Nonprofit Governance and the 990

With the introduction of the revised 990 tax return in '08 and the upcoming tax filing for many nonprofits who use a calendar year, there are sometimes questions about the role, if any, for the board around this activity.  I recently received the following query on this matter:

The President of my Board just mentioned that she had heard that there is a new
requirement for the 990 filing that has all board members literally sign off on
the filing. Does anyone know anything about this?

While I am not attorney, I do believe that the Board president of this nonprofit may be taking the IRS directive too literally.  I think on the other-hand that a practice of having each board member acknowledge they have read, understand and vouch for what has been stated in the 990 is a great idea.  But, in reality, the task of reviewing the 990 is generally delegated to a task force or committee (note thought, I am not a fan of standing committees) and the IRS does not actually prescribe who nor how many folks review and act on the 990.  The IRS does however presume that the Board does know and understand what's stated in the 990 and can hold individual members responsible should something have been stated that is erroneous or even false.  Hence, members can be rewarded for their due diligence and really, if the Board are the actual stand-in owners (for the public), then it's reasonable for them to have a formal process where they can discuss and perhaps act on the 990.

 

That said, here's what the IRS says:

B. Form 990. Although not required to do so by the Internal Revenue Code, some

organizations provide copies of the IRS Form 990 to its governing body and other

internal governance or management officials, either prior to or after it is filed with the

Internal Revenue Service. Practices differ widely as to who sees the form, when they

see it, and the extent of their input, review, or approval. Some, especially smaller

organizations, may provide a copy of the Form 990 to the full board for review or

approval before it is filed. Others provide a copy of the form to a portion of the

governing body, or to a committee or top management officials, before it is filed. Still

others provide a copy to the board, a committee or top management officials, but not

until after it is filed. Organizations that file Form 990 will find that Part VI, Section A,

Line 10 asks whether the organization provides a copy of Form 990 to its governing

body, and requires the organization to explain any process of review by its directors or management.

Happy tax year ending to all!