IRS Issues 990 Guidelines to Its Agents

It's time to start thinking about filing your organization's 990. As you undoubtedly know, the new form looks very different from that in years past. The IRS has been providing its agents with guidelines that will help them evaluate the completed forms they receive. We thought you might want a copy of those guidelines so that you can be sure you are meeting the agency's expectations.

Governance Project: Guide Sheet for Completing the Project Check Sheet

1. Enter the Agent’s name and group number.

2. Enter the name of the organization examined.

3. Enter the EIN of the organization examined.

4. Enter the tax period or periods examined.

5. Enter the Form being examined (Form 990, Form 990-EZ,or Form 990-N). If different Forms were filed, enter the Form filed for the primary year under
examination. If the organization was not required to file a Form 990, Form 990-EZ,or Form 990-N, select Not Applicable.

6. Enter the organization’s foundation code.

7. Select Yes or No depending on whether the organization has a written mission statement that reflects its current I.R.C. § 501(c)(3) purpose(s). If the organization does not have a written mission statement, answer No. Likewise, if the organization has a written mission statement but its current activities do not reflect that mission statement, answer No even if the organization is fulfilling other appropriate I.R.C. §501(c)(3) purposes.

8. For each item, select Yes – just officers, Yes – just directors, or Yes – both, as appropriate, based upon whether the organization’s bylaws address the listed
information with respect to those individuals. Select No if the bylaws do not address the listed information at all, or N/A – No Bylaws if the organization has no bylaws.

9. Select the appropriate box or boxes corresponding to those individuals or groups of individuals to whom the organization provides copies of its most recent articles and bylaws.

10. Enter the number of board members with voting rights as of the first date of the primary tax year under examination.

11. a. Select the appropriate response (Once per year, Twice per year, Quarterly, Once per month, Twice per month, or Other) depending on the number of times the board met during the primary year under examination.
b. Select the appropriate response (Once per year, Twice per year, Quarterly, Once per month, Twice per month, or Other) depending on the number of times the board met during the primary year under examination. The board includes members with voting rights as well as those without voting rights. For purposes of this question, the term full board does not require that all board members actually be present.

Example: If all board members were invited to attend a meeting and the board
actually met, then this would qualify as a meeting of the full board.

12. Select the appropriate response (Yes-met the requirements, Yes-exceeded the requirements, No-did not meet the requirements) depending on whether the number of meetings actually held by the board met or exceeded the meeting requirements as set forth in the bylaws.

For example, if the bylaws provided that the board would meet monthly (twelve times in a year) and the board only met ten times during the primary year under examination, then the response would be No. If the board does not have bylaws, the appropriate response is N/A – No bylaws.

13. Select Yes or No depending on whether compensation arrangements for all officers, directors, trustees, and key employees are approved in advance by an authorized body of the organization composed of individuals with no conflict of interest with respect to the compensation arrangement. If anyone with a conflict of interest with respect to a particular compensation arrangement participated in the approval of that particular compensation arrangement, the appropriate response is No. Select N/A – No Compensation Provided as appropriate. For purposes of this question, officers,directors, trustees, and key employees are the same as the definitions contained under I.R.C. § 4958.

14. a. Select Always, Sometimes, or Never depending on whether the organization’s authorized body relies upon comparability data in making compensation determinations. Select N/A – No Compensation Provided as appropriate.
b. If you responded Always or Sometimes to 14a, select the appropriate box or boxes corresponding to the comparability data considered by the organization in making its compensation determinations.
c. If the Other response is selected for 14b, please write in a brief description of the other comparability data referred to.

15. Select Yes or No depending on whether the organization contemporaneously documents the basis for its compensation determinations. For example, do the organization’s meeting minutes or other documents, created at the time compensation is approved, reflect the reasons underlying particular compensation determinations?Select N/A – No Compensation Provided as appropriate.

16. a. Select Yes or No depending on whether any of the organization’s voting board members have either a family or business relationship with any other voting or nonvoting board member, officer, director, trustee, or key employee. Family relationships include those of spouses, brothers or sisters, spouses of brothers or sisters, ancestors, children, grandchildren, great grandchildren, and spouses of children, grandchildren and great grandchildren. For purposes of this question, officers, directors, trustees, and key employees are the same as the definitions contained under I.R.C. § 4958.
b. If you responded Yes to question 16a, enter the number of such family or business relationships that exist.
c. If you responded Yes to question 16a, enter the number of voting members with family relationships, the number of voting members with business relationships, and the number of voting members with both types of relationships with any other voting or non-voting board member, officer, director, trustee, or key employee. The number of family, business, or both relationships should equal the number of relationships indicated in question 16b.

Example: An organization has a total of ten board members. Husband and Wife both serve on the board. Wife and another board member are the sole shareholders in a for-profit corporation. In addition, Wife and Husband are partners in a for-profit organization. For 16a, the answer would be yes. For 16b, the total number relationships would be two. For 16c, the answer would be one business relationship (the relationship between Wife and the other board member) and one for both (since Husband and Wife have both a family relationship and business relationship.

17. Select Yes or No depending on whether effective control of the organization rests with a single or select few individuals. For example, is there a single individual or small group of individuals to whom the board typically defers?

18. a. Enter Yes or No depending on whether the organization has a written conflict of interest policy.
b. If you responded Yes to question 18a, select Yes or No depending on whether the conflict of interest policy addresses recusals. If you responded No to 18a, select Not Applicable.
c. If you respond Yes to 18a, select Yes or No depending on whether the conflict of interest policy requires annual written disclosures of conflicts of interest. If you responded No to 18a, select Not Applicable.
d. Select Never adhered to, Sometimes adhered to, Always adhered to, or Not
Applicable depending on whether the organization’s conflict of interest policy was adhered to. For example, did those with a conflict of interest on a particular matter recuse themselves from the corresponding decision making process? If you responded No to 18a, select Not Applicable. If no actual or potential conflicts of interest were disclosed during the primary year under examination, select Not Applicable.

19. Select Yes or No depending on whether the organization has systems or procedures in place intended to ensure that assets are used properly and consistently with the organization’s mission.

20. a. Select Never, Once per year, Twice per year, Quarterly, Once per month, Twice per month, or Other depending on how often the organization provided board members with written reports of the organization’s financial activities. The board includes members with voting rights as well as those without voting rights.
b. Select Never, Once per year, Twice per year, Quarterly, Once per month, Twice per month, or Other depending on how often the board discussed/considered reports of the organization’s financial activities. For example, look at whether the organization maintained complete, current, and accurate financial records, and whether the board had and exercised the opportunity to discuss/consider those reports and records. The board includes members with voting rights as well as those without voting rights.

21. Select Yes or No based on whether, prior to filing, the organization’s Form 990 was reviewed by either the full board or a designated committee. Please note that the question addresses a review of the Form 990 prior to filing, not merely receipt of the Form 990 prior to filing. If the organization was not required to file a Form 990,Form 990-EZ, or Form 990-N then select Not Applicable.

22. a. Select Yes or No depending on whether an independent accountant’s report was prepared during the primary year under examination.
b. If you responded Yes to 22a, select Yes or No depending on whether the
accountant’s report was discussed/considered by either the full board or a designated committee. If you responded No to 22a, select Not Applicable.

23. a. Select Yes or No depending on whether a management letter was prepared by an independent accountant during the primary year under examination.
b. If you responded Yes to 23a, select Yes or No depending on whether the
management letter was reviewed by either the full board or a designated committee. If you responded No to 23a, select Not Applicable.
c. If you responded Yes to 23a, select the appropriate response (Yes - adopted some, Yes – adopted all, or No – adopted none) based on whether the organization adopted any of the recommendations contained in the management letter. If you responded No to 23a, select Not Applicable.

24. a. Select Yes or No depending on whether the organization has a written policy for document retention and destruction.
b. If you responded Yes to 24a, select the appropriate response (Yes – all of the
time, Yes – some of the time, or No – none of the time) depending on whether the organization adhered to its written document retention and destruction policies during the primary year under examination. If you responded No to 24a, select Not Applicable.

25. Select the appropriate response (Yes – all of the time, Yes – some of the time, or No – none of the time) depending on how often the board of the organization contemporaneously documents its meetings and retains this documentation.

26. Select the appropriate response depending on whether your examination was hindered by a lack of necessary documentation. Consider whether documents that should have been available were never produced, prematurely destroyed, or otherwise unaccounted for.

27. Select the examination disposal code for the primary return from the drop down menu.

28. Select the principal issue codes for the primary return from the drop down menus.

How Can I Get My Board to Evaluate Me?

Q: Could you refer me to an appropriate form or format for executive director evaluation? I am the executive director. While the board says it appreciates the work I have accomplished, I can’t seem to get anyone to formalize this feedback or talk about the raise I was promised as inducement for my accepting the position originally. I submitted a detailed progress report on my first anniversary, enumerating all that I had achieved. This included cutting costs equal to my annual salary, creating procedures where none existed previously and building our brand. I find myself, seven months later, still waiting for my first evaluation. The board recently asked me to find an evaluation form that it can use to facilitate the process. I’m hoping that if I give the directors one, they will finally sit down with me. In doing my research I came across your article, “Evaluating the Top Administrator: A New Approach,” and I thought you might be able to point me in the right direction. Thank you.

A: I can feel your frustration. It’s hard putting your heart and soul into a job, not knowing whether your bosses think you are on the right track, let alone whether or when you’ll get that promised raise. All of us deserve an evaluation. It’s the opportunity to get some pats on the back and learn where we need to grow.

However, I’m not surprised that your board keeps putting off your evaluation. As you read in the article to which you refer above, most people are very uncomfortable judging others. And, in today’s economy, where uncertainty reigns, you can understand why the directors might be less than anxious to provide any evaluation, let alone one they tied to a raise.

Let me start by saying congratulations for all that you have accomplished in a relatively short time. It is impressive and I’m sure the directors that verbally express appreciation are sincere. I must ask, though, whether these goals were the board’s priorities or yours. The fact that the board as a whole has not rushed to praise you leads me to suspect that these were your priorities and the board doesn’t know how to say it wishes you had done other things instead. I further suspect that the directors are hoping you will present them with an evaluation form that lists a plethora of typical tasks that they can then say you ignored as you forged ahead following the beat of your own drummer.

I hope I am wrong. The only way to avoid this in the future is to sit down together with your board and create a list of specific goals that are tied directly to the organization’s vision and for which you will be responsible. Each goal should be measurable and have a deadline for achievement. Each should specify whether the accomplishment is expected or whether it would be seen as exceeding expectations. Any promises of a raise should be in writing and tied to these goals. (Note – in these times do not be surprised or upset if the board doesn’t wish to commit to any sort of raise or bonus. Most likely, it is just being prudent with the organization’s funds.) I would also suggest that you put dates on the calendar right now for a quarterly or six-month review. The dates are more likely to be honored if they are already scheduled. If you wait until the evaluations are due it is too easy to let day to day crises prevent you from making the necessary time.

Of course none of this addresses the specific concerns you raised. I would go to your board chair and ask for a date within the next two weeks that you can put on your calendar for an evaluation. I would remind him or her that evaluations are a “best practice.” They are more critical today than ever before because they will ensure that you and the board are of a single mind moving forward in these chaotic times. You are holding your staff accountable for meeting the needs of the community and you expect to be held accountable as well. You are always looking to grow and you know that you can benefit from the board’s observations. You count on the board’s ability to share the community’s perceptions of you and the organization, and an evaluation provides the perfect opportunity to get these perceptions out on the table…. I could go on, but I’m sure you get the idea. The one thing I would not mention is that you are looking forward to discussing money. Get the evaluation first. You can always speak about money later.

When you approach the board chair I would acknowledge that you were asked to find an evaluation form that the board can use. I would say, however, that the more you researched the more you heard that off-the-shelf evaluation tools prove inadequate because no two executive director/CEO jobs are the same and check boxes or Likert scales fail to adequately reflect either the job that is being done or that needs to be done in the future. You can refer him or her to the article you found and referenced in your question. Suggest that you are willing to sit down with a small group of directors to help them determine the skills and characteristics that they see as important for the executive director of your organization to have at this time in history and at this point in the organization’s march toward vision accomplishment. You might also say that you have given the subject some thought and are prepared to help the board committee come up with something mutually satisfactory in a single meeting. (Remember, you don’t want this process to drag on any longer.) Of course, that means you must do your homework and be prepared to come with your ideas fully formed!

Good luck.