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Q&A #137 – Is an amended Form 990 required to correct a minor error or omission?
Tax-exempt, nonprofit organizations are required by law to file Forms 990 that are complete and correct, but there is no affirmative legal duty to file an amended Form 990 to correct a newly discovered error or omission. While an organization may wish to file an amended Form 990 to manage public perception, show transparency, or mitigate the risk of penalties, this step may not be worth the cost and effort in the case of an inadvertent good-faith mistake like the omission of a single, volunteer Board member.
How Inflation Affects Planning, Budgets, and Operating Reserves
Inflation has always been present at some level. When inflation is low, it lurks quietly in the corner of our minds. But when inflation is revving, the ringing in our ears will not go away. During periods of uncertainty and economic volatility, inflation tends to draw attention, often triggering regressive non-thinking reactions. Inflation needs to be treated as an economic reality to be confronted and a challenging obstacle to be solved, not as a call to action by itself.
Q&A #136 – Is good cause required to remove a nonprofit Board member?
A nonprofit organization’s Bylaws generally determine whether “cause” is required to remove a Board member and, if so, what type of conduct or inaction constitutes cause for removal. The applicable state nonprofit corporation statute may have some rules and guidelines related to the removal of directors, but these laws usually defer to the organization’s Articles of Incorporation and Bylaws, so checking your own governing documents is always the first step.
VIDEO: Understanding the Public Support Test under § 509(a)(2) | 5-Minute Lessons 4 Nonprofits
SE4N's Benjamin Takis provides a short lesson for 501(c)(3) nonprofit organizations on how to understand the calculation of "public support" under Internal Revenue Code section 509(a)(2).
Q&A #135 – Must directors who left the Board mid-year be listed in the Form 990?
The IRS instructions for Part VII, Section A of the Form 990 provide that any director or trustee who “served at any time during the organization's tax year” is reported as a “current” director or trustee. In other words, Board members who step down in the middle of the year must appear on the list of directors, officers, key employees, and other individuals reported in Part VII, Section A of the Form 990.
Choosing to Serve an Additional Term as a Nonprofit Board Member
Nonprofit organizations generally have a set length for each Board service term, typically 2 or 3 years. The number of consecutive terms a Board member may serve can be constrained by term limits or be open-ended. In either case, at the end of your first Board term, a decision to continue or exit must be made.
Q&A #134 – Are pending applications for tax-exempt status subject to public disclosure requirements?
A tax-exempt organization is generally required, upon request, to make its application for tax-exempt status available for public inspection and copying (this includes the Form 1023, Form 1023-EZ, Form 1024, or Form 1024-A, as well as all supporting documents and related correspondence with the IRS). However, this requirement does not apply to applications that have not yet been approved by the IRS, so applications in “pending” status are not required to be disclosed.
Choosing to Serve as an Officer for a Nonprofit Organization
There is no perfect time to decide to serve as an officer for a nonprofit organization. However, the best time to consider this option is often just after you complete your first year of Board service and have relinquished your unofficial title as a “new Board member.” Insights gained from your first-year experiences interacting with Board members, management, and staff will provide a unique view that you would not have had prior to the start of your Board service term.
Q&A #133 – How does delegation to a committee impact the fiduciary duties of Board members?
While delegating a matter to a committee does not totally absolve the other Board members from their fiduciary duties, there is usually no explicit requirement that the Board retain final approval authority over day-to-day transactions. Further, state nonprofit corporation law typically provides favorable treatment to Board members who properly and reasonably delegate a matter to a committee of other qualified and experienced Board members.
Learning to Lead as an Experienced Board Member
With the first year of nonprofit organization Board service completed, it is time to reassess and consider how to best position yourself to leverage your new status as an experienced Board member. There will be no better time during your Board service term to raise the bar on your efforts, take on new and expanded leadership roles, and inspire change and innovation through increased participation at Board meetings and thoughtful engagement with the mission of the organization.
Q&A #132 – Does every nonprofit committee need to have a charter?
All nonprofit committees should have documentation describing their purpose, authority, membership, and basic meeting and recordkeeping requirements. A committee “charter” is the most common term used to describe this document, which is also sometimes described less formally as the committee’s “job description.” What you call the document is less important than ensuring that there are records containing this essential information.
Finding the Right Fit as a Nonprofit Volunteer
As a volunteer for a nonprofit organization, you can gain the strength to “move mountains.” We each have the power to give but also receive. This life-changing experience is often overlooked because it quietly hides in the background, out of our sight and consciousness. You can receive more than you give if you approach volunteering with an open mind as well as an open heart.
Q&A #131 – Do nonprofit committees need to be listed in the Bylaws?
As a general rule, it is not strictly necessary to list or reference every committee in a nonprofit organization’s Bylaws unless there are provisions in the organization’s Articles of Incorporation or Bylaws specifying this requirement. Rather, a Board motion or resolution is usually sufficient to form a new committee, so long as proper records of the Board action are maintained.
Q&A #130 – Is monthly distribution of financial reports to the Board a best practice?
Monthly distribution of financial reports to the Board and finance committee is absolutely a best practice for nonprofit organizations, and I also recommend this as a must-have procedure in your accounting policies and procedures manual. Board and finance committee members have a fiduciary responsibility to help oversee and ensure the safety and proper use of a nonprofit organization’s financial assets. Monthly financial reports are a key tool for fulfilling this important role.
Drafting Purpose and Mission Language for the Articles of Incorporation
The “purpose” clause is one of the most important provisions in a nonprofit organization’s Articles of Incorporation. This language satisfies a core legal requirement while also establishing the organization’s main mission and permissible range of activities. However, it can be deceptively challenging to get this language right.