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The New Form 990: Seven Things You Can Do Now to Prepare
Tax-Exempt Organizations Alert
by Cordelia A. Glenn Grabiak . December 2008


1. Educate Your Board and Management Team Regarding the New Form 990

  • Bring your board up to speed on the changes and alert them to the extent of board and management involvement that will be required.  Your annual meeting or board retreat would be an ideal time to do this.
  • Ensure that your management team is aware of the scale of the response and is “tasked” to comply.  Consider a monthly compliance schedule.
  • Consider a trial run to identify and correct potential problem areas and start to develop narrative explanations.

2. Develop or Fine-Tune Your Mission Statement and Program Service Descriptions

  • Ensure that your mission statement captures the full range of your exempt activities and has been approved by the board.
  • Review and/or revise your program service descriptions to reflect how you are accomplishing your mission and verify that you are tracking expenses, grants, and revenues of each program service.
  • This will set the stage for all of the information in the Form 990.

3. Adopt, Review and/or Revise

  • Conflict of interest policy and annual disclosure statement
  • Whistleblower policy
  • Document retention and destruction policy
  • Procedures for determining compensation of CEO/Executive Director and key employees
  • Policy for evaluation of joint ventures with taxable entities
  • Policies regarding disclosure of Form 1023, Form 990, Form 990-T, governing documents, conflict of interest policy and financial statements
  • Process for monitoring use of grant funds by grantees

4. Using the New Definitions, Identify and Inventory

  • Related organizations, disregarded entities, and joint ventures taxed as partnerships
  • Current and former officers and directors
  • Current and former key employees
  • Current and former highest compensated employees
  • Substantial contributors
  • Grant selection committee members
  • Disqualified persons


5. Develop and Implement an Annual Questionnaire for Directors, Officers, Key Employees, and Other Interested Persons That You Have Identified
This document should provide explanations and elicit information from appropriate persons sufficient to determine the existence of and properly report:

  • Grants or assistance received from your organization
  • Direct and indirect business transactions with your organization
  • Compensation paid by related organizations
  • Family and business relationships among directors (including common board memberships)
  • Number of independent directors

6. Work with Legal Counsel to Identify and Assess

  • Transactions with interested persons, including excess benefit transactions, loans, grants or assistance, and direct and indirect business transactions
  • Restructure problematic arrangements, if possible.
  • Compensation practices and benefit packages that may draw unwanted IRS attention
  • Compliance with state charitable solicitation and gaming laws

7. Consider Formation of Separate Audit Committee & Examine Relationship with Auditor

  • Examine roles and responsibilities of audit committee and bring them in line with best practices.
  • Assess independence of auditor.

For more information regarding the New Form 990 and how it will impact tax-exempt organizations, see K&L Gates’ more in-depth analysis by clicking here.

Contacts:
Cordelia A. Glenn Grabiak, +1.412.355.6701, cordelia.grabiak@klgates.com

This publication/newsletter is for informational purposes and does not contain or convey legal advice. The information herein should not be used or relied upon in regard to any particular facts or circumstances without first consulting a lawyer.

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