Monday, July 27, 2009

Wondering What to Do About the New 990? New Principles Workbook is a Comprehensive Governance Resource for Boards

Ever since the IRS adopted the new 990 with a series of governance questions that must be answered every year, the topic of governance has been much more popular with Boards. Sarah Hall Ingram, IRS Commissioner of Tax Exempt and Government Entities has been talking about governance and nonprofits. In recent remarks, she said that she believes that adherence to principles of good governance is entirely consistent with accomplishing charitable objectives and seeing that the tax-exempt sector complies with the IRS Code. Good governance helps advance these goals and it is a tool– something practical and useful.

It seems to me that sometimes the financial professionals almost frighten nonprofits when they talk about the new 990. But in fact, Ms. Ingram is clear that she understands there is not a one size fits all set of governance requirements and she plans to begin a dialogue with small nonprofits and membership organizations as they have particular concerns about which principles may apply to them. The IRS is actually starting quite gently here by merely asking questions - they haven't established harsh new requirements. But I do believe it will not take look for more good governance policies and practices to take hold with a broad spectrum of nonprofits. There already are good governance best practices and free tools to help you implement them.

Independent Sector and Boardsource have developed two comprehensive governance resources for nonprofit boards and they are available as free downloads at Independent Sector. I highly recommend these excellent resource as a basis for Board training.

1. Principles for Good Governance and Ethical Practice
A Guide for Charities and Foundations

This is the report of a panel on nonprofits convened by Independent Sector in 2007. The panel adopted 33 principles of good governance for Nonprofits and grouped them into four categories:
• Legal Compliance and Public Disclosure
• Effective Governance
• Financial Oversight
• Responsible Fundraising

2. Principles Workbook: Steering Your Board Toward Good Governance and Ethical Practice
Now Independent Sector, again working with BoardSource has published this user friendly tool that boards can use to for governance training. The principles are grouped into one of the related categories above and for each item there is a worksheet with a summary format including:
1. Core concepts
2. Discussion items
3. Legal and compliance issues
4. Resources

The worksheets provide a clear, concise summary and discussion items which can stimulate lively discussion around board governance and ethical practices.

The principles covered are:
1. Laws and Regulations
2. Code of Ethics
3. Conflicts of Interest
4. “Whistleblower” Policy
5. Document Retention and Destruction
6. Protection of Assets
7. Availability of Information to the Public
8. Board Responsibilities
9. Board Meetings
10. Board Size and Structure
11. Board Diversity
12. Board Independence
13. CEO Evaluation and Compensation
14. Separation of CEO, Board Chair, and Board Treasurer Roles
15. Board Education and Communication
16. Evaluation of Board Performance
17. Board Member Term Limits
18. Review of Governing Documents
19. Review of Mission and Goals
20. Board Compensation
21. Financial Records
22. Annual Budget, Financial Performance, and Investments
23. Loans to Directors, Officers, or Trustees
24. Resource Allocation for Programs and Administration
25. Travel and Other Expense Policies
26. Expense Reimbursement for Nonbusiness Travel Companions
27. Accuracy and Truthfulness of Fundraising Materials
28. Compliance With Donor’s Intent
29. Acknowledgement of Tax-Deductible Contributions
30. Gift Acceptance Policies
31. Oversight of Fundraisers
32. Fundraiser Compensation
33. Donor Privacy

My consulting work includes Board Development training and I am now integrating this workbook into my own toolbox. Give me a call if you are interested in Board Development training.