The IRS is taking a heightened approach to their monitoring of charities, and it is already becoming apparent that they do intend to stick with these policies. Last week, a charity had its tax exempt status revoked for not spending enough on their charitable programs. Many steps can be taken though to be confident in submitting the new form 990. The Panel on the Nonprofit Sector has published a list of guidelines for charities to look at. (visit www.independentsector.org for the full text)
The 33 principles in this booklet are not all required for charities to follow. There are six that apply to every charity (by law) and the other twenty seven are ones that may apply depending on the specific structure of your organization. The six required items, along with the panel's advice, are listed below.
"Principle #1—Comply with all applicable laws and regulations—federal, state, local, and international. Check out www.stayexempt.org for guidance from the IRS about what is required.
Principle #3—Have policies and procedures for conflicts of interest. Charity regulators require that board members and staff disclose any interest in a transaction or action that could be viewed as affecting their objectivity or independence. First, any potential conflicts should be disclosed. Then there should be policies to deal with them transparently. If a board member has a material conflict of interest, the law requires that he/she not discuss or vote on the issue. An Internet search will provide sample conflict-of-interest policies to use as a model.
Principle #21—Keep complete, current, and accurate financial records, preferably audited or reviewed by a qualified independent financial expert. State laws vary on the sizes and types of organizations that are required to have audits or reviews by an outside accountant, so check on your state's requirements. Creating an audit committee of board members (including some with financial expertise) helps reduce a possible conflict of interest between the paid staff and the outside auditors.
Principle #25—Establish clear written policies for paying or reimbursing business or travel expenses. The IRS does not want to see "lavish, extravagant, or excessive expenditures." A review of IRS Publication 463, "Travel, Entertainment, Gift, and Car Expenses" (download at www.irs.gov/pub/irs-pdf/p463.pdf), can help you write your reimbursement policies.
Principle #26—Do not pay for expenses or reimburse travel for spouses, dependents, or others who accompany someone conducting business for the charity. This restriction doesn't apply for small costs (such as a meal) or if the person is also working on charity business.
Principle #27—Be accurate and truthful in your solicitation materials. What you need to address is covered in A Donor Bill of Rights, developed by the Association of Fundraising Professionals, and available at www.afpnet.org/content_documents/Donor_Bill_of_Rights.pdf."
It is highly recommended that you continue reading the rest of the recommendations. They provide a basic framework for making sure your charity is in legal compliance with these new rules and in general will help grant you peace of mind.
--Jessica High is a Research Assistant at Christian Foundation Grants (www.christianfoundationgrants.com) which is subscription database of foundations that provide grants to faith based organizations. iDonate.com is a website (www.iDonate.com) that allows ministries to receive non cash gifts online.