I had the pleasure to attend a day-long Alliance for Justice program last week on the new Form 990 presented by Eve Borenstein, a highly respected exempt organizations attorney who I consider the go-to person on this subject.  Here are some of the highlights of the introductory portion of the program:

  • The Form 990 (and 990-EZ) "annual information returns" serve as THE tool for compliance and accountability that meets the diverse "needs" of both the regulatory community and the public.
  • The Form 990's data provides a fairly wide "thru the looking glass" view of the filing organization, narrating key operational touch-points that have practical meaning for all organizations:
    • What the organization "got done"
    • At what cost
    • With what monies
    • Who held legal responsibility or key managerial authority during the year and thus watched over some or all of the above – TDOKEs (Trustees/Directors/Officers/Key Employees)
    • What financial position resulted at year end
  • The remainder of the annual information return is populated with many Parts that basically require "tun yourself in" versus "applaud yourself" for being compliant with the tax laws!
    •  90% of rest tracks "tax" attributes or mandates
    • Best case, rest of Form is compliance checklist for management — worst case, rest of Form is fodder for whistleblowers and/or red-flag for regulators

Eve noted that for many filers, there is a major dilemma as to "who will prepare" the Form 990.  Will it be prepared internally or externally?  If prepared internally, who will be responsible?

Note that the Form 990 goes far beyond simply requiring financial information.  And it may be examined carefully by donors, funders, prospects, clients, the media, and persons disgruntled because of some action taken by the organization (e.g., terminated employees, dissatisfied clients, unhappy competitors).  Accordingly, simple reliance on a paid preparer or internal finance person may yield poor results with harsh consequences.

The program emphasized that filers absolutely must "own" five key arenas of their results/data to ensure availability of accurate and complete information on the filing year:

  1. Program Service Accomplishments.
  2. Identifying all Trustees/Directors/Officers who served at any time in the year.
  3. Identifying all Key Employees who served at any time in the year.
  4. Filers need to undertake and enforce policies so that procedures may be employed to alert the organization to (and track) transactions with any of the above TDOKEs, their family members, or other entities in which they hold "interests."
  5. Filers must understand (a) the financial results of their operations, and  (b) tax compliance-related inquiries.

As Eve states in her materials:

Failure to "own" any of these arenas leaves the filer's return preparer in a predicament.  Without good systems in place, the preparers access data that is not only inaccurate but cannot be relied upon.  The situation is akin to bringing a car in for service while assuring the garage that it is still in brand-new condition – no mileage accumulated, no "after-market" additions, no recall history, no scheduled maintenance missed.

Here's a link to Eve's Quick Intro to the Redesigned Form 990