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Part VI, Section A of the Form 990 Shines a Light on Your Board and Governance Practices
Part VI, Section A of the Form 990 asks many probing questions related to a nonprofit organization’s “Governing Body and Management.” How an organization chooses to respond to these questions will directly impact perceptions of the quality of its management systems and the integrity of its governance practices, so be thoughtful and complete with your responses.
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GUIDE SHEET: Form 990, Page 6, Part VI, Section A - Governing Body and Management [SUBSCRIBERS-ONLY]
R. Michael Sorrells (CPA) and A. Michael Gellman (CPA, CGMA) jointly authored this guide sheet to provide insights and tips on this highly visible portion of the Form 990, which directly impacts perceptions of the quality of your nonprofit organization’s management and the integrity of its governance practices.
Q&A #99 – Do non-spouse romantic relationships raise conflict of interest issues?
While a non-spouse romantic relationship would ordinarily fall outside of the scope of the conflict of interest rules in the federal tax code, and may or may not be addressed by your organization’s conflict of interest policy and applicable state nonprofit corporation statute, it would be prudent to treat this situation like any other conflict of interest. Regardless of the legal formalities, these types of relationships can certainly lead to the perception that there is a conflict and should be treated as such to avoid the risk of damaging your organization’s reputation.
Past Presidents Can Be a Powerful Resource or a Missed Opportunity
I have looked at many lists of Past Presidents for nonprofit organizations and been amazed by the roster of names, but I am often disappointed at how many Past Presidents have become lost connections. High performing nonprofits keep their Past Presidents engaged and connected with meaningful active roles that are thoughtful and strategic.
Q&A #98 – When should nonprofits hold their annual Board meeting?
Nonprofit Boards are generally required to meet at least once per year. However, if the Bylaws do not specify when the annual Board meeting must take place, then the organization and its Board is free to decide the timing. In my experience, the question of when to hold the annual meeting should be based on three key considerations: consistency, alignment with your organization’s governance and operational cycles, and efficiency. Applying these three factors will help to enhance the effectiveness and timing of the annual Board meeting.
![A Lesson for Nonprofits about Public Perception from the Crisis Text Line Controversy [SUBSCRIBERS-ONLY]](https://images.squarespace-cdn.com/content/v1/5e6ccadfb4659c1d51df14d5/1709903325020-J1C3HBLFN06X624YSYZ4/adem-ay-ik_AuIWeBBM-unsplash.jpg)
A Lesson for Nonprofits about Public Perception from the Crisis Text Line Controversy [SUBSCRIBERS-ONLY]
A controversy involving the nonprofit organization Crisis Text Line’s sharing of anonymized data with a related for-profit entity has been a major topic of conversation recently following a lengthy report by Politico. While the specifics of this situation may be unique, this story is a lesson to all nonprofits that public perception should always be considered as one of the main factors in any decision, and this public perception can be just as important as legal formalities.
Q&A #97 – What to do when the Bylaws are ambiguous?
It is nearly impossible to eliminate all ambiguity from the Bylaws of a nonprofit organization, so sometimes interpretive questions will arise that truly do not have a clear answer. Fortunately, courts will often defer to the Board’s interpretation of ambiguous Bylaws if the Board can show that the interpretation was reasonable and made in good faith. While the level of deference will vary depending on the applicable jurisdiction, this is a good standard to aim for regardless.
VIDEO: Adding an Assistant Treasurer Position | 5-Minute Lessons 4 Nonprofits
SE4N's A. Michael Gellman provides a short lesson on the benefits of adding an assistant treasurer position to your nonprofit organization’s governance structure, including ideas for how to implement this role.
Q&A #96 – Must a Form 1099 be issued for a grant made to a nonprofit organization?
Grants made to nonprofit organizations are usually not subject to Form 1099 reporting because nonprofit payees typically fall within certain exceptions under the Form 1099 rules. Specifically, Form 1099 reporting is generally not required with respect to payments made to corporations or tax-exempt organizations. In this case, both exceptions probably apply.
Three Tactics for Communicating Difficult Budget Issues to Your Board
Difficult budget issues can often arise quickly and unexpectedly. To maintain a high level of trust with your nonprofit organization’s Board and remain transparent, collaborative, and inclusive, be sure to communicate in a timely and thoughtful manner.
Q&A #95 – Can nonprofit parent and subsidiary organizations have identical Boards?
There is not a cut-and-dry answer to the question of whether nonprofit parent and subsidiary organizations with different tax-exempt statuses are permitted to have identical Boards. However, too much Board overlap could potentially increase the risks that one or both organizations will be perceived by the IRS to be violating the restrictions on their tax-exempt status. In the case of a parent 501(c)(6) chamber of commerce with a subsidiary 501(c)(3) organization, it is generally advisable to have at least one or two persons on the Board of the subsidiary who are not Board members of the parent.
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How to Better Leverage the Position of Immediate Past President [SUBSCRIBERS-ONLY]
Every nonprofit organization has a chief Board position, often titled as President, who serves an influential and highly visible leadership role. The time served as President is active and intense, but often comes to a halt quickly once the term of office is completed. Nonprofits can ease this transition by giving more thought to the role of the Immediate Past President.
Q&A #94 – How is a tax gross up calculated?
Grossing up a payment to offset the taxes the employee will owe on the payment is a relatively rare practice among nonprofit organizations, but can be appropriate under certain circumstances usually involving one-time payments such as reimbursement of relocation expenses. These calculations can be confusing because when you increase a payment to cover taxes, there is also tax on that increased amount. Therefore, a formula must be used to figure out the amount that is sufficient to pay the taxes on the original (pre-gross up) amount as well as the taxes on the increased amount.
Three Attributes to Consider and Balance When Making Financial Decisions
Making financial decisions is never easy. Making sure multiple points of view, strategies and possible consequences are considered will help to optimize results and protect the organization. Three attributes to consider when making financial decisions are return on investment (ROI), safety, and confidence. These three attributes individually may appear simplistic, but together they can help shape and focus discussion and positively impact strategy and sustainability.
Q&A #93 – Are term limited Board members ever eligible to rejoin the Board?
The question of whether Board members are eligible to rejoin the Board after a period of time has lapsed is one of the most important issues that should be addressed in the Bylaws of any nonprofit that has term limits for its Board of Directors. If the Bylaws are truly silent to this issue and do not specify when term limited Board members become eligible to serve again, then the Bylaws should probably be interpreted as not allowing these Board members to rejoin. Amending the Bylaws to clarify this issue would be advisable.