Sure, the policies listed on IRS Form 990 aren’t required. But the IRS does equate the ones listed below to overall good organizational governance – meaning if you don’t have them in place now, it’s a good idea to consider making this task a priority.
“As a measure of our interest in this area,” the IRS says, “we ask about an organization’s governance, both when it applies for tax-exempt status and then annually as part of the information return that many charities are required to file with the [IRS].”
In addition to the policies the IRS would like to see in place within your organization, there are other really great policies out there that can set your nonprofit apart from the competition while helping you become more effective in all facets of the organization. Read on to learn more.
Basic Policies For Good Governance
Wondering where to start? Consider drawing up the following policies, which are identified by the IRS on Form 990.
- Governance – For organizations with a more wide-spread reach, policies must be put in place to help govern the activities of any chapters affiliates, and branches to ensure operations are consistent with the nonprofit’s exempt purposes.
- 990 Review – Your organization should have a process that allows all board members to review Form 990, prior to the document being filed with the IRS.
- Conflict of Interest – In addition to requiring all officers, directors, trustees and key employees should disclose any interests that could result in conflicts, the organization should have a policy in place that outlines how the organization actively monitors and enforces this particular policy.
- Whistleblower Policy – This policy is important because it helps ensure that anyone coming forward with a tip or a concern can do so without fear of retaliation.
- Document Retention and Destruction Policy – You don’t have to keep every document every drawn up or collected by your organization, but you do need to keep a few of them around for a while. Ask your Rea advisor how long you should hold on to particular documents to ensure you continue to comply with state and federal laws.
- Compensation – While board members are not generally paid for the work they perform for the organization, some members may receive stipends for their efforts. Additionally, there may be others employed by the nonprofit. Before anyone is compensated for serving the organization, a deliberation phase should be documented and formally approved by the board.
- Joint Venture – If the nonprofit invested in, contributed assets to or participated in a joint venture or similar arrangement with a taxable entity during the year, a policy must be established to evaluate its participation under applicable federal tax law and take steps to safeguard the organization’s exempt status.
Gold-Standard Policies For Nonprofits
The policies above are great, but we’ve only scratched the surface. These policies and procedures will help take your nonprofit’s governance to the next level.
- Code of Ethics – This particular policy should be considered a living document and the provisions outlined within should be considered a part of the organization’s brand and culture.
- Expense Reimbursement – In order to be reimbursed for expenses, documentation should be required for all receipts over a particular dollar amount.
- Gift Acceptance – In addition to a formal written policy, potential gifts should be screened by legal counsel to determine whether ethics, financial circumstance or other interests held by your nonprofit would be compromised.
- Financial Statement Review – An independent audit committee should meet to monitor the organization’s financial practices as well as to select a knowledgeable auditor.
- Grant Recipients – if your organization is in the business of providing grants, be sure to have a policy in place to identify how grant recipients are selected.
- Endowment Spending – If your nonprofit is considering an investment, this policy will help ensure that the organization’s resources are being managed responsibly.
- Fundraising – Nonprofits with written fundraising policies can ensure that funds are in line with the nonprofit’s mission and objectives.
- Disclosure – Don’t forget to identify a policy that aids in the disclosure of your organization’s governing documents. These days, there is not much more important than facilitating transparency among your internal stakeholders and external audience.
- Minutes – Not only are your meeting minutes a great resource for those who couldn’t attend a recent meeting, they are essential to keeping your organization on course and for referring back to critical decisions and announcements.
A lot of times, the whirlwind of day-to-day responsibilities takes over and any desire you once had to review and update your nonprofit’s policies and procedures is forgotten. Don’t let history repeat itself!
It’s still a good time to set aside time to tackle your organization’s policies, and help is never far away. Email Rea & Associates for help or for additional tips and insight.
By Brent Ardit, CPA (Dublin office)