For Nonprofit Board Members, Financial Compliance is Good Business and It’s the Lawback
By Michael Davidson, October 05, 2009
The Form 990 your organization files in 2010 will hold your board accountable for active, documented financial oversight of your organization. Leaders of nonprofits will be required to report on the existence and on the enforcement of policies on:
- Conflicts of Interest
- Whistle Blower Protection
- Document Retention and Destruction
- Executive Compensation
- Accounting Procedures
Moreover, board performance in these areas will be public record, available to all current and potential supporters on the Internet.
Nonprofit executives need to take a close look at these requirements and at their own procedures to make sure that their organization will be able to comply with the rules, come reporting time. What the IRS is looking for is accountability: Is your organization following the best practices in fiscal oversight?
Don’t look at it as a burden; look at it as part of effective fiscal management. Good financial oversight is critical to good governance. Your board may already have many — or all — of the required procedures in place. If so, good for you! Keep up the good work. If not, now is the time to get started.
Here are the specifics of what nonprofit boards must do, and report, in 2010:
Review the 990
The 990 must now be signed and attested to by an Officer of the Board. The board must describe the process it used to review the 990 before it is filed.
Conflicts of Interest
The organization must describe the process used to monitor and enforce compliance with its policy, including whether the board and key employees are required to annually disclose any “interests that could give rise to a conflict.”
The board is also required to disclose business relationships with any “current or former officer, director, key employee, substantial contributor, or person related to such an individual.”
Executive Director Compensation
The board must describe the process it used to determine compensation of the Executive Director, including whether there was a “review by independent persons, use of comparability data and documentation of the deliberation and decision.”
The board must disclose whether there are contemporaneous minutes of meetings of the board and key committees, and the way the organization’s documents are made available to the public.
The board must also disclose whether it is in compliance with other regulatory filing requirements, including registration in all states where fundraising activities are conducted.
Because your reports will be online, think of them as another way to communicate with potential donors about the integrity, effectiveness and transparency of your organization.
You can find more details about the Form 990 on the IRS website
Guest blogger Michael Davidson is a board coach who has provided board training and retreat facilitation for a wide range of nonprofit organizations and management support organizations. 347-431-9452, firstname.lastname@example.org