IRS requires more disclosure on nonprofits' operations

August 3, 2009 By JENNIFER BARRIOS  This e-mail address is being protected from spambots. You need JavaScript enabled to view it

Long Island's nonprofit organizations are preparing this year for some hefty new requirements from the IRS to disclose more information on their boards and operations.

Form 990, the principal document filed with the federal government by tax-exempt organizations each year, has been revamped for tax year 2008 to include an emphasis on how a nonprofit runs its organization, rather than focusing mostly on financial information.

It's the first major revision of the form in 30 years.

The new requirements involve questions about conflicts of interest on nonprofit boards, whether the organization has a written whistle-blower policy and how executive compensation packages were calculated.

This year, only larger nonprofits - those with gross receipts more than $1 million - must file the new 990. It will be phased in during the next two years for smaller organizations.

Ken Cerini, managing partner of Cerini and Associates, a Bohemia-based accounting firm that does extensive work with Long Island nonprofits, said the new 990 aims for greater transparency among nonprofits by asking them to expand on their answers.

"The days of just checking off yes or no boxes are over," Cerini said.

Ken Berger, president and chief executive of the Mahwah, N.J.-based nonprofit watchdog Charity Navigator, called the new form a "double-edged sword."

"On the one hand, I think that there's encouragement that some of these are a good way to encourage best practices," Berger said. "On the other hand, the bad news is this form's going to take five times as long as it used to."

But so far, several nonprofits that have filled out the new form have said it has not added a significant amount of work.

Paule Pachter, executive director of Long Island Cares in Hauppauge, said the new requirements added less than a week of work. He plans to put the finishing touches on his organization's filing this week.

"The focus of the new 990 is really on conflict of interest, ethics, and transparency," Pachter said. "And there's nothing wrong with that."

The Guide Dog Foundation for the Blind and America's VetDogs-The Veteran's K-9 Corps in Smithtown aren't filing their 990s until November, but their staff is already eyeing the extra workload now.

"It will be a burden on our staff here," said Wells Jones, who is chief executive of both nonprofits. Plus, he said, because the new form is so different from last year's, donors might have difficulty comparing the two years.

"We're afraid that people will find it confusing," Jones said. "There's not very good comparability to prior years. Everything's going to look so different to a donor who has customarily looked at it."

David Okorn, director of advancement and donor relations for the Long Island Community Foundation, said he doubts the new 990 will be a significant help to donors, although some might benefit from looking through the filing.

And for nonprofits, the real test may come two years from now, when all nonprofits making more than $250,000 in gross receipts will be required to fill it out, Okorn said.

"From the nonprofit standpoint, most of the organizations won't be filing them as of yet," he said. "It hasn't really hit home yet."

link: Newsday Article