reporting
Part VIII Statement of Revenue
Statements of Revenue and Functional Expenses 2008 Schedule I Revenue, Expense and changes in Net Assets or Fund Balances Schedule II Statement and Functional Expenses Schedule VIII Analysis of Income Producing Activities 2009 Replaced With Part VIII Statement of Revenue Part IX Statement of Functional Expenses
Statement of Revenue Columns A. Total Revenue B. Related or Exempt Function Income C. Unrelated Business Income D. Excluded from tax under 512, 513, or 514 Revenue Groups A. Contributions, gifts and amounts B. Program Service Revenue C. Other Revenue
Part IX Statement of Functional Expenses
Statement of Functional Expenses Columns a) Total Expenses b) Program Expenses c) Management Expenses d) Fundraising Section 501 (C)(3) and (4) organizations must complete all columns. Other 501(c) organizations complete only column a. Expenses attributable to management, fundraising or program expenses are shown here together with indirect expenses from other income sources.
Statement of Functional Expenses Continued Part 10 Line 3 Pledges Actual vs. FAS 116 Lines 5-7 Compensation is reported using method used in its books & records a) Cash or accrual b) Compensation is reported base on organization s fiscal year, NOT necessarily calendar year. Line 24 Miscellaneous expenses cannot exceed 5% of total expenses. If over 5% it must be broken out
Schedule X Balance Sheet
Balance Sheet Three Sections Assets Liabilities Net Assets of Fund Balance
Balance Sheet Lines 5-6: If there are loans to officers, directors, etc. or other disqualified parties, must complete Schedule L Lines 11-13: No choice of reporting cost or fair market value. Only report fair market value Line 3: SFAS 116- Report Net
Balance Sheet Continued Line 18: Report grants even if party is not notified Line 27-29: Use these lines if the financial statement are prepared under SFAS 117 Financial Statements of Not-for-Profit Organizations. SFAS 117. If not, use lines 30-32. Part XI: Financial Statement Reporting New questions to answer
Other Schedules Schedule A: Public Charity Status and Public Support No compensation information as in the past Questions about status Support test schedule changed 1. Support test for Organizations and Schools e.g. Libraries- governmental support 2. Support test for Public Support
Other Schedules Schedule B: Schedule of Contributions Remains the same Schedule C: Political Campaign and Lobbying Expenses Complete if answer way Yes Lines 3, 4, or 5 Part IV
Schedules Continued Schedule D Must be completed if answered Yes to Part IV Lines 6, 7, 8, 9, 10 Also Part X- Lines 10, 12, 13, 15, 25 (Balance Sheet) Part XI, XII and XIII take the place of Part IV- A, IV-B 990 2008- Reconciliations Between Return and Books
Schedules Continued Schedule E: Schools Questionnaire Schedule F Statement of activities outside the US, must complete if activities exceed $10,000 More than $5,000 of Grants or Assistance to one Organization More than $5,000 of aggregate grants to individuals
Schedules Continued Schedule G: Supplemental Information Regarding Fundraising or Gaming Activities Complete if answered Yes to Part IV Line 17, 18 or 19 Provides a great deal more detail on fundraising activities Schedule H: Hospitals Only Part V Facility Information required for 2008
Schedules Continued Schedule I: Grants and Other Assistance to Organizations and Individuals in the United States Required if answered YES on Part IV Line 21 and received $5,000 Must report grants from flow through entities Schedule K: Information on Tax Exempt Bonds
Schedules Continued Schedule L: Transactions with Interested Persons 1. Officer, director, trustee or key employee 2. Substantial contributor or related person a) $5,000 or more during the year b) Related person 1) Member of organization s selection committee 2) Family member 3) 35% controlled entity of current or former directors, officers, etc. 4) An employee of substantial contributor or 35% owned entity Schedule M: Non-Cash Contributions
Schedules Continued Schedule N: Termination, Liquidation, Dissolution or Significant Disposal of Assets Schedule R: Related Organizations and Unrelated Partnerships Must list all organizations that have any relationship to the reporting organization Disregarded entities Related tax exempt organizations Related organization taxed as a partnership Related organizations taxed as a corporation Transactions with the above
Core Form New Form 990 provides for explanation of what organization does before accounting for how it does it. New Form 990 is regulation by disclosure.
Schedules Schedule A: Public Charity Status Schedule B: Schedule of Contributors Schedule C: Political Campaign and Lobbying Activities Schedule D: Supplemental Financial Statements Schedule E: Private School - Policies Schedule F: Activities Outside U.S. Schedule G: Supplemental Information re Fundraising and Gaming Activities Schedule H: Hospitals Charitable Activities & Management Schedule I: Grants & Assistance to Orgs, Govs and Individuals Schedule J: Compensation Information Schedule K: Supplemental Information for Tax-Exempt Bonds Schedule L: Transactions with Interested Persons Schedule M: Non-Cash Contributions Schedule N: Liquidation, Termination, Dissolution, Significant Asset Dispositions Schedule O: Supplemental Information to Form 990 Schedule R: Related Organizations and Unrelated Partnerships
Key Definitions 35% Controlled Entity Audit Committee Business Relationship Conflict of Interest Control Director or Trustee Governing Body Highest Compensated Employees Independent Voting Member of the Governing Body Key Employee Management Company Reasonable Compensation Related Organization Top Management Official
Corporate Governance: The Board of Directors Direction to Management Oversight and Compliance
Direction to Management Business strategy Manner entity performs its mission
Duty of Oversight and Compliance Oversee the management Monitor compliance
Fiduciary Duties of the Board Duty of Care Duty of Loyalty
Maryland law - standard of care for directors is to perform duties in good faith in a manner reasonably believes to be in best interest of corporation; and with the care that an ordinarily prudent person in a like position would use under similar circumstances.
Report on Governance Composition of its board of directors, Governance and management structure, and Policies for promoting transparency and accountability
Board of Directors and Officers Independence among directors, officers and key employees Independence from organization
Part VI Section A. Management Company Organizational Document Changes Documentation Policy / Minutes Affiliate Policy Board Review of Documents and filings
Part VI Section B. Conflict of Interest Policy Whistleblower Policy Document Retention and Destruction Policy Compensation Policy Joint Venture Policy
Conflict of Interest Policy A conflict of interest arises when a person in a position of authority may benefit financially from a decision, including indirect benefits such as to family members or associated businesses. Define Identify Facilitate Specify
Whistleblower Policy Protect and encourage the Whistleblower
Document Retention and Destruction Policy E-mail Web files Text files Sound and movie files PDF documents Other formatted files
Compensation Policy Formal Process review and approval by independent persons use of comparability data contemporaneous substantiation of the deliberation and decision
Responsibility of the Compensation Committee Establishing goals Evaluating performance Setting compensation
Joint Venture Policy Ensure tax-exempt status when dealing with affiliates or another entity
Disclosure Governing documents, conflict of interest policy, and financial statements Form 990s online Significant governing documents
Audit Committee Super Board Qualification for members
Audit Committee Charter Non-Cash Gift Acceptance Policy Other Policies
Questions?