BY TRACEY DRURY
Business First

Tax preparation at nonprofit organizations will be a considerably more complex effort with major changes in federal requirements taking effect.

Nonprofit organizations are dealing with major changes to Form 990, the tax-disclosure document for nonprofits, that they say will result in double or triple the amount of time dedicated to completion of the form, as well as changes in how activities are monitored year-round.

Denise Schaefer, director of finance at Boys & Girls Clubs of Buffalo Inc., says she participated in a four-hour seminar about how to understand and manage the changes when completing the 2008 tax return. The sentiment among participants, she says, was that it's going to be a rough transition.

"The IRS is estimating that it'll take 50 percent more time," she says, "but from what I got a feel from people in the room, that's not really true: It will probably take two to three times (longer) the first year to get everything right. If that does happen, it will obviously affect the cost of having it prepared."

Craig Stevens, a partner at The Bonadio Group LLC accounting firm, cosponsored the seminar with law firm Nixon Peabody LLP, which he says is geared toward increasing awareness about the changes and how best to create systems to capture the new information.

"I don't think they're freaking out, but they're becoming more aware," he says. "The biggest change will be with respect to addressing all of the governance issues. Before, you could always answer yes or no, but now they're asking you to provide (details on) what you're doing. You've got to develop policies and procedures to answer these questions in the affirmative."

Better reporting of costs and allocations between the program, management and fundraising expense lines is now required.

"There's a good story to be told for most of these nonprofits, and it should be told," Stevens says.

The changes, while burdensome for nonprofits, will ultimately help expand the information available to a public that increasingly wants to know how their dollars are spent, says James Byron, board treasurer at the Society of St. Vincent de Paul.

"I hope that these changes will allow potential donors to have an easier time of determining a charity's mission and effectiveness in managing its financial resources in accomplishing that mission," he says. "This may allow benefactors to support a charity that better matches their interests and intents."

Anne Stone, CFO at People Inc., says the organization may be better prepared than smaller nonprofits, as it's been reporting much of the outcome data to its board for years, and has good-governance policies in place.

"I'm not looking at it as any big change," she says.

Michael Helbringer, president of Bristol Home and Bristol Village, says the biggest impact will come administratively, when some policies become more formalized.

The new rule "references a number of policies which need to be in place," he says. "In our case, we have a large majority of them already, but need to develop some new ones as well. We also have to review our accounting system to ensure it is adequate and able to capture the expanded disclosure requirements regarding resource usage."

 

What's new

For the first time in nearly 30 years, the IRS has made changes to Form 990, the filing form for tax-exempt organizations. Some of the key changes:

• New governance section and revisions on reporting compensation of officers, directors, trustees and key/highly compensated employees. Disclosure required for those receiving at least $100,000, up from $50,000.

• New section requiring expanded information about governing body, management policies and disclosure practices.

• Expanded disclosure requirements for payments of $100,000 or more made to independent contractors.

• Expanded reporting regarding program services and exempt-purpose outcomes.

SOURCE: NATIONAL COUNCIL OF NONPROFITS