Non-Profit Policies and Procedures of Interest to the IRS
Whistleblower - The Form 990 asks whether the organization has a written whistle blower policy. Such a policy is important to prevent retaliation against employees who report suspected illegal activities. Retaliation could violate both federal and state law.
Document Retention and Destruction - The Form 990 asks whether an organization has a written document retention and destruction policy. This, too, is important because federal and state laws prohibit the destruction of documents under certain circumstances, particularly if they are relevant to a pending investigation or lawsuit.
Compensation - The Form 990 requires the description of the process used to approve compensation of the organization’s CEO and other officers and key employees; and whether the organization is following the “safe harbor” procedures of the Internal Revenue Code for approving compensation of “disqualified persons.” This procedure includes approval by independent directors or committee members, review of comparable data, and contemporaneous substantiation of the deliberation and decision by the board or committee.
Joint Venture Investments - The Form 990 requires organizations that participate in a joint venture to indicate whether they have a written procedure ensuring evaluation of the joint venture in light of the requirements for income tax exemption.
Gift Acceptance - The new Schedule M (Non-cash Gifts) generally requires the review of any “non-standard contributions.” A “non-standard contribution” is a non-cash gift that is not used in the organization’s activities, one for which there is no market in which it can be readily liquidated, and whose value is “highly speculative or difficult to ascertain.” Although the definition of a “non-standard contribution” is narrow, organizations should have gift acceptance policies that guide executives regarding the circumstances under which the organization will accept non-cash gifts. This particularly is important with respect to gifts of real estate (which may hold environmental cleanup liabilities), and of securities and other business interests that are not publicly traded.
Disclosure of 990/990-T - Form 990 requires the organization to indicate how it makes available for public inspection its application for exemption, Forms 990, and Forms 990-T. Organizations must also describe whether, and if so, how, they make their articles of incorporation, bylaws, conflict of interest policy, and financial statements available to the public. The tax code does not require this second group of documents to be published by the organization. However, articles of incorporation and amendments are public record documents, and most large ministries are required to file their articles of incorporation, bylaws, and audited financial statements with some state offices that regulate charitable solicitations.
Disclosure of Governing Documents, Conflict of interest Policy, and Financials - Few nonprofits make the governing documents (articles of incorporation. and bylaws or constitution), conflict of interest policy, and financial statements (whether or not they are audited) available to the public. Except for ECFA members who are required to provide copies of the audit upon request, few nonprofits post their governing documents, conflict of interest policy, and financial statements on their website.
Documentation of Meetings - The Form 990 asks about the contemporaneous documentation of the governing body meeting and each committee with authority to act on behalf of the governing body. While most board minutes are timely recorded, the same is often not true of committee minutes.
Form 990 Provided to the Board - A question is asked whether a copy of Form 990 is provided to the governing board before it is filed and the process used to review the Form 990. This question does not ask if the form was reviewed by the board prior to filing, only if the form was provided to the board.
The IRS does not require nonprofits to adopt all these policies and procedures. But it is using the Form 990 to ask whether nonprofits are using these tools.
Other Appropriate Policies
Accountable Expense Reimbursement Plan
Travel and Other Expense Reimbursement Policy
Credit Card Policies and Procedures
Benevolence Fund Policy