1 2009 Form – An Overview December 11, 2010 Speaker: Patricia A. O’Malley, CPA Rubino & McGeehin, Chartered CPA’s and Consultants [email protected]

1

2009 Form – An Overview

December 11, 2010

Speaker: Patricia A. O’Malley, CPARubino & McGeehin, Chartered

CPA’s and Consultants [email protected]

Rubino & McGeehin, CPA's and Consultants 2

Form 990

2008 was the first year the expanded Form 990 was filed.

The time expended on the form was high due to: Expanded request for information

The prior year form consisted of an 11 page core form

2 schedules that potentially would need to be completed


Form 990 continued

For 2008, the form was substantially expanded: There are 16 additional schedules

The schedules are completed only if the organization meets the requirements for additional reporting for that schedule

Core form of 11 pages

Form 990 continued

Form 990 for 2009 The form was expanded slightly Major changes came in the form of

changed instructions Governance Compensation Schedule L, Interested Parties Schedule R, Related Parties


Form 990 continued For 2009:

The process was much smoother as the changes to the form and schedules were minimal

The request for information included the prior year comments, so only updates were necessary

The major changes were included in the instructions

The IRS reworded parts of the instructions to clarify what was being requested



Form 990 continued

The IRS is collecting data Comparisons are being made to

information collected from other forms Information will be used to determine

future actions Audits Additional information requests for types of

entities where inaccurate reporting is noted

Form 990 continued

Part I, Summary: An overview of the entire return Information provided is found in more

detail in other parts of return The financial information is in

comparative form



Form 990 continued

Part I, Summary: continued

Activities and governance: Questions are organizational and include: Number of voting members of the governing

body Number of employees Gross unrelated business income has always

been disclosed. Also requests the net amount from the Form 990T


Form 990 continued

Part VI, Governance, Management and Disclosure: Broken into three parts: Governing body and management Policies Disclosure Some of the questions relate to current legal

requirements, but none of the policies is required Most are best practices that the IRS believes

should be promoted.

Form 990 continued Reasonable effort

Relates to the effort made to obtain information from Board members and related parties while preparing the Form 990

An example is the sending of an annual questionnaire to each member that includes the name, title, date and signature of the person reporting, along with instructions and definitions relating to the particular part



Form 990 continued

Part VI, Section A, Governing Body and Management: All questions require a yes or no answer. Many require further explanation if answered a

specific way Questions include:

The total voting members of the governing body at the end of the year

The number of independent members of the governing body


Form 990 continued

Independence of Voting Members Must meet three criteria at all times during the year to be

independent: Criteria 1

The member was not compensated as an officer or other employee of the organization or a related organization

Criteria 2 The member did not receive total compensation or other

payments exceeding $10,000 from the organization or related organizations as an independent contractor, other than:

Reasonable expense reimbursements under an accountable plan Reasonable compensation for services provided in the capacity as a

member of the governing body


Form 990 continued

Independence of Voting Members Criteria 3

Neither the member, nor a family member was involved in a transaction with the organization, whether directly or indirectly through affiliation with another organization, that is required to be reported on Schedule L (Transactions with Interested Parties) for the reporting organization or a related organization

.


Form 990 continued

Independence of Voting Members Circumstances that will not jeopardize

independence: The member is a donor of the organization,

regardless of the amount of the contribution The member receives financial benefits from

the organization solely in the capacity of being a member served by the organization in the exercise of its exempt function


Form 990 continued

Relationships Explanations need to be given if the following

questions are answered “yes”: Were there any family or business relationships

between the officers, directors, trustees and key employees?

Family relationship includes: Spouse Ancestors Siblings (whole and half blood) Children (natural and adopted) Grandchildren and great-grandchildren Spouses of those listed above


Form 990 continued

Relationships Explanations continued

Business relationships between two persons include:

One person is employed by the other in: A sole proprietorship An organization in which the other person is a trustee,

director, officer, key employee or a greater than 35% owner


Form 990 continued

Business Relationships continued Business is transacted with the other, directly or indirectly, in

one or more contracts of: Sale Lease Loan License Performance of services Transactions involving transfers of cash or property valued in

excess of $10,000 in the aggregate for the year Does not include transactions in the ordinary course of business on

the same terms as are generally offered to the public Indirect transactions for this purpose are those with an organization

with which the one person is associated as a trustee, director officer, key employee, or greater than 35% owner.

Both are directors, trustees, officers, or greater than 10% owners in the same business or investment entity.


Form 990 continued

Governance – Affiliated Organizations Does the organization have chapters, branches, or

affiliates? If yes, are there written procedures governing

the activities of these groups? IRS is looking for consistency with the activities

of the organization. If the answer is no, an explanation of how the

organization ensures that the local unit’s activities are consistent with its own is required.


Form 990 continued

Governance – Board Review of Form 990 Did the members of the governing body review

the Form 990? Can only answer “yes” if a copy of the final document

was provided to each voting member of the governing body prior to submission to the IRS

Whether the form is distributed before or after submission, an explanation stating the process for the review must be provided


Form 990 continued

Part VI, Section B, Policies Conflict of interest

Asks if officers, directors and key employees are required to make disclosures annually

Also asks whether the organization regularly and consistently monitors and enforces compliance.

If the answer is yes, must provide a description of the process


Form 990 continued

• Policies continued Definition of a conflict of interest for this

purpose: “A conflict of interest arises when a person in

a position of authority over an organization, such as an officer, director, or manager, 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.”


Form 990 continued

Policies continued Does the organization have a whistleblower

policy? Sarbanes Oxley imposes criminal liability for

retaliation against whistleblowers Does the organization have a document

retention policy? Sarbanes Oxley imposes criminal liability for

destruction of records with intent to obstruct a federal investigation


Form 990 continued

Policies continued One question with multiple parts relates to

the approval process for determining the compensation for:

The CEO Executive Director Other top management official Other officers or key employees of the

organization


Form 990 continued

Policies continued Components of the approval process are:

Review and approval by independent persons Comparability data Contemporaneous substantiation of the deliberation and

decision An explanation of the process must be made if the answer is

yes. The questions must be answered by all organizations Answer yes only if all of the criteria are met If yes, must provide an explanation of the process


Form 990 continued

Part VI, Section C, Disclosure A description of whether and how the

following documents are made available to the public:

Governing documents Conflict of interest policy Financial statements


Form 990 continued

Part VII, Compensation of Officers, Directors, Trustees, Key Employees, Highest Compensated Employees and Independent Contractors All organizations must now provide

information that was formerly limited to 501(c)(3) organizations


Form 990 continued

Part VII, Section A Officers, Directors, Trustees, Key Employees and Highest Compensated Employees To be included:

All current officers, directors, and trustees regardless of compensation level

All key employees who received reportable compensation greater than $150,000

The organization’s five current highest compensated employees (other than current officers, directors and key employees) who received reportable compensation of more than $100,000

All former officers, key employees and highest compensated employees who received more than $100,000

Former directors and trustees that received, in the capacity of a former director or trustee, more than $10,000


Form 990 continued Part VII, Section A, continued

The definitions for those to be included: Director or Trustee

Is a member of the governing body, but only if the member has voting rights

Those who served at any time during the organization’s tax year is considered a current director or trustee

Officer: A person elected or appointed to manage the

organization’s daily operations Includes a president, vice president, secretary or

treasurer as noted in the governing documents Regardless of titles, includes top management

official and top financial official


Form 990 continued Part VII, Section A, continued

Key Employee There is now a 3 part test

$150,000 Test Reportable compensation for the calendar year ending with

or within the organization’s tax year is in excess of $150,000 Responsibility Test

Has responsibilities, powers or influence over the organization as a whole that is similar to those of officers, directors, or trustees

Manages a discrete segment or activity that represents 10% or more of the activities, assets, income, or expenses of the organization, compared to the organization as a whole

Has or shares authority to control or determine 10% or more of the organization’s capital expenditures, operating budget or compensation for employees

Top 20 Test Is one of the 20 employees that satisfy the first 2 tests with

the highest reportable compensation from the organization and related organizations for the reporting period


Form 990 continued

Part VII, Section A, continued Information to be provided:

Name and title Average hours per week Position (check all that apply as listed on the form) Reportable compensation from the organization (W-

2/1099-MISC) Reportable compensation from related organizations (W-

2/1099-MISC) Amount of other compensation from the organization and

related organizations


Form 990 continued

Part VII, Section A, continued Schedule J is to be completed if:

Any former officer, director, trustee, key employee, or highest compensated employee is listed on Part VII

If the compensation for any individual listed from the organization and all related organizations is greater than $150,000

Schedule J requires additional compensation disclosure for those who meet these requirements


Form 990 continued

Schedule J, Compensation Information The form is used to provide additional, detailed

information for those listed in Form 990, Part VII, Section A if they:

Are former officers, directors, trustees, key employees or five highest paid employees

Current officers, directors, trustees, key employees and five highest compensated employees for whom the sum of columns (D), (E) and (F) in Form 990, Part VII is greater than $150,000

Each of the current and former officers, etc. who received or accrued compensation for services rendered to the organization from an unrelated organization and is reported in Line 5 of Part VII of Form 990.


Form 990 continued Schedule J, Compensation Information

Part I, Questions Regarding Compensation General questions relating to the organization’s policies

and procedures including: Checking the box for several listed benefits if applicable,

including travel for companions, first-class travel, discretionary spending account, personal services

If these benefits are given, need to indicate whether there is a written policy regarding payment. If the answer is no, an explanation must be provided.

Is substantiation required prior to reimbursing expenses? Checking the box to indicate the methods used to

establish the compensation of the CEO Did any of the listed persons receive severance or change

in control payments, participate in a supplemental nonqualified retirement plan or participate in an equity-based compensation arrangement?


Form 990 continued

Schedule L, Transactions with Interested Persons

The definition of an interested person is different for each of the 4 parts of Schedule L Transactions requiring disclosure:

Excess benefit transactions for 501(c)(3) and 501(c)(4) organizations


Form 990 continued

Schedule L, Transactions with Interested Persons continued

Loans to and from interested persons Includes salary advances, other advances and

receivables Each loan must be reported separately Does not include advances under an accountable plan

Grants or assistance benefiting interested persons Includes scholarships, fellowships, prizes and awards Related persons who benefit must also be reported


Form 990 continued

Schedule L, Transactions with Interested Persons continued

Business transactions Includes direct and indirect business transactions for

which payments were made during the tax year between the organization and an interested person exceeded $100,000

All payments during the year from a single transaction between such parties exceeded the greater of $10,000 or 1% of the filing organization’s total revenues

Compensation payments by the organization paid to a family member of certain persons exceeds $10,000


Form 990 continued Schedule L, Transactions with

Interested Persons continued Part IV continued

Business transactions include, but are not limited to:

Contracts of sale, lease Performance of services Joint ventures in which either the profits or the

capital interest of the organization and the interested person each exceeds 10%


CMI

Gross receipts continued to be below $25,000 for 2009

Electronic filing of short form

Group Trust Form 990 is filed with consolidated

information received from all of the participating chapters

Only selected information is requested

The required information is still being obtained


Documents

1 2009 Form – An Overview December 11, 2010 Speaker: Patricia A. O’Malley, CPA Rubino & McGeehin, Chartered CPA’s and Consultants [email protected]