Board Governance and Its Relevance to the New Form 990

1. Board Governance and Its Relevance to the New Form 990

2. Board Governance and Its Relevance to the New Form 990

3. Board Governance and Its Relevance to the New Form 990 Table of Contents Page Presentation Slides 1 IRS Conflict of Interest Policy 23 Sample Whistleblower Policy 25 Document Retention/Destruction Policy 28 Gift Acceptance Policy 31 Contact Information 37

4. Overview � How did we get here? First complete overhaul of Form 990 since 1979 Private Sector � Enron/Sarbanes-Oxley 2001-2002 June 2007 � IRS issues draft of new Form 990 December, 2008 � the IRS releases new Form 990 Basic duties of Board members have not changed.

5. Care Loyalty Manage accounts Obedience to Purpose Source: PCPS of AICPA Duties of Board Members

6. I. Duty of Care The care that �an ordinary prudent person would exercise in a like position and under similar circumstances� Attending Board meetings regularly Showing independent judgment Being informed about organization resources Delegating only to responsible individuals Following up regularly

7. II. Duty of Loyalty Give undivided allegiance to organization when making decisions Personal, family or business interest cannot be put above the organization�s interest Avoid conflicts of interest in fact and in appearance

8. III. Duty to manage accounts Ensure financial accountability by: Overseeing the organization�s chief business officer Checking that resources are used prudently Implementing procedures to ensure accurate records Ensuring that no one person has control over finance Accurate documentation of decision making considerations using Board meeting minutes

9. IV. Duty of Obedience Ensure that your organization remains obedient to its central purpose Establish accountabilities Policies Programs Performance Process Outcomes & effectiveness Planning, allocating & managing

10. New Form 990 Increased transparency � gives donors more information to make informative decisions Provides the IRS with more factual data in areas that the IRS perceives to be indicators of abuse Administrative burden � significant increase in record keeping and disclosure requirements There are many questions on policies, and although not required by tax law, non-compliance may pose audit and credibility risks

11. Policies Addressed by the Internal Revenue Service in the New Form 990 Conflict of Interest Whistleblower Document Retention/Destruction Audit Committee/Finance Committee Review of Executive Compensation Gift Acceptance Review and Distribution of Form 990 prior to the filing Meeting Minutes

12. Policies Addressed by the Internal Revenue Service in the New Form 990 Conflict of Interest Policy Annual disclosure by all directors, officers and key employees of possible conflicts Disclosure of any transaction in which director, officer or key employee has a personal financial interest Recusal of interested director from discussion and voting Determination by disinterested directors that terms are fair and as favorable as those available from a third party

13. Policies Addressed by the Internal Revenue Service in the New Form 990 Whistleblower Protection Encourages reporting of improper behavior Identifies persons to whom violations should be reported Promises protection from retaliation

14. Policies Addressed by the Internal Revenue Service in the New Form 990 Whistleblower Policy The Organization should ensure that employees have a secure means by which to report fraud, accounting irregularities, noncompliance or other misconduct. The Organization should ensure any reporting of fraud, accounting irregularities, noncompliance with policies or other misconduct can be made without fear of reprisal.

15. Policies Addressed by the Internal Revenue Service in the New Form 990 Document Retention/Destruction Policy Clear guidelines on retention and destruction of paper and electronic records Prohibit destruction of records for purposes of preventing use in an official proceeding Provide security and confidentiality

16. Policies Addressed by the Internal Revenue Service in the New Form 990 Audit Committee/Finance Committee Policy Audit Requirements Committee responsible for oversight Understand the different roles of Audit and Finance Committees

17. Policies Addressed by the Internal Revenue Service in the New Form 990 Audit Committee vs. Finance Committee

18. Policies Addressed by the Internal Revenue Service in the New Form 990 Executive Compensation Policies Rebuttable presumption/safe harbor Applies to CEO, Executive Director and their equivalents regardless of title Officers Key employees ($150,000 compensation and benefits)

19. Policies Addressed by the Internal Revenue Service in the New Form 990 Executive Compensation Policies Review and approval by board or compensation committee Recusal of anyone with a conflict of interest, including anyone who Is related to the key employee Is in an employment relationship subject to the direction or control of the key employee Receives compensation or payments subject to the approval of the disqualified person Has a material financial interest affected by the arrangement.

20. Policies Addressed by the Internal Revenue Service in the New Form 990 Executive Compensation Policies Comparable data Must be comparable as to type of organization, size of organization, annual revenues, number of people served, geographic area Independent compensation studies Written offers from competing employers Organizations with gross receipts of less than $1 million can rely on data from three comparable organizations

21. Policies Addressed by the Internal Revenue Service in the New Form 990 Executive Compensation Policies Contemporaneous documentation Terms Date approved Members of the authorized body who were present and how they voted Comparable data relied upon Actions by any member of the authorized body with a conflict of interest

22. Policies Addressed by the Internal Revenue Service in the New Form 990 Gift Acceptance Policy - Does your organization have a gift acceptance policy that requires the review of any non-standard contributions?

23. Policies Addressed by the Internal Revenue Service in the New Form 990 Form 990 Review Policy Provide as-filed copy to Board prior to filing Process for review of Form 990 by management or Board

24. Policies Addressed by the Internal Revenue Service in the New Form 990 Meeting Minutes Policy Contemporaneously prepared within 60 days, but no later than the next meeting Includes all committees with power to act for Board

25. How do you as a Board member initiate the Adoption of New �Best Practices?� Develop an understanding Yourself and Discuss with decision makers Include an agenda item for a Board meeting Promote a consciousness of �running your organization like a business� Highlight consequences of not following �best practices�

26. Policies Addressed by the Internal Revenue Service in the New Form 990 Document Retention � Permanent

27. Policies Addressed by the Internal Revenue Service in the New Form 990 Document Retention � 7 Years

28. Policies Addressed by the Internal Revenue Service in the New Form 990 Document Retention

29. Contact Information Peter H. Dinsmore, CPA 617.426.9440 pdinsmore@pmn.com Parent, McLaughlin & Nangle, CPAs 160 Federal Street Boston, MA 02110 T: 617.426.9440 F: 617.423.3955 100 Cummings Center, Suite 335G Beverly, MA 01915-6106 T: 978.921.0005 F: 978.927.3428 Barry N. Chait, Esq. 617.426.9440 bchait@pmn.com 85 Rangeway Road Forest Ridge Office Park, Bldg #1 Billerica, MA 01862-2105 T: 978.663.9750 F: 978.663.5151 10 Commerce Way Raynham, MA 02767 T: 508.880.4955 F: 508.823.6976