The nonprofit didn’t plan. It had no policy for pay. So folks never knew What might happen one day.
And then it arrived! A plan for the pay! And not just a plan, a policy — hooray!
It was clear! It was fair! It was legal and true! Staff, the board, and donors all said, “Yoo-hoo!”
Today would have been the 115th birthday of Theodor Seuss Geisel (March 2, 1904-Sept. 24, 1991) — the author and illustrator of The Cat in the Hat, Green Eggs and Ham, The Lorax, and Horton Hears a Who! and many, many more classic books for children.
And to quote Dr. Seuss, no matter your nonprofit’s size and mission, you need a compensation policy for all employees that is not a Grinchy “two sizes too small.”
Oh, the places you’ll go with good policy!
A clear and strong compensation policy isn’t just about wages and benefits, it signals to employees, donors, and the public that the care you put into fulfilling your nonprofit’s mission extends to the people who are integral to its success.
By adopting such a policy, you make clear the nonprofit’s values and philosophy when it comes to compensating its employees. A well-drafted Compensation Policy lays out pay tiers and benefits and how they are determined and approved; describes potential conflicts of interest and how they can be avoided; and includes comparability data information that shows how your nonprofit determines compensation based on similarly-situated organizations.
Your nonprofit’s compensation policy will help keep you on track when making hiring decisions and planning — and sticking to! — your budget.
And, remember, a good Compensation Policy doesn’t just tell employees where they are on a pay scale within the organization and the benefits that are available. It lays out for them in plain language how compensation decisions are made, who makes them, and what they can (should?) do to be successful in the organization.
Even if you’re comfortable with your nonprofit’s current Compensation Policy — when was the last time it was reviewed by the Board of Directors and a qualified attorney with expertise in nonprofit law? Whether it’s a revision to reflect a new labor law or fine-tuning to add clarity, a robust up-to-date Compensation Policy provides a fair and consistent framework for making sure employees are paid appropriately for their work.
Delaying or blowing off a review of a Compensation Policy can have dire consequences for a nonprofit. There are a host of state and federal legal requirements when it comes to employees and hiring, from pay to working conditions to benefits. In addition, the IRS requires nonprofits follow specific rules when it comes to compensation in order to maintain their tax-exempt status.
A compensation policy, you will find
Is beneficial to all inclined.
You will like it on a boat.
You will like it with a goat.
You will like it in the rain.
You will like it on a train.
You will like it here or there
You will like it ANYWHERE!
If your organization is interested in drafting or revisiting its compensation policy, don’t hesitate to reach out to Gordon Fischer Law Firm.
For the month of March, I’m offering a special to Iowa nonprofits. I will draft, revise, and edit, the ten (10) policies expressly referenced by the IRS on Form 990 specific to the unique mission of your nonprofit.
https://www.gordonfischerlawfirm.com/wp-content/uploads/2024/02/taylor-heery-keS4jbSHTF0-unsplash-scaled-e1708381295198.jpeg16001913Lexi Luneckashttps://www.gordonfischerlawfirm.com/wp-content/uploads/2017/05/GFLF-logo-300x141.pngLexi Luneckas2024-03-02 08:00:132024-03-03 12:28:46In Honor of the Birthday of Dr. Seuss
A Special Rhyme for Iowa Nonprofits About the Importance of a Compensation Policy
Wow, Iowa weather has been completely crazy the last few days. In the last week we’ve experience all four seasons: Fall, Spring, Summer, Winter. In just a single week!
While Iowa’s weather may be ever-changing, some things never change. Such as the ten (10) specific policies that every nonprofit should adopt. Adopting a strong set of policies that provide operational, financial, and legal guidelines is one of the best things a nonprofit can do to steer and guide its board and staff.
During this month of March (2024), I’ll be explaining the policies nonprofits need to establish a solid foundation for maintaining their financial health, improving their operations, and fulfilling their missions.
A well-drafted nonprofit policy will:
Enhance the confidence of donors and other stakeholders;
Establish a consistent framework for decision-making;
Improve compliance with federal, state, and local laws;
Reduce myriad risks to its board, staff, volunteers, and donors.
The IRS requires nonprofits to file Form 990 every year. IRS Form 990 is the “tax return” which all nonprofits must file. IRS Form 990 expressly references ten (10) specific policies on its Form 990.
The IRS does not currently require nonprofits to adopt these polices. However, by expressly asking about these specific policies on Form 990, it is clear the IRS is strongly, strongly encouraging nonprofits to adopt these policies.
In alphabetical order, the ten (10) policies referenced on IRS Form 990:
1. Compensation Policy. States compensation ranges for positions, keeps job descriptions current, outlines salary administration, and establishes a process for management performance and discipline. It also explains philosophy of how compensation supports the organization’s mission.
2. Conflict of Interest Policy. Requires members with a conflict (or potential conflict) to disclose it and excludes individual board members with a perceived conflict from voting on matters in which they may unfairly benefit.
3. Document Retention and Destruction Policy. Clarifies the types of documents that should be retained, how they should be filed, and for how long, as well as describes proper deletion and/or destruction techniques.
4. Financial Policies and Procedures. Provides specific guidelines for financial decision-making, reporting the nonprofit’s financial status, managing funds, and developing financial goals. It should also outline the budgeting process, investment reporting, what accounts may be maintained by the nonprofit, and when scheduled auditing must occur.
5. Fundraising Policy. Describes provisions for compliance with local, state, and federal laws, as well as ethical practices the nonprofit follows in its fundraising efforts, including soliciting donations.
6. Gift Acceptance Policy. Different from a Fundraising Policy, it establishes how certain types of assets — specifically non-cash donations — are handled by providing protocols for their evaluation and steps for accepting or politely declining them.
7. Investment Policy. Designates who is accountable for investment decisions and offers guidance on growing and protecting investments and maintaining access to cash.
8. IRS Form 990 Review Policy. Lays out the specific steps for distribution and the procedural review of IRS Form 990 to ensure compliance and maintain tax-exempt status.
9. Public Disclosure Policy. Describes what organizational documents must be made available to the public upon request and those that will be kept internal.
10. Whistleblower Policy. Establishes a process for handling whistleblower complaints and specifically prohibits retaliation against employees reporting on credible suspicions of illegal practices or nonprofit policies.
Iowa nonprofits make transformational investments in their communities in a wide range of areas: education, animal welfare, the environment, children, and the arts, among many others. Adopting these 10 policies is an investment that nonprofits must make in themselves to successfully carry out their missions forever.
For the month of March, I’m offering a special to Iowa nonprofits. I will draft, revise, and edit, the ten (10) policies expressly referenced by the IRS on Form 990 specific to the unique mission of yournonprofit.
Questions about the ten (10) policies referenced on IRS Form 990?
Every nonprofit, every year, must complete and file a version of Form 990, which the IRS calls its “Return of Organization Exempt From Income Tax.” Just when the “long” version of IRS Form 990 asks about many financial matters – donations, money on hand, non-cash assets, breakdown of expenses, and so on.
IRS Form 990 goes even further, however, and asks nonprofits if they have in place certain policies. In fact, there are ten (10) specific policies which the IRS asks about on Form 990. To be clear, the IRS does not mandate adopting these ten (10) policies. But the IRS, to me, is at the least signaling what polices nonprofits should have in place. Again, my read of Form 990 is
that the IRS is showing nonprofits what it considers to be “best practices.”
II. REASONS AND BENEFITS TO ADOPT THESE TEN (10) POLICIES
One might ask, if these policies are not absolutely required, why have them?
Generally, these ten (10) policies provide substantial benefits, including but hardly limited to:
Enhanced confidence of donors and other stakeholders
Consistent framework for decision making
Increased compliance with federal and state laws
Reduced risk to the nonprofit and its management and governing board
The existence of a policy doesn’t mean compliance is assured, of course, but having policies in place provides a framework and sets expectations for a nonprofit’s board members, employees, donors, volunteers, and other stakeholders. Such policies can be referenced if (when) issues arise.
Another major reason to invest in adopting these policies is because the IRS audits tax-exempt nonprofits, just as it audits companies and individuals. Having certain policies in place will only serve to benefit the nonprofit should it happen to be audited. Also, proper policies provide a foundation for soliciting, accepting, and facilitating charitable donations.
Last, but not least, Form 990 is made accessible to the public, meaning it can be used as a public relations tool if filled out diligently. Major donors can and often do review a nonprofit’s Form 990 to ensure the nonprofit is compliant, putting charitable donations to good use, and continues to operate in alignment with its overall mission.
III. WHAT POLICIES ARE WE TALKING ABOUT?
The IRS made a major revision to Form 990 in 2008. The old version focused largely on financial data. Now, Form 990 reports extensive information on operations such as board governance, fundraising, non-cash assets, and more. Let’s cover all ten (10) policies the IRS asks nonprofits to report on in its Form 990. I’ll discuss each policy in alphabetical order.
1. COMPENSATION
Data related to compensation is reported in multiple sections on Form 990: Part I, Part VI, Part VII, Part IX, and Schedule J.
Competitive compensation is just as important for employees of nonprofits as it is for for-profit employees. Having a set policy in place that objectively establishes salary ranges for positions, updated job descriptions, relevant salary administration, and performance management is used to establish equality and equity in compensation practices. A statement of compensation philosophy and strategy, which explains to current and potential employees and board members how compensation supports the nonprofit’s mission, should be included in the compensation policy.
2. CONFLICT OF INTEREST
Found on Form 990 Part VI, Section B, Line 12 a-c.
A conflict of interest policy should do two important things. First, require board members with a conflict (or a potential conflict) to disclose said conflict. Second, exclude individual board members from voting on matters in which there is a conflict.
The Form 990 glossary defines a “conflict of interest policy” as follows:
A conflict of interest policy defines conflicts of interest, identifies the classes of individuals within the organization covered by the policy, facilitates disclosure of information that can help identify conflicts of interest, and specifies procedures to be followed in managing conflicts of interest. A conflict of interest arises when a person in a position of authority over an organization, such as an officer, director, manager, or key employee can benefit financially from a decision he or she could make in such capacity, including indirect benefits such as to family members or businesses with which the person is closely associated. For this purpose, a conflict of interest doesn’t include questions involving a person’s competing or respective duties to the organization and to another organization, such as by serving on the boards of both organizations, that don’t involve a material financial interest of, or benefit to, such person.
Form 990 asks whether the nonprofit has a conflict of interest policy, as well as how the nonprofit determines and manages board members who have an actual or perceived conflict of interest. This policy is hugely important, as conflicts of interest that are not successfully and ethically managed can result in sanctions against both the nonprofit and the individual with the conflict(s).
3. DOCUMENT RETENTION AND DESTRUCTION
Found on Form 990 Part VI, Section B, Line 14.
This policy should clarify what types of documents should be retained, how they should be filed, and for what duration. It should also outline proper deletion and or destruction techniques. The document retention and destruction policy (sometimes called, simply, a “DRD policy”) is useful for a number of reasons. The principle rational as to why any nonprofit would want to adopt such a policy is that it ensures important documents—financial information, employment records, contracts, information relating to asset ownership, etc.—are stored for a period of time for tax, business, and other regulatory purposes. No doubt document retention is incredibly important should litigation or governmental investigation arise.
A strong, clear DRD policy also allows nonprofits to save time, space, and money associated with both hard copy and digital file storage, by determining what is no longer needed and when…it’s like sanctioned spring cleaning!
4. FINANCIAL POLICIES AND PROCEDURES
Different than the investment policy (as discussed below), financial policies specifically address guidelines for making financial decisions, reporting financial status of the nonprofit, managing funds, and developing financial goals. The financial management policies and procedures should also outline the budgeting process, investment reporting, what accounts may be maintained by
the nonprofit, and when scheduled auditing will take place. Form 990 does not make a specific ask about a nonprofit’s financial policies, but this type of policy will serve as an indispensable guide to organizing, collecting, and reporting financial data.
5. FORM 990 REVIEW
Found on Form 990 Part VI, Section B, Line 11.
Form 990 asks the following questions:
Has the organization provided a complete copy of this Form 990 to all members of its governing body before filing the form? Describe in Schedule O the process, if any, used by the organization to review this Form 990.
In asking these questions, the IRS is indicating that careful distributing and reviewing Form 990
prior to filing is optimal. This policy is extremely useful in clarifying the specific process for
distribution and procedure review by the governing body (such as the board of directors). It also
acts as a reminder to nonprofit leaders that Form 990 is coming due!
6. FUNDRAISING
The topic of fundraising gets substantial attention on Form 990; fundraising income and expenses are asked about in Part I, Part IV, Part VIII, Part IX, and Schedules G and M.
Almost every nonprofit needs a fundraising policy, as so many nonprofits engage in some sort of
charitable fundraising. This policy should include provisions for compliance with local, state,
and federal laws, as well as the ethical norms the nonprofit chooses to abide by in fundraising
efforts. Remember that fundraising doesn’t just include solicitation of donations, but also receipt
of donations.
7. GIFT ACCEPTANCE
Gifts and contributions are referenced many times on Form 990: Part I, Part IV, Part V, Part VIII, Part IX, and Schedule M.
While related to the fundraising policy, the gift acceptance policy is different, as it relates to how nonprofits will handle certain types of assets. This policy provides written protocols for nonprofit board members and staff to evaluate proposed non-cash donations. The policy can also grant some much-needed guidance in how to kindly reject donations that can carry extraneous
liabilities and obligations the nonprofit is not readily able to manage.
8. INVESTMENT
One way a board of directors can fulfill their fiduciary responsibility to the nonprofit is through investing assets to further the nonprofit’s goals. But, before investment vehicles are used, the nonprofit should have an investment policy in place to define who is accountable for the investment decisions. The policy should also offer guidance on activities of growing/protecting
the investments, earning interest, and maintaining access to cash if necessary.
Beyond the specifics of investments, this policy can also govern financial management decisions regarding situations like accepting charitable gifts of securities.
The policy should be written to give the nonprofit’s management personnel the authority to make investment decisions, as well as preserve the board’s oversight ability.
Many nonprofits hire a professional financial advisor or investment manager to implement investments and offer advice. This person’s role can be accounted for in the investment policy. Form 990 does not ask if a nonprofit has a specific investment policy, but it does refer to investments in multiple places throughout the form, and there is an obvious need.
9. PUBLIC DISCLOSURE
Found on Form 990 Part VI, Section C, Lines 18-20.
Speaking broadly, nonprofits exist to serve the public in some way or another, and some nonprofit documents must be made available to the public upon request. Other documents can be kept entirely internal. This policy should overview (1) what documents the nonprofit must disclose, and (2) to what extent does it want to make other non-required documents and
information available to the public.
Form 990 specifically asks the filing nonprofit to report if certain documents are made available to the public, such as governing documents (like the bylaws), financial statements, and the conflict of interest policy. Additionally, Form 990 asks for the name, address, and phone number of the individual(s) who possesses the financial “books” and records of the nonprofit.
10. WHISTLEBLOWER
Found on Form 990 Part VI, Section B, Line 13.
Nonprofits, along with all organizations, are prohibited from retaliating against employees who call out, draw attention to, or “blow the whistle” against employer practices. A whistleblower policy should set a process for complaints to be addressed and include protection for whistleblowers. Ultimately this policy can help insulate your nonprofit from the risk of state and
federal law violation and encourage sound, swift responses of investigation and solutions to complaints.
A whistleblower policy encourages staff and volunteers to come forward with credible information on illegal practices or violations of adopted policies of the nonprofit, specifies that the nonprofit will protect the individual from retaliation, and identifies those staff or board members or outside parties to whom such information can be reported.
IV. CONCLUSION
With nonprofits passion should always lead the way, but good policy will guide and protect your efforts. You can have a huge impact by having your favorite nonprofit adopt the ten (10) policies referenced on IRS Form 990.
In Honor of the Birthday of Dr. Seuss
NonprofitsA Special Rhyme for Iowa Nonprofits About the Importance of a Compensation Policy
March 2, 2024
Today would have been the 115th birthday of Theodor Seuss Geisel (March 2, 1904-Sept. 24, 1991) — the author and illustrator of The Cat in the Hat, Green Eggs and Ham, The Lorax, and Horton Hears a Who! and many, many more classic books for children.
And to quote Dr. Seuss, no matter your nonprofit’s size and mission, you need a compensation policy for all employees that is not a Grinchy “two sizes too small.”
Oh, the places you’ll go with good policy!
A clear and strong compensation policy isn’t just about wages and benefits, it signals to employees, donors, and the public that the care you put into fulfilling your nonprofit’s mission extends to the people who are integral to its success.
By adopting such a policy, you make clear the nonprofit’s values and philosophy when it comes to compensating its employees. A well-drafted Compensation Policy lays out pay tiers and benefits and how they are determined and approved; describes potential conflicts of interest and how they can be avoided; and includes comparability data information that shows how your nonprofit determines compensation based on similarly-situated organizations.
Your nonprofit’s compensation policy will help keep you on track when making hiring decisions and planning — and sticking to! — your budget.
And, remember, a good Compensation Policy doesn’t just tell employees where they are on a pay scale within the organization and the benefits that are available. It lays out for them in plain language how compensation decisions are made, who makes them, and what they can (should?) do to be successful in the organization.
Even if you’re comfortable with your nonprofit’s current Compensation Policy — when was the last time it was reviewed by the Board of Directors and a qualified attorney with expertise in nonprofit law? Whether it’s a revision to reflect a new labor law or fine-tuning to add clarity, a robust up-to-date Compensation Policy provides a fair and consistent framework for making sure employees are paid appropriately for their work.
Delaying or blowing off a review of a Compensation Policy can have dire consequences for a nonprofit. There are a host of state and federal legal requirements when it comes to employees and hiring, from pay to working conditions to benefits. In addition, the IRS requires nonprofits follow specific rules when it comes to compensation in order to maintain their tax-exempt status.
If your organization is interested in drafting or revisiting its compensation policy, don’t hesitate to reach out to Gordon Fischer Law Firm.
For the month of March, I’m offering a special to Iowa nonprofits. I will draft, revise, and edit, the ten (10) policies expressly referenced by the IRS on Form 990 specific to the unique mission of your nonprofit.
My email is: gordon@gordonfischerlawfirm.com
####
Happy Birthday Dr. Seuss!
A Special Rhyme for Iowa Nonprofits About the Importance of a Compensation Policy
March: Lamb or Lion?
NonprofitsWhile Iowa’s Weather Changes, Some Things Never Do – Every Iowa Nonprofit Should Adopt Ten (10) Policies
March 1, 2024
Did March come in like a lamb or lion?
Wow, Iowa weather has been completely crazy the last few days. In the last week we’ve experience all four seasons: Fall, Spring, Summer, Winter. In just a single week!
While Iowa’s weather may be ever-changing, some things never change. Such as the ten (10) specific policies that every nonprofit should adopt. Adopting a strong set of policies that provide operational, financial, and legal guidelines is one of the best things a nonprofit can do to steer and guide its board and staff.
During this month of March (2024), I’ll be explaining the policies nonprofits need to establish a solid foundation for maintaining their financial health, improving their operations, and fulfilling their missions.
A well-drafted nonprofit policy will:
The IRS requires nonprofits to file Form 990 every year. IRS Form 990 is the “tax return” which all nonprofits must file. IRS Form 990 expressly references ten (10) specific policies on its Form 990.
The IRS does not currently require nonprofits to adopt these polices. However, by expressly asking about these specific policies on Form 990, it is clear the IRS is strongly, strongly encouraging nonprofits to adopt these policies.
In alphabetical order, the ten (10) policies referenced on IRS Form 990:
Iowa nonprofits make transformational investments in their communities in a wide range of areas: education, animal welfare, the environment, children, and the arts, among many others. Adopting these 10 policies is an investment that nonprofits must make in themselves to successfully carry out their missions forever.
For the month of March, I’m offering a special to Iowa nonprofits. I will draft, revise, and edit, the ten (10) policies expressly referenced by the IRS on Form 990 specific to the unique mission of your nonprofit.
Questions about the ten (10) policies referenced on IRS Form 990?
My email is: gordon@gordonfischerlawfirm.com
####
While Iowa’s Weather Changes, Some Things Never Do - Every Iowa Nonprofit Should Adopt Ten (10) Policies
YOUR FAVORITE NONPROFIT NEEDS THESE TEN (10) POLICIES
NonprofitsI. IRS FORM 990
Every nonprofit, every year, must complete and file a version of Form 990, which the IRS calls its “Return of Organization Exempt From Income Tax.” Just when the “long” version of IRS Form 990 asks about many financial matters – donations, money on hand, non-cash assets, breakdown of expenses, and so on.
IRS Form 990 goes even further, however, and asks nonprofits if they have in place certain policies. In fact, there are ten (10) specific policies which the IRS asks about on Form 990. To be clear, the IRS does not mandate adopting these ten (10) policies. But the IRS, to me, is at the least signaling what polices nonprofits should have in place. Again, my read of Form 990 is
that the IRS is showing nonprofits what it considers to be “best practices.”
II. REASONS AND BENEFITS TO ADOPT THESE TEN (10) POLICIES
One might ask, if these policies are not absolutely required, why have them?
Generally, these ten (10) policies provide substantial benefits, including but hardly limited to:
The existence of a policy doesn’t mean compliance is assured, of course, but having policies in place provides a framework and sets expectations for a nonprofit’s board members, employees, donors, volunteers, and other stakeholders. Such policies can be referenced if (when) issues arise.
Another major reason to invest in adopting these policies is because the IRS audits tax-exempt nonprofits, just as it audits companies and individuals. Having certain policies in place will only serve to benefit the nonprofit should it happen to be audited. Also, proper policies provide a foundation for soliciting, accepting, and facilitating charitable donations.
Last, but not least, Form 990 is made accessible to the public, meaning it can be used as a public relations tool if filled out diligently. Major donors can and often do review a nonprofit’s Form 990 to ensure the nonprofit is compliant, putting charitable donations to good use, and continues to operate in alignment with its overall mission.
III. WHAT POLICIES ARE WE TALKING ABOUT?
The IRS made a major revision to Form 990 in 2008. The old version focused largely on financial data. Now, Form 990 reports extensive information on operations such as board governance, fundraising, non-cash assets, and more. Let’s cover all ten (10) policies the IRS asks nonprofits to report on in its Form 990. I’ll discuss each policy in alphabetical order.
1. COMPENSATION
Data related to compensation is reported in multiple sections on Form 990: Part I, Part VI, Part VII, Part IX, and Schedule J.
Competitive compensation is just as important for employees of nonprofits as it is for for-profit employees. Having a set policy in place that objectively establishes salary ranges for positions, updated job descriptions, relevant salary administration, and performance management is used to establish equality and equity in compensation practices. A statement of compensation philosophy and strategy, which explains to current and potential employees and board members how compensation supports the nonprofit’s mission, should be included in the compensation policy.
2. CONFLICT OF INTEREST
Found on Form 990 Part VI, Section B, Line 12 a-c.
A conflict of interest policy should do two important things. First, require board members with a conflict (or a potential conflict) to disclose said conflict. Second, exclude individual board members from voting on matters in which there is a conflict.
The Form 990 glossary defines a “conflict of interest policy” as follows:
Form 990 asks whether the nonprofit has a conflict of interest policy, as well as how the nonprofit determines and manages board members who have an actual or perceived conflict of interest. This policy is hugely important, as conflicts of interest that are not successfully and ethically managed can result in sanctions against both the nonprofit and the individual with the conflict(s).
3. DOCUMENT RETENTION AND DESTRUCTION
Found on Form 990 Part VI, Section B, Line 14.
This policy should clarify what types of documents should be retained, how they should be filed, and for what duration. It should also outline proper deletion and or destruction techniques. The document retention and destruction policy (sometimes called, simply, a “DRD policy”) is useful for a number of reasons. The principle rational as to why any nonprofit would want to adopt such a policy is that it ensures important documents—financial information, employment records, contracts, information relating to asset ownership, etc.—are stored for a period of time for tax, business, and other regulatory purposes. No doubt document retention is incredibly important should litigation or governmental investigation arise.
A strong, clear DRD policy also allows nonprofits to save time, space, and money associated with both hard copy and digital file storage, by determining what is no longer needed and when…it’s like sanctioned spring cleaning!
4. FINANCIAL POLICIES AND PROCEDURES
Different than the investment policy (as discussed below), financial policies specifically address guidelines for making financial decisions, reporting financial status of the nonprofit, managing funds, and developing financial goals. The financial management policies and procedures should also outline the budgeting process, investment reporting, what accounts may be maintained by
the nonprofit, and when scheduled auditing will take place. Form 990 does not make a specific ask about a nonprofit’s financial policies, but this type of policy will serve as an indispensable guide to organizing, collecting, and reporting financial data.
5. FORM 990 REVIEW
Found on Form 990 Part VI, Section B, Line 11.
Form 990 asks the following questions:
In asking these questions, the IRS is indicating that careful distributing and reviewing Form 990
prior to filing is optimal. This policy is extremely useful in clarifying the specific process for
distribution and procedure review by the governing body (such as the board of directors). It also
acts as a reminder to nonprofit leaders that Form 990 is coming due!
6. FUNDRAISING
The topic of fundraising gets substantial attention on Form 990; fundraising income and expenses are asked about in Part I, Part IV, Part VIII, Part IX, and Schedules G and M.
Almost every nonprofit needs a fundraising policy, as so many nonprofits engage in some sort of
charitable fundraising. This policy should include provisions for compliance with local, state,
and federal laws, as well as the ethical norms the nonprofit chooses to abide by in fundraising
efforts. Remember that fundraising doesn’t just include solicitation of donations, but also receipt
of donations.
7. GIFT ACCEPTANCE
Gifts and contributions are referenced many times on Form 990: Part I, Part IV, Part V, Part VIII, Part IX, and Schedule M.
While related to the fundraising policy, the gift acceptance policy is different, as it relates to how nonprofits will handle certain types of assets. This policy provides written protocols for nonprofit board members and staff to evaluate proposed non-cash donations. The policy can also grant some much-needed guidance in how to kindly reject donations that can carry extraneous
liabilities and obligations the nonprofit is not readily able to manage.
8. INVESTMENT
One way a board of directors can fulfill their fiduciary responsibility to the nonprofit is through investing assets to further the nonprofit’s goals. But, before investment vehicles are used, the nonprofit should have an investment policy in place to define who is accountable for the investment decisions. The policy should also offer guidance on activities of growing/protecting
the investments, earning interest, and maintaining access to cash if necessary.
Beyond the specifics of investments, this policy can also govern financial management decisions regarding situations like accepting charitable gifts of securities.
The policy should be written to give the nonprofit’s management personnel the authority to make investment decisions, as well as preserve the board’s oversight ability.
Many nonprofits hire a professional financial advisor or investment manager to implement investments and offer advice. This person’s role can be accounted for in the investment policy. Form 990 does not ask if a nonprofit has a specific investment policy, but it does refer to investments in multiple places throughout the form, and there is an obvious need.
9. PUBLIC DISCLOSURE
Found on Form 990 Part VI, Section C, Lines 18-20.
Speaking broadly, nonprofits exist to serve the public in some way or another, and some nonprofit documents must be made available to the public upon request. Other documents can be kept entirely internal. This policy should overview (1) what documents the nonprofit must disclose, and (2) to what extent does it want to make other non-required documents and
information available to the public.
Form 990 specifically asks the filing nonprofit to report if certain documents are made available to the public, such as governing documents (like the bylaws), financial statements, and the conflict of interest policy. Additionally, Form 990 asks for the name, address, and phone number of the individual(s) who possesses the financial “books” and records of the nonprofit.
10. WHISTLEBLOWER
Found on Form 990 Part VI, Section B, Line 13.
Nonprofits, along with all organizations, are prohibited from retaliating against employees who call out, draw attention to, or “blow the whistle” against employer practices. A whistleblower policy should set a process for complaints to be addressed and include protection for whistleblowers. Ultimately this policy can help insulate your nonprofit from the risk of state and
federal law violation and encourage sound, swift responses of investigation and solutions to complaints.
A whistleblower policy encourages staff and volunteers to come forward with credible information on illegal practices or violations of adopted policies of the nonprofit, specifies that the nonprofit will protect the individual from retaliation, and identifies those staff or board members or outside parties to whom such information can be reported.
IV. CONCLUSION
With nonprofits passion should always lead the way, but good policy will guide and protect your efforts. You can have a huge impact by having your favorite nonprofit adopt the ten (10) policies referenced on IRS Form 990.
I’ll draft these ten (10) policies for only $990. Email me right now at:
gordon@gordonfischerlawfirm.com
####