The NonProfit Times - June 1, 2008 - (Page 29)

TAXING ISSUES coincide with an unprecedented level of legislative, regulatory and media scrutiny over the governance practices of exempt organizations. Clearly, the IRS sees an important link between good governance and tax compliance. Beyond shedding light on an exempt entity’s governing board and organizational policies, the new Form 990 requires additional disclosures and is more successful in delineating good governance practices through questions. Governing Board. The IRS’s focus on an exempt organization’s governance is exemplified by the placement of several questions on the first page of the Form 990. Part I of the core form now requires your organization to enter the number of voting members on the governing board, as well as the number of independent voting members.The same two questions are repeated on page 6 of the core form, under the heading: Part VI Governance, Management, and Disclosure. The IRS’s focus on these two numbers leads to the conclusion that the IRS believes independent board members are important to good nonprofit governance. These numbers also allow inferences to be made regarding the responsiveness of the board to the public interest. For instance, a low number of board members may suggest that the organization is not benefiting from several viewpoints, while a high number could suggest that board members are inattentive to oversight functions. Part VI of the new Form 990 continues with additional questions that paint a clearer picture of what is going in your organization’s boardroom. That picture depicts whether your organization has members or stockholders, and if so, whether decisions of the governing body are subject to their ultimate approval.The ability of directors to elect one or more members of the governing body is also transparent on the Form 990.Additionally, Part VI seeks information regarding view Form 990. This question is included to ensure that the board is aware of the information being disclosed on Form 990. The core form also has nonprofit governance questions pertaining to: • Whether there are existing familial or business relationships among officers, directors, trustees or key employees; • Whether the organization delegates any management duties to a management company or other person; into how CEO compensation is determined. Specifically, Schedule J asks the organization to check the appropriate boxes if any of the following provide guidance in establishing the CEO’s compensation: • Compensation committee • Independent compensation consultant • Form 990 of other organizations • Written employment contract • Compensation survey • Approval by the board or compensation committee Schedule J also questions whether the organization made severance payments, change of control payments, a nonqualified retirement plan or an equity-based compensation arrangement to certain persons (officers, directors, trustees, key employees, and highest compensated employees). Information is requested regarding whether incentive compensation or other non-fixed compensation was paid to any of the organizations officers, directors, trustees, key employees and highest compensated employees.Part II of Schedule J then goes even further by requiring the organization to categorize these payments into the following categories: base compensation, bonus and incentive compensation, other compensation, deferred compensation and nontaxable benefits. Disclosures. Form 990 requires your organization to inform the public where to find your organization’s Form 1023 “Application for Recognition of Exemption” (or Form 1024), 990, and 990-T (if applicable). It also asks you to explain on Schedule O lists whether and how the organization makes its governing documents,conflict of interest policy and financial statements available to the public. When your organization does not, the media and donors are often left wondering why. Modified Schedule L now requires organizations to reflect non-loan transactions between the organization and insiders and report grants or assistance to interested persons. Good nonprofit governance increases an organization’s effectiveness in carrying out its charitable goals.With the new Form 990, the IRS has achieved its goal of making the governance practices of Form 990 filers more transparent. If that transparency induces nonprofit boards to reexamine and change bad governance practices, the IRS will have succeeded in strengthening nonprofit governance and accountability. If you are looking for additional information on good governance practices for charitable organizations, go to the IRS Web site, www.irs.gov and search governance practices. This will provide you and your organization with information on practices and policies the IRS believes leads to success in pursuing your exempt purposes and earning public support. NPT Harvey J. Berger is a retired tax partner with Grant Thornton and currently serves as a consultant on nonprofit tax issues. His email is harvey.berger@gt.com. D. Greg Goller is Grant Thornton’s national partner-in-charge of Not-for-Profit Tax Services and is based in the Washington, D.C. area office. His email is greg.goller@gt.com. Garrett B. Gluth is a senior associate with the firm. His email is Garrett.Gluth@gt.com whether there is contemporaneous documentation of all meetings of the governing body and documentation of all meetings of any committee with the authority to act on behalf of the governing body. The new Form 990 also seeks information regarding whether the board was provided with a copy of Form 990 before it was filed and asks the organization to describe the process the board uses to re- BOARDS Continued from page 20 builds confidence. Just knowing that there is someone to whom the person can turn to makes the job “less lonely” at the top. 5. Establish a Governance Committee which encompasses the traditional role of the nominating committee.Also consider a board development committee, but expands the role of this committee into a broader discussion of board educational/retreat requirements, orientation, structure, board performance assessment and board leadership succession. Make sure that the issue of board leadership succession is continuously discussed throughout the year. 6. Ensure that the work of the board is done efficiently, including establishing the agenda, running meetings, communicating with other board members, and receiving information from the committee reports. When the work of the board runs “smoothly,” it is easier to recruit someone to assume the top spot than when the work is perceived as tortuous and uninspiring. 7. Find ways to reward and recognize your board members for the job they do. Everyone likes to be recognized for their efforts, whether volunteer or paid staff. Invite board members to socialize outside of the work place or to your home during the holidays. Building relationships helps to motivate people to want to get further involved and provide the necessary leadership to further your mission. Remember, the old saying,“all work and no play” doesn’t help recruit a board chair. 8. Provide opportunities for all board members to participate in a wide array of committees, task forces and advisory boards to allow them to grow and develop as a board member.The more experience and knowledge board members have of the organization, the more comfortable they will feel when accepting the board leadership role. 9. Build a culture of success. Organizations that strive for excellence in all they do create a winning culture. Individuals are more likely to want to join a board and eventually lead an organization that is perceived by everyone as a “winner” and “the place to be.” 10. Recognize former board chairs either through a formal recognition at an annual benefit event or through the creation of a “Chairperson’s Club.” Make the role of board chair something special that is looked upon very favorably to make it more attractive for someone to seek and accept the important role. By recognizing some of the reasons that appointing a board chair is difficult and then by working hard to implement some of the many actions that will eliminate this difficulty, nonprofit, will be able to successfully transition the board leadership in a more effective manner that will benefit everyone that is served by the mission of the organization. NPT Dennis C. Miller is president and chief executive officer of Dennis C. Miller Associates in Morristown, N.J. The firm’s Web site is www.dcmillerassociates.com • Whether the organization has local chapters, branches or affiliates, and if so, whether there are written policies and procedures governing their activities; • Whether any significant changes were made to the organizational documents since the prior Form 990 was filed; and, • Whether the organization became aware during the year of a material diversion of the organization’s assets. Organizational Policies. The new Form 990 is successful in unmasking an exempt entity’s policies. Specifically, Part VI, section B requires an organization to disclose information regarding its conflict of interest policy. Additionally, Schedule O Supplemental Information requires information concerning how regularly the organization monitors and enforces compliance with the policy.This section also questions whether an organization has a written whistleblower policy and a written document retention policy. Collectively, the questions in this section reflect the Service’s interest in inducing organizations to adopt policies that are designed to safeguard the use of charitable assets. Part VI also informs the public of the processes used to determine how many charitable dollars will go toward compensating officers. Specifically, the new 990 inquires into the process for determining compensation. Part VII Compensation of Officers, Directors, Trustees, Key Employees, Highest Compensated Employees and Independent Contractors and the newly added Schedule J, Compen http://www.irs.gov http://www.dcmillerassociates.com http://www.nptimes.com

Table of Contents Feed for the Digital Edition of The NonProfit Times - June 1, 2008

The NonProfit Times - June 1, 2008 First Kroc Center Set To Open It’s Layoffs And A Lawsuit At ARC In The Twin Cities Hospices Put On Life Support Contents Who...When...Where...How...What? Idol Charities Still Waiting For Funds Heck Of A Job Play On Words Make Endowments Pay Donor Management Software Who’s Next? Joining The Masses Online Email Evangelism Three Corners Business Briefs Fiduciaries And The 990 Calendar United Way Refocusing On Programs, Reducing Affiliates NPT Jobs Resource Directory

The NonProfit Times - June 1, 2008

For optimal viewing of this digital publication, please enable JavaScript and then refresh the page. If you would like to try to load the digital publication without using Flash Player detection, please click here.