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Useful Information & Best Practices
Highlights of the New Form 990
Overview:
The recently redesigned Form 990 takes the spotlight in many discussions among leaders of not-for-profit organizations. Form 990 has not been significantly revised since 1979. The new revision is designed to better meet the IRS's tax compliance interests, and the transparency and accountability needs of the states, the general public, and local communities served by the organization.
Major Changes:
Major changes to Form 990 include a front page summary that provides a snapshot of key financial operating information, a governance section, and revised compensation and related organization reporting. The new form increases the number of schedules from two for the old form, to 16 schedules.
Why the changes are important:
In addition to fulfilling the new filing requirements, not-for-profit organizations should realize that the newly designed Form 990 will become a tool for the organizations to "tell their stories". These new Form 990s will provide various funding sources a much better picture of your operation and potentially help you promote your mission and your organization.
Timeline:
The new filing requirements have become effective for the 2008 calendar year or fiscal years beginning in 2008. However, special transition rules apply for certain organizations for 2008 and 2009. Please consult your accountant for more filing details.
Best Practice Tip - Investment Policy
If your organization receives donor contributions, you are managing others' money. To ensure that your organization is following proper procedures for managing and using the funds, the organization should maintain an investment policy. The key components of a basic investment policy include:
- Detail of the board's philosophies, policies, and goals (both short-term and long-term)
- Identification of who has the right to transfer between investment accounts, set transaction amount limits, determine what kind of investments can be made, and who can authorize purchases and sales
- Addressing the investment goals, the targeted return of the investment portfolio, the amount of acceptable risk, and evaluation of the risk/reward of investment alternatives
- Requiring that investment returns and composition be analyzed at least quarterly to evaluate performance, and adherence to the investment policy
Best Practice Tip - How to Keep Your Money Safe in this Rocky Market
For years when we discussed the cash concentration disclosure with our not-for-profit clients, the question raised was always "who cares about the FDIC insurance limit", as if the insurance protection with a limit that has not changed since 1980 is merely meaningless. Things changed overnight in the fall of 2008. Now the question everyone is asking is, "is our cash protected?"
While the FDIC insurance limit has been raised to $250,000 since October 2008 (the temporary increase is set to end by December 31, 2009), there are two products provided by most commercial banks that can offer even higher protections. The first product is a non-interest bearing checking account that has unlimited protection. This product is a good place to keep your operating funds. Another product is called Certificate Deposit Account Registry Service (CDARS), which provides protection to deposits up to $50 million. CDARS helps the organization earn reasonable interest on funds that are not needed immediately, and saves trips to different banks to open up numerous CD accounts. Talk to your banker today about these products!