No nonprofit can exist nor thrive without the key constituents who are highly invested in its success, current happenings, and future. As a key constituent at your nonprofit, protecting yourself and your nonprofit organization is no easy task, and inaccurate tax filings on forms such as the Form 990 are one way that your organization can easily be in trouble. Last week, we took a look at how Form 990s are often misunderstood or not sufficiently understood, what risks these misunderstandings could create, how important professional help in filing Form 990s can be, and what Form 990s are all about. To learn more about the Form 990 and what you need to know on general terms, visit here.
In order for you, a key constituent within the nonprofit, to be well versed in the information you need to know that will be included in the Form 990, you’ll want to be sure your organization is using a nonprofit accounting software. This nonprofit accounting software will go a long way in helping all constituents to have the important financial data they need to be informed and to file information correctly. Learn more about Abila MIP Fund Accounting software by visiting here. If you don’t have any such software, RBP Methods highly recommends getting and using one that will help take the guessing game out of financial data, reports, and needed tax information.
It should be clear by now that protecting yourself and others from penalties is important, but how do you ensure that this happens (in addition to the help you receive from a professional CPA)? How do you actually know what must be filed on Form 990 returns? The following information will help you do to be informed when it comes to filing Form 990s and all of their nuances. The questions below are meant to assist you with any future tax compliance filings and the process of informing and educating boards and management teams alike. All key constituents (officers, directors, trustees, key employees, management, presidents, board members, etc.) should be sufficiently informed to be able to answer these questions.
- Do all members of the governing body of your organization have a complete copy of the Form 990 that is supplied prior to filing?
- Did your organization become aware of or engage in any excess benefit transactions in the past tax year?
- Did your organization have any receivables from or payables to key constituents recorded on its financial statements?
- Was any grant or assistance given to any of these key constituents or their families by the organization?
- Was your organization a party to a business transaction with any of these current or past key constituents, employees, or their family members?
- Do any donor-advised funds where the right to advice on distribution or use of funds/accounts was granted exist?
- Did your organization hold assets in endowments of any kind?
- Has your organization had any international financial accounts?
- Did any key constituent have a relationship (familial or business) with any other key constituent?
- Have substantial and significant changes been made during the tax year to governing documents?
- Is a written conflict of interest policy in place that requires annual interest disclosure that could give rise to conflicts? If so, was this monitored and enforced regularly and with compliance?
- Does your organization have written policies for: whistleblowing, document retention, and document destruction?
- Does compensation determination follow a review and approval procedure with sufficient data and deliberation before a decision is reached? (A review of Form 990, Part VII is highly recommended.)
- Does your organization have an audit, review, and compilation committee responsible for oversight of financial statements and independent accountant selection?
- Is a gift acceptance policy used for non-standard contributions?
If key constituents can answer these questions, they will be on the right track to completing the Form 990 or reviewing it with sufficient information to avoid penalties and give accurate reporting information. With some education, information, and review, you can save your organization from lots of headaches and potential disaster in the eyes of the public, press, and IRS. Don’t leave your key constituents uninformed. Use a nonprofit accounting software to gather and have access to the information you need, and learn this information well.
RBP Methods offers Nonprofit Accounting Software Selection and Review services to help you have the systems in place to make tax time and the information needed for the Form 990 easy to access and organized. Contact us to learn more.