Connections for Success



The Must Have Policies Not Required by the IRS
Alison Fetzer

An important key to success for any not-for-profit organization is having the right governance policies and procedures in place. Conveniently, with the redesign of the form 990, the IRS has put together a short but important list of suggested policies and procedures.  Though it has been five years since the IRS Form 990 revision, there are still many organizations that have not adopted the policies listed on Section B.  While still not required, these seven policies provide a framework of best practices that every organization should follow.  The first and last policies may not apply to your organization, but the remaining five are universal.  How does your organization measure up?

  1. All organizations with local chapters, branches or affiliates should have written policies and procedures governing the activities of such chapters, branches or affiliates to ensure their operations are consistent with the organization’s exempt purposes.
  2. A complete copy of the Form 990 should be provided to all members of its governing body before filing the form.
  3. All organizations should have a written conflict of interest policy that is regularly and consistently monitored and enforced.
  4. All organizations, regardless of size, must have a written whistleblower policy.  This is also required under the Sarbanes-Oxley Act for both non-profit and for-profit entities.
  5. All organizations must have a written document retention and destruction policy.  This is also required under the Sarbanes-Oxley Act for both non-profit and for-profit entities.
  6. Executive compensation should require a review of comparable data and approval by independent persons that is documented.
  7. All organizations involved in a joint venture with a taxable entity should have written policy or procedure that evaluates its participation in the joint venture to safeguard the organization’s exempt status.

If your organization is missing one or all of these best practices, it may be time to start drafting some new policies and procedures.  A written policy manual is an easy and convenient medium to convey information to all members of the organization.  Make sure to educate those charged with governance as well as key employees and staff of all of the organization’s policies and procedures.  Remember, a policy on paper means nothing if it is not followed.

If you have implemented all of the policies above, ask yourself, when was the last time the policies were reviewed by the board and management?  If the answer is 2008, when Form 990 was updated, then it is probably time to revisit them.  As your organization grows and changes, so must your policies and procedures.  Reviewing the policy manual annually will keep the process current and in line with your organization’s mission.

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