We all need to be Girl Scouts® or Boy Scouts® when it comes to the IRS. Their ‘Be Prepared’ motto applies well to the governance needs of nonprofit organizations. IRS field agents are using a Governance Check Sheet to gather data that relates governance practices to tax compliance. The check sheet isn’t directly connected to a charity’s Form 990, but the questions are similar. Because the revised Form 990 is being phased in over three years, many organizations have not yet come into full compliance. The Governance Check Sheet can be used as a prompt to get written documentation in order.
Examples of your requirements are:
A written mission statement
- Bylaws that include composition, duties, qualifications and voting rights of board members, officers and directors
- Board meeting frequency, financial review policies and family relationships to the organization
- Conflict of interest policy andany specific applications
- Compensation arrangements – how they’re calculated and approved
- A process for review of the Form 990
- A written policy for document retention and destruction
As you can see, the check list is quite comprehensive. And while governance issues for nonprofit organizations are primarily state-related, the federal IRS Form 990 is requiring greater transparency. On the flip side of the burden placed on nonprofits, comprehensive information provides your donors an assurance of your compliance and financial integrity.
To preview or download the check sheet, go to http://www.irs.gov/pub/irs-tege/governance_check_sheet.pdf.