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15 Questions Nonprofit Board Members Should Be Able to Answer

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It is a good best practice for nonprofit board members to review the organization’s Form 990, Return of Organization Exempt From Income Tax. The information on this form can help board members understand the organization’s activities and the applicable tax laws, both of which are key to fulfilling their fiduciary duties.

If you serve as a nonprofit board member, we recommend that you review the organization’s Form 990 and be informed enough to answer these 15 questions:

  1. Has your organization provided a complete copy of your Form 990 (nothing redacted, even Schedule B – List of Contributors) to all members of your governing body before filing the form?
  2. Did your organization engage in an excess benefit transaction with a disqualified person during its most recent tax year or become aware of an excess benefit transaction that occurred in a prior tax year?
  3. Did your organization have any amounts recorded on its financial statements for receivables from or payables to any current or former officers, directors, trustees, key employees, highest compensated employees, or disqualified persons?
  4. Did your organization provide a grant or other assistance to an officer, director, trustee, key employee, substantial contributor or employee thereof, a grant selection committee member, or to a controlled entity or family member of any of these persons?
  5. Was your organization a party to a business transaction with a current or former officer, director, trustee, or key employee?
  6. Was your organization a party to a business transaction with a family member of a current or former officer, director, trustee, or key employee?
  7. Was your organization a party to a business transaction with an entity of which a current or former officer, director, trustee, or key employee (or a family member thereof) was an officer, director, trustee, or direct or indirect owner?
  8. Did your organization maintain any donor-advised funds or any similar funds or accounts for which donors have the right to provide advice on the distribution or investment of amounts in such funds or accounts?
  9. Did your organization, directly or through a related organization, hold assets in temporarily restricted endowments, permanent endowments, or quasi-endowments?
  10. At any time during the calendar year, did your organization have an interest in, or a signature or other authority over, a financial account in a foreign country (such as a bank account, securities account, or other financial account)?
  11. Did any officer, director, trustee, or key employee have a family relationship or a business relationship with any other officer, director, trustee, or key employee?
  12. Did your organization make any significant changes to its governing documents during its most recent tax year?
  13. Did your organization’s process for determining compensation of the CEO, executive director, president, and/or other officers and top executives include a review and approval by independent persons, comparability data, and contemporaneous substantiation of the deliberation and decision?
  14. Have you reviewed Form 990, Part VII – Compensation of Officers, Directors, Trustees, Key Employees, Highest Compensated Employees, and Independent Contractors for accuracy and understanding?
  15. Does your organization have a committee that assumes responsibility for oversight of the audit, review, or compilation of its financial statements and selection of an independent accountant?

While the IRS does not require board review of Form 990, Part VI, Line 11a of the form asks, “Has the organization provided a complete copy of this Form 990 to all members of its governing body before filing the form?” Further, Line 11b asks the organization to describe the process used to review the form, if there was one.

If you have any questions after reviewing your organization’s Form 990, do not hesitate to ask the organization’s management for clarification. In addition to being filed with the IRS, Form 990 is available to the public. It’s vital for board members to be well informed on what the form contains before it is filed.

Dave Moja

Dave serves as Partner and is dedicated to meeting client needs in the exempt organization tax arena through review of client returns, consulting engagements, training, and the compilation of the annual CapinCrouse Higher Education Tax Reporting Trends Project. He has 30 years of accounting experience and serves several industry committees, including the AICPA Not-for-Profit Advisory Council. Dave has also served on the IRS Advisory Committee on Tax Exempt and Government Entities (ACT).

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