Form – An Overview November 7, 2009 Speaker: Patricia A. O’Malley, CPA Rubino & McGeehin, Chartered CPA’s and Consultants Simple Steps to Make Sure You Have the Bases Covered!!!

Rubino & McGeehin, CPA's and Consultants2 Form 990EZ CMI Below $25,000 in gross receipts for 2008 CMI is a supporting organization Form 990EZ is required Electronic filing

Rubino & McGeehin, CPA's and Consultants3 Form 990 Last Year: Core form of 9 pages Schedule A for Section 501(c)(3) organizations Schedule B for listing donors

Rubino & McGeehin, CPA's and Consultants4 Form 990 – 2008 Core form of 11 pages There are 16 additional schedules The schedules are completed only if the organization meets the requirements for additional reporting for that schedule.

Rubino & McGeehin, CPA's and Consultants5 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

Rubino & McGeehin, CPA's and Consultants6 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

Rubino & McGeehin, CPA's and Consultants7 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.

Rubino & McGeehin, CPA's and Consultants8 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

Rubino & McGeehin, CPA's and Consultants9 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 Reasonable compensation for services provided in the capacity as a member of the governing body

Rubino & McGeehin, CPA's and Consultants10 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).

Rubino & McGeehin, CPA's and Consultants11 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

Rubino & McGeehin, CPA's and Consultants12 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 Spouses of those listed above

Rubino & McGeehin, CPA's and Consultants13 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

Rubino & McGeehin, CPA's and Consultants14 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) Both are directors, trustees, officers, or greater than 10% owners in the same business or investment entity.

Rubino & McGeehin, CPA's and Consultants15 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.

Rubino & McGeehin, CPA's and Consultants16 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 the document was provided to each voting member of the governing body prior to submission to the IRS If yes, whether distributed before or after submission, provide an explanation stating the process for the review If no, must state “No review was or will be conducted.”

Rubino & McGeehin, CPA's and Consultants17 Form 990 continued Part VI, Section B, Policies Conflict of interest This question has been asked for several years Now asking 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

Rubino & McGeehin, CPA's and Consultants18 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, may 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.”

Rubino & McGeehin, CPA's and Consultants19 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

Rubino & McGeehin, CPA's and Consultants20 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

Rubino & McGeehin, CPA's and Consultants21 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 if all of the criteria are met

Rubino & McGeehin, CPA's and Consultants22 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

Rubino & McGeehin, CPA's and Consultants23 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

Rubino & McGeehin, CPA's and Consultants24 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

Rubino & McGeehin, CPA's and Consultants25 Form 990 continued Part VII, Section A, continued There are new 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

Rubino & McGeehin, CPA's and Consultants26 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

Rubino & McGeehin, CPA's and Consultants27 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) Estimated amount of other compensation from the organization and related organizations

Rubino & McGeehin, CPA's and Consultants28 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 reportable 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

Rubino & McGeehin, CPA's and Consultants29 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 form 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.

Rubino & McGeehin, CPA's and Consultants30 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, must provide an explanation. 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?

Rubino & McGeehin, CPA's and Consultants31 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

Rubino & McGeehin, CPA's and Consultants32 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

Rubino & McGeehin, CPA's and Consultants33 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

Rubino & McGeehin, CPA's and Consultants34 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%