No matter the size of your nonprofit, it is essential to present yourself to the world in the best possible light. And believe it or not, your annual Form 990 tax return can create opportunities to garner more support for your organization and its cause. Since your return is made available to the general public, via www.guidestar.org, potential individual and organizational donors will often review it to determine if your organization is one they may want to support.
Make Your Mission Clear
Your disclosures on pages one and two of the 990 are critical, as they contain your mission statement and details of your program services. Providing a strong, well-crafted mission statement and detailing the organization’s accomplishments during the year and important services provided is vital. Be sure to highlight what makes your organization great, what you have done or are doing to accomplish your mission and how your organization has helped the general public. It is important to use these statements as an opportunity to showcase your organization in a way that will capture the reader and gain their support.
Pay Attention to Policies and Governance
Not only does the IRS believe that if strong policies are in place an organization is more likely to be compliant with laws and regulations, but the general public will also scrutinize your policies and governance. Within the Form 990, there are questions and disclosures relating to policies such as compensation, whistleblower, record retention/destruction and conflict of interest. Some of these policies are not required by the IRS, but it is considered a best practice to have them in place — potential donors or current supporters may view an organization in an unfavorable light if it ignores such items. If you are missing some, just know that many of these policies are easier to put into place than you may think. For example, the IRS includes a sample conflict of interest policy in the instructions to Form 1023.
Regardless of the policy, a nonprofit may write it themselves and have legal counsel review, or it can opt to have legal counsel create the first draft. In addition to having these polices in written format, remember to obtain board of director approval and, most importantly, to follow the policies and procedures and to review/update them on a regular basis.
Keep in mind that to answer “yes” to a question on Form 990, stating that a particular policy is in place, the policy must have been adopted on or before that Form 990’s year end. If a policy is put into place after your organization’s year end, you will need to answer “no,” but you can note on Form 990 Schedule O that the policy has been subsequently adopted.
Watchdogs Are Out There
Think no one is looking? A recent article in the Cleveland Plain Dealer reported that several local not-for-profit organizations had omitted information on their recently filed Form 990s. The missing information was officers’/directors’ compensation, which is a required disclosure by the IRS. Compensation information for the executive director must be included as well. The article also noted that many of these organizations lacked compensation, whistleblower, record retention/destruction and conflict of interest policies.
Like it or not, your Form 990 is public information. Every nonprofit should remain compliant regarding Form 990 but should also view the return as yet another way to communicate why the organization is vital to the community.
Contact Donna Weaver, CPA, MT, at firstname.lastname@example.org for more information.
This communication is for information only, and any action should only be taken after a detailed review of the specific situation and appropriate consultation.
Notwithstanding that these materials do not constitute legal, accounting or other professional advice, as may be required by United States Treasury Regulations and IRS Circular 230, you should be advised that these materials are not intended or written to be used, and cannot be used by you or any other person, for the purpose of avoiding penalties that may be imposed under federal tax laws. No written statement contained in these materials may be used by any person to support the promotion or marketing of or to recommend any federal tax transaction(s) or matter(s) addressed in these materials, and any taxpayer should seek advice based on the taxpayer’s particular circumstances from an independent tax advisor with respect to any such federal tax transaction matter.