Non-Profits Have Starring Role In Era Of Transparency

Carroll Boardway, CPA

 

The dramatic turmoil of our current financial situation has been injected with an ever stronger platform of full transparency. Not to ignore non-profit organizations, the Internal Revenue Service has recently updated Form 990 to reflect the greatest number of changes in reporting requirements since the 1970s.

Though non-profits do not pay income taxes on their revenue, they are obligated to report their income annually. In addition to these reports, called 990s, these groups are now faced with the demands required by a deeper look into how the organization operates. Such scrutiny extends from policies of the entity to board configuration and compensation for the executive team, among others. The goal is for the IRS to ensure that all non-profits have built in safe-guards to promote accountability and protect from corruption, thus giving donors peace of mind when making the decision on which organizations to fund.

This reporting transition begins by updating an old form to the new; the full time period for adopting changes is three years. For the 2008 tax year, non-profits with gross receipts less than $1 million and gross assets less than $2.5 million may choose to file the new Form 990 or the old version of the Form 990-EZ. By 2010, only non-profits with gross receipts less than $200,000 and gross assets below $500,000 will be allowed to file Form 990-EZ.

The new Form 990 itself grew from nine pages to 11 and now has 16 possible schedules for the non-profit to attach; up from the previous total of only two. The term "schedules" refers to multiple items including but not limited to:

• Hospitals (H)
• Schools (E)
• Public Charity Status and Public Support (A)
• Contributors (B)
• Compensation Information (J)
• Political Campaign and Lobbying Activities (C)

A full list of Schedules is provided by the IRS on their website www.irs.gov. All information within completed Form 990s will be available upon request to the public with the exception of (B) contributor names.

Why is this important? A higher level of full disclosure is reached with more opportunities throughout the form to provide supplemental information. Before, the IRS did not require written formalization of relationships between board members, employees, contributors, or vendors, nor was there room on the old format in any case. It also ignored staff salary negotiations.

Specifics of the Form 990 changes are detailed on the IRS website under the "Charities and Non-profits" option. To be certain your non-profit complies with the new guidelines, we recommend you have your accountant walk through the new steps with you and address the changes. Or, consider attending classes or seminars held by local CPA groups, such as the Fort Worth Chapter Study Group. Of course, you can also call us at 817-877-5000

 Certified Public Accountant Carroll Boardway is a senior audit manager at Sanford, Baumeister, & Frazier, PLLC. Carroll has over thirty years of experience in public accounting with substantial expertise in the not-for-profit arena. A 1976 graduate of the University of Texas at Arlington, Carroll is a member of the American Institute of Certified Public Accountants, Texas Society of Certified Public Accountants and the Fort Worth Chapter of TSCPA.