BY: JEFF LADENBURGER, CPA, FHFMA
EDITOR'S NOTE
Download IRS Form 990 and Schedule H for tax year 2010 at www.irs.gov/char ties/charitable/article/0,,id=236275,00.html
Now that we have the benefit of some real-life experience, it is a good time to focus on IRS Form 990 reporting requirements and recent Form 990 filings. Organizations have worked hard to meet the challenges of the updated Form 990 disclosure requirements, which include key organizational, financial, compensation, governance and operational information.
CHAN Healthcare Auditors, which provides internal audit services to nonprofit health care organizations, has worked with management and governance departments of many nonprofit organizations as they complete their Form 990s. In fact, the Form 990 has been one of the topics most discussed by governance throughout 2010.
Here are some important questions that come up most frequently:
- Which governance committee should review the Form 990 and how detailed should this review be?
- What should the governance committee communicate to the full board regarding Form 990?
- Should the full board review the entire Form 990, or just certain key areas?
- Should just one board member perform a review and report back to the full board?
- Should management prepare a communication to the board notifying them about the Form 990 submission to the IRS?
- How soon, prior to the filing deadline, should Form 990 be presented to governance?
- What areas should governance be concerned about on Form 990, including the applicable schedules?
- Should Form 990 be posted to the organization's website?
WHAT DISCUSSING THE QUESTIONS WILL DO
Deciding on your organization's answers to these questions will help guide you — and those in governance and management — through the Form 990 planning, preparation, review, approval and submission process.
Answering the questions also will prepare you for the portion of Form 990 that asks if the organization has provided a copy of the form to all members of its governing body before filing — and to describe the process, if any, the organization uses to review the form.
Discussing the questions serves as an ongoing education to those in governance, helping them keep informed about current IRS reporting requirements and deepening their understanding of the information the IRS requires. This education will also help those in governance better understand their oversight responsibilities regarding Form 990.
REVIEW AND APPROVAL PROCESS
Navigating through the questions provides an opportunity to develop a well-defined IRS 990 review and approval process, identifying responsible parties and a timetable for completion — or refining the process already established. To ensure effective accountability, identify a senior level management representative who is responsible for the process. A reliable Form 990 process is extremely important because your submission needs to be complete, accurate and timely. The IRS will continue to use more and more of the submitted information to analyze both governance and operations of nonprofit organizations over time. Therefore, organizations need to be sure they have the proper process in place to accurately report the organization's information.
Clear, effective direction will help ensure that everyone understands the Form 990 review process. Communicate with governance in advance about what information they can expect management to provide, what actions governance is expected to take — and give them ample time to review documents.
As noted above, at least one organization has asked if they should post their Form 990 on their website. To date, that isn't required, but Form 990 is to be made available to the general public. Posting it on a website gives easier access, if so desired.
STAY CURRENT
As the IRS receives information gathered via Form 990, they are likely to re-focus their attention on certain areas they are more interested in further pursuing. That means changes are likely. Keep management informed about current developments, and look to the IRS, CHA and other organizations such as the Healthcare Financial Management Association to see if they offer webinars and other helpful information about Form 990 updates.
JEFF LADENBURGER is chief audit executive with CHAN Healthcare Auditors, Cincinnati.