One Phase of Nonprofit Organizational Readiness for Grant Funding: Recordkeeping

Every organization needs well-planned, carefully maintained files in order to handle applications, grants and to function effectively. Setting up a useful filing system can be an easy task if several basic decisions are made beforehand. This article offers an outline of what an organization can expect to maintain: written policies, procedures, forms and recordkeeping. It will discuss the need for maintaining, retrieving, archiving and destroying records and accountability for each.

I have included a list of resources for deciding on retention deadlines and management of records.

There are those of us who see the mission and the vision of an organization as a spiritual process seeking and expressing the values of the organization. It is outward, not inward. It is the pursuit of excellence, not necessarily perfection. It is an experience of constant renewal; there is a dimension of the human soul and an orientation of the heart. It is a way of making sense of the insensible and insensible.

Beginning and working in a nonprofit organization is a leap of faith. It is walking to the end of a cliff and taking one more step. It is a calling that is difficult to put down. It is a risk about which we are passionate. With this spiritual side of an NPO, there are the hard facts that leadership, paper work, recordkeeping, management, budgets, grant writing, fund raising, cleaning the bathroom are the outward and visible signs of that inward and spiritual belief in the mission and the vision of the organization.

And so here we go.

How long should you keep records? Some records may have to be kept 3 years, some 7 years, some permanently. Your state or the grant or contract may have minimum requirements for keeping records. It is my suggestion that you have a written policy about keeping these records and more such as business-related web sites and significant e-mail at least through the state or Federal statute of limitations for bringing a lawsuit against the organization and any subsequent appeals. The statutes of limitation are different state by state and with the federal law; they are based on the type of suit or administrative complaint.

It is important that you meet with an attorney to assist on this and other policies to be certain you are appropriately protected.

Specific people should be assigned responsibility for maintaining specific files. Once these assignments are made, everyone in the organization should know who can assist in locating needed information, as well as to whom various documents should be given for filing. When an organization has staff and an office, the staff usually maintains the files for the organization in the office. Public disclosure laws require certain information be located in all offices with three employees or more. Privacy laws may affect the way you handle personnel records and the records of applicants for employment.

In an organization without staff, generally the secretary is responsible for maintaining corporate records, correspondence, and membership files, while the treasurer is responsible for all financial records. The bylaws should clearly state that the officer, secretary and treasurer are obligated to return all records to the organization president or chairperson when relieved of duties. Make sure board members know who is responsible for what, and that nothing falls through the cracks.

Nonprofit organizations should have a written, mandatory document retention and periodic destruction policy. Policies such as this will eliminate accidental or innocent destruction. In addition, it is important for administrative personnel to know the length of time records should be retained to be in compliance with the law and with contracts.

I also suggest checking with your attorney and accountant before destroying any records.
But First: An Important Tip - Always return all material to the proper file promptly to avoid loss of important documents.
Records and Files to Be Kept
The following are samples of records you should keep permanently, even if the law or a grant permits a shorter period. Your state/province may have statutes of limitation for legal action that will influence the maintenance and destruction of records. Some of these records will be important to preparing a grant application.

• Audit reports of accountant or board committee
• General ledger
• Cash books, petty cash, client funds
• Charts of accounts
• Transfer registers
• Bank statements
• Property lists and inventory, serial numbers, date of purchase, original cost, grantor(s) who paid for it, purchase records
• Checks (canceled, and especially for taxes, purchase of property, salaries, contracts, etc.)
• As appropriate copies of staff licensing (i.e. social worker, doctor, lawyer, psychologist, nurse), staff and volunteer motor vehicle insurance if driving clients or for other work duties
• Employment contracts
• Personnel records and material filed by applicants for employment
• Hiring policy, procedure and application forms; establish a written policy for the retention of applications, resumes and employment inquiry letters, from three to six months but there is an argument that you need to keep them through the statute of limitations for any potential law suit.
• All employee withholding, transmittal, reporting, forms filed.
• Written policies, procedures, forms and recordkeeping such as Personnel Manuals, Equal Employment, Anti-Sexual Harassment Policy, Drug and Alcohol-Free Workplace Policy, Violence in the Workplace Policy and Procedure Manual, Standards of Practice, Ethics, etc.
• Employee benefits and records of accrual, employee time and travel sheets
• Policies, applications and records of volunteers
• Correspondence (legal and important letters)
• Records of all gifts received and letters of acknowledgement
• Deeds, mortgages, easements and bills of sale
• Financial statements (at least end-of-year, other months optional unless required by law or a grantor)
• End of year trial balances
• Insurance policies and other records, correspondence, claims
• Current accident reports and claims
• Journals and minutes of Board meetings and attachments
• Charter or incorporation papers with amendments, bylaws and amendments and change of registered agent, state and local approvals and reports
• Purchase of Service Agreements.
• Memoranda of Understanding (MOU)
• Copies of all Federal, State and local tax documents, e.g.: Federal Employer Identification Number (FEIN), IRS designation letters, state identification number, all correspondence with the IRS and state including annual reports, 990 and so on
• All correspondence to or from federal, state and local taxing agencies, tax returns, extensions, worksheets, reports, income tax forms etc.
• Property records (costs, depreciation, blueprints, plans, etc.)
• Trademark registrations, patents and copyrights and applications
• Material related to any threat of or actual lawsuit or administrative claim including but not limited to civil rights, ADA and other potential liabilities, subject to statute of limitations; avoid destruction of e-mail and other records that may impact litigation
• Client or customer's files; client or customer complains, contracts, a state or federal Statute or a licensing organization may set time lines for retaining these files but be conscious of the statute of limitations for legal action by a client or customer
• Copy of all matters posted on your web site
• Significant and relevant e-mail, instant messaging, and other telephonic communication systems
• Labor contracts
• Training and orientation material
• Hardware and software licenses
• User names and passwords

Important Tip: Nonprofit organizations should give careful consideration to written policies, procedures, forms and recordkeeping separating duties between officers and employees. For instance the duties of opening envelopes with checks, registering the checks, preparing bank deposits and accounting for funds are different duties that should be shared by various board officers or employees. Talk with your accountant to develop these written policies, procedures, forms and recordkeeping to increase accountability.

There are two other files that the organization and development people should create, The Dream File and The Memory File:


The Dream File – This file should contain the dreams of programs and activities that leadership, staff and others present for funding ideas. They may be somewhat far fetched. They cannot be off-mission, however. The record of a dream may be simply a few lines; it may be several pages with details started. Take the time to dream and capture the dreams for potential funding opportunities and partnerships. Add to the dream file material from what you read or what you hear, a line may make a good opening to a grant application if on mission I have used lyrics of Bruce Springsteen successfully more than once to lead off the cover letter.


The Memory Files - These files should contain information that a potential funder may request. Have them clearly available so that there will be no delay or lost opportunities for grants. There is no consistency about what funders want. These are samples of commonly requested material:

• Original verified copies of the Articles of Incorporation and any amendments, and copies of the bylaws and all amendments,
• History and mission of the organization,
• The completed IRS Form 1023, FEIN, state identification number or other papers
• The last three years of 990s, audits and management letters,
• Employee and board job descriptions,
• Leadership resumes,
• Current annual budget,
• Board minutes and fiscal reports for the most recent 12 month period,
• Evaluations and monitoring reports by any funders,
• Press coverage, Internet references
• Names and short biography of board members and staff management and leadership,
• Templates of the description and brief history of the organization, its mission, goals, objectives, activities,
• List of current funding sources,
• Business or strategic plan, needs assessment and priority studies,
• Building plans and
• Any other papers you believe may be relevant to a government, foundation or corporation.

The copies sent to a funder should be legible and presented in and orderly and best possible fashion. It may help to have an appendix sheet listing additional material. Some applications require consecutive numbering from page 1 through the last page. A copy of a that is crooked or the bottom cut off is not the way to do it.


Funders may request all material be on back-to-back paper for conservation. Others may request 20 copies of everything. Follow the instructions. Provide what they ask for. Follow instructions as to what they do not want. You are putting your best foot forward here. Show your professionalism, your passion and abilities.


Considerations

The recordkeeping about recordkeeping should give guidance concerning categories of records, access to records, forms, schedule for retention or destruction, schedule for archiving if appropriate, methods for retrieval and notice of who is responsible for the action.

The board needs to develop written policies, procedures, forms and recordkeeping capability for fiscal, legal, contract, employment and other accountability. Who will maintain the corporate files for fiscal accountability? Who does not have access to certain records? How will the board know what is going on?

Where do you keep these records? What facts and documents of your organization are available to the public? If you receive public funds there may be requirements from your state law or funding source about more public accountability. If you have staff, there are certain personnel records that may not be released, such as health records. On the other hand, there are some personnel records open for inspection at least to funders. What other records should an organization retain permanently and in what format? Who may have access to the records?

What policy and procedure will you have for destruction and retention of records? What system will be used for retrieval of documents? Who has access and who has the right of access to these records?

Where do you store the old records for your organization? In a disaster, how vulnerable do you think these records will be? There are consultants to help you assess the vulnerability of your organization to disaster, but they may be more costly than you can afford. But what can you afford if you lose everything?

The best advice: Plan ahead. Keep copies of backup material off site. Store it in an electronic vault or secure web site if necessary. Double-check your insurance – does it cover floods if you are near water or other disasters? Develop a plan for protecting your business so you will be up and running as soon as possible.

If you are going to seek grants, be certain you have looked carefully at the responsibilities, recordkeeping and reporting in the application and in the contract.

I am required to tell you that I am a licensed attorney in New Jersey. It is not my intent to provide you with legal advice. I may have given you legal information but I have not given you legal advice. Reading this material is not a substitute for seeking legal assistance in these decisions.


Resources


Document Retention Limits

A limited list from Pfau Englund Nonprofit Law can be found at http://www.nonprofitlaw.com/retention.shtml


Records Retention Schedule at Delaware Association of Nonprofit Agencies’ web site - http://www.delawarenonprofit.org/toolstemplates/managefinance_faq2.php


Document Retention In The Digital Age: How Long Is Long Enough? By Philip L. Gordon of Littler Mendelson, P.C. - http://library.findlaw.com/2004/Sep/27/133589.html


Management

The Basic Guide to Nonprofit Financial Management by Carter McNamara at http://www.mapnp.org/library/finance/np_fnce/np_fnce.htm

See the Policies for Financial Accountability at Idealist/Action Without Borders http://www.idealist.org/if/i/en/faq/56-25/50-5


Financial Management - http://www.allianceonline.org/FAQ/financial_management

Foundation Center Tutorial, Proposal Budgeting Basics - http://foundationcenter.org/getstarted/tutorials/prop_budgt/


The Sarbanes-Oxley Act and Implications for Nonprofit Organizations – http://www.independentsector.org/issues/sarbanesoxley.html


Compendium of Standards, Codes, and Principles of Nonprofit and Philanthropic Organizations - http://www.independentsector.org/issues/accountability/standards2.html


Audit Committee Toolkit - http://www.aicpa.org/Audcommctr/toolkitsnpo/homepage.htm


Checklist for Accountability - http://www.independentsector.org/issues/accountability/Checklist/index.html


Insurance Questions for Nonprofits – http://www.idealist.org/if/i/en/faq/144-221/50-5


Principles for Good Governance and Ethical Practice: A Guide for Charities and Foundations. http://www.nonprofitpanel.org/report/principles/Principles_Guide.pdf and http://www.nonprofitpanel.org/


What Must We, What Can We Disclose to the Public, Staff, Board and Clients? - http://www.nonprofits.org/if/idealist/en/FAQ/QuestionViewer/default?category-id=1&item=1505&sid=40057025-157-xBkAU


Standards for Charity Accountability - http://us.bbb.org/WWWRoot/SitePage.aspx?site=113&id=4dd040fd-08af-4dd2-aaa0-dcd66c1a17fc


Nonprofit Governance and Accountability - http://www.jhu.edu/listeningpost/news/pdf/comm04.pdf


Evangelical Council for Financial Accountability Standards and Best Practices - http://www.ecfa.org/Content.aspx?PageName=ECFABestPractices

Maryland Nonprofits: Standards for Excellence - An Ethics and Accountability Code for the Nonprofit Sector - http://www.marylandnonprofits.org/html/standards/04_02.asp

Grant Writing Tools Web Sites - http://www.idealist.org/npofaq/19/64.html

IKnow is Interactive Knowledge for Nonprofit Organizations Worldwide - http://www.iknow.org/Main.cfm?Main=14


Is a Grant Right for Your Agency? A helpful one page check list from U.S. Department of Agriculture - http://www.nal.usda.gov/wicworks/Topics/grant_checklist.pdf 

Minutes: The Ongoing Record of Your Nonprofit Organization

This article is prepared to give a board of trustees of nonprofit organizations guidance about the importance of keeping written minutes of meetings. Throughout this article I will refer to the board as "board" or "board of trustees". Some states use the words "board of trustees" and others refer to the "board of directors". Basically they are the same and state law generally dictates what name is used.

What is the Importance of Minutes?

The minutes are the official record of meetings of and the actions by the board of trustees or its committees. They should clearly record important facts and decisions in order to prevent or clarify disputes that may arise at a later date. They serve as the basis for the history of the organization.

What do the Law and the State Statutes Say?

Many if not all states have provisions similar to those below which are a general set of standards about what should be reflected in a nonprofit organization's minutes.

1. Each corporation shall keep books and records of account and minutes of their proceedings of its members and board and committees. Unless otherwise provided in the bylaws, the books, records and minutes may be kept outside the state in which it is incorporated. The corporation shall make available certain records for inspection at its registered or principal office in the incorporating state. The records usually include the names and addressees of all members, the number, class and series of membership held by each and the dates when they respectively became members of record.
2. There is a requirement to make records available within a certain time period after demand by a member entitled to inspect the books, minutes and records. The books, minutes or records may be in written form or in any other form capable of being converted into written form within a reasonable time. A corporation is required to convert into written form without charge any records not in that form, upon the written request of any person entitled to inspect them.
3. State laws may require that upon the written request of any member, the corporation shall mail to that member its balance sheet as at the end of the preceding fiscal year and its statement of income and expenses for that fiscal year.
4. State laws may provide that members of the corporation, either singly or in number, shall have the right for any proper purpose to examine in person or by agent or attorney, during usual business hours, the minutes and to make copies at the places where the minutes are kept.
5. State statutes may provide that a member has the right to go to court to compel the production for examination by the member of the books and records of account, minutes and record of members of a corporation.
6. There is a definite movement among states and within the Federal Government to open the accountability and transparency of not-for-profit organizations to the public. Be certain you are aware of what is a public record for your organization under both the IRS and state law.

What about Unincorporated Associations?

Keeping a record of meetings and decisions made is just as important even if your organization is not incorporated. The important criterion should be whether your organization will have a continued existence and you want to have a record of your meetings, actions and activities. Some unincorporated groups, such as Alcoholics Anonymous, have no minutes or formal meetings. The purpose of the group will dictate what you want or need.

Who Records the Minutes?

The bylaws usually state who is responsible for taking and keeping the minutes. The Secretary does this for most organizations. In rare cases the Vice President or Treasurer may have this task. If the organization has staff, the bylaws can be drafted to allow delegation of taking and preparing the minutes to a staff member. Some organizations tape record meetings to help recall who made certain motions, who abstained and so on. There are some organizations that have a policy to retain such recordings and other organizations are silent and reuse the tape after the minutes are approved.

The person who takes notes at the business meetings uses these notes to prepare minutes, reads or distributes them to the entire board of trustees and dates and signs the minutes after approval by the board of trustees. There is no doubt that early distribution of the minutes to the board by mail, e-mail or web-site posting saves precious time at subsequent meetings.

Where are the Minutes Kept?

Minutes usually are kept in a bound or loose-leaf book or in a file. They may also be kept on a computer file with backup. Most organizations prefer a loose-leaf book or a file with a binder. Keep all minutes in one book (or set of books) or file and never remove them without replacing them. You may want to have the minutes for the year bound at the end of each corporate year.

What should be in the Minutes?

The minute's book should contain at least:

1. Title page and agenda
2. Minutes of the meetings of members, board of trustees and its committees with important documents attached to the meeting record to which they pertain. The minutes should be kept in order by date.
3. Minutes are not a record of all discussion from a meeting. The minutes should reflect the date, location of the meeting, starting and ending times, name of the chairperson, list those in attendance and those who were absent with and without an excused absence and state if there is a quorum. The minutes will reflect all motions that are made whether approved or defeated listing the mover, the person who seconded the motion and the names of any persons asking to be listed who are opposed to the motion or abstaining from the vote.
4. The material that has been provided to the members and to the board such as budgets and reports, generally mailed in advance, should also be bound in the chronological order with the appropriate minutes.
5. Some organizations tape record board meetings to assist in writing the minutes. There are differences of opinion whether tapes of meetings should be maintained or recorded over after the board approves the minutes. Some organizations have found that one member may bring a tape recorder to a meeting; the board should be prepared on what it will do if this is from a growing disagreement among members. There is disagreement whether the approved minutes or a tape recording is the official record - check with an attorney promptly if this is an issue.

The file or book should always be treated as an entire unit. Pages should never be removed. When particular pages are needed, the entire file or book should be removed and returned.

Pages should be numbered and initialed by the secretary after the board has approved the minutes. An index by subject, date and a page number can be very helpful particularly if there are frequent meetings during a year. It can be placed at the beginning of the minutes for that year.

What Should Be the Form and Contents of the Minutes?

The minutes of each meeting should contain at least:

• Name of group, organization or committee.
• Time (date and hour).
• Place (address and even the room number).
• Statement that the meeting was duly called:
  
  a) by whom;
  b) indicating the kind of meeting (regular meeting, special meeting, etc.);
  c) name of the presiding officer;
  d) name of the secretary of the meeting;
  e) time of the beginning and end of the meeting.
• Names of those present and those with an excused absence and those not excused.
• Quorum statistics (how many were present in person and how many by proxy or through telephone or other technological means, if allowed).
• Reading, correction and adoption of minutes of the previous meeting.
• Approval of the agenda or consent agenda
• Record of what occurred at this meeting, including:
  
  a) important decisions;
  b) resolutions proposed;
  c) resolutions adopted, defeated or tabled (include names of the proposers; the names of the seconders);
  d) record of those for or against a proposal (when requested by a member);
  e) record of who abstained on any vote by name;
  f) reports of the officers, committees and staff;
  g) some organizations have an open forum for staff members or community members to address the board;
  h) other business or ideas.
  
• Next meeting date, time, place.
• Adjournment (time).
• Signature of the secretary and date following approval of the minutes by the board with each page initialed.

The handwritten meeting notes taken by the secretary should be carefully copied in ink or neatly typed. The minutes should report mainly on what is accomplished or decided at the meeting, not what is said. Minutes should follow the progress of the meeting, but should be arranged so those important items, such as resolutions, votes, etc., can be easily found. Brief summaries of important discussions are often helpful to remind people about why certain decisions are made. Minutes should include exact statements of motions and decisions made.

A recent concept called the “consent agenda” has helped make many board meetings more focused and shorter. I have included material about consent agendas under “Resources”, below.

What About Corrections and Verifications?

Approved minutes of each meeting should end with the signature of the Secretary and the date. After they are read and, if necessary corrected in ink at the next meeting, the corrections should be initialed in the margin by the Secretary. Any such correction ordinarily may be made only with the consent of those present at the meeting, but the trustees also may amend the minutes to include official actions not already recorded at the preceding meeting.

No change or alterations should be made in the minutes after they are signed. If changes in decisions or records are to be made, they should be indicated in the minutes of later meetings - not by rewriting past history. Minutes of the meetings are proof of what occurred at that meeting.

There may be minutes when there is no meeting but the board makes a decision by mail or on a signed ballot. The written votes are to be attached to the minutes indicating the date and the motion voted upon.

What About Executive Sessions?

Some state laws have limits on what topics can be discussed in an executive session or closed meeting of nonprofit organizations. The board should review the state law laws, open meeting laws or sunshine laws, with an attorney. The bylaws of the organization may be appropriate place to list the rules for executive sessions.

An executive session generally is listed on the agenda for the meeting so that any non-board member will be excused from the meeting. The meeting can include the executive director or chief executive officer. Sometimes an attorney for (but not necessarily on) the board will be present to take minutes. Many executive sessions have no minutes since no decisions are made.

The topics for an executive session may include discussions about a lawsuit threatened or pending or actually filed against the organization, the planning for the purchase or leasing of property, the hiring, evaluation and discussion of firing the executive director. Organizational mergers are also topics for an executive session. Decisions about these topics, however, have to take place in an open meeting.

Are minutes open to the public?

Generally the answer is no, but check your state law. I am not certain why a nonprofit organization would want to keep them a secret, however. I was never asked for copies of minutes of meetings except by some new members on the board. Whenever I was granted an interview for the CEO position, I always asked for certain documents before the interview including the minutes of all meetings in the prior twelve months.

I cannot emphasize enough the erosion of privacy of nonprofit organizations. There are many documents that are required by state and federal laws to be made public. The door will continue to widen on into the future. Nonprofit organizations have been given a great privilege to serve our world. Nonprofits belong to the community and should not be hidden by veils of secrecy.

See my article entitled Nonprofit Organizations - Disclosure of Information: What Must We, What Can We Disclose to the Public, Staff, Board and Clients? http://www.nonprofits.org/if/idealist/en/FAQ/QuestionViewer/default?category-id=1&item=1505&sid=40057025-157-xBkAU

Auditors

Auditors will want to have copies of all minutes and all relevant material to review for the annual audit.

Other Corporate Records

The Secretary of an organization generally has the responsibility of maintaining the corporate records including but not limited to the incorporation papers, the IRS letter recognizing the organization as tax exempt, budgets, audits, Form 990 and its family, all annual reports filed and all correspondence between the organization and the state government and the IRS. The secretary does not own the minutes and other records. The secretary has a duty of loyalty to the organization to maintain the records for the organization and to turn them over to the leadership if the secretary resigns and or cannot maintain the position. .

RESOURCES

What should be included in the minutes of a board meeting?
http://www.boardsource.org/Knowledge.asp?ID=3.71

The Nonprofit FAQ: Who Should See Board Minutes?
http://www.idealist.org/if/i/en/av/FAQText/25-54

How Nonprofits Take Action: Getting Board or Member Approval
http://www.nolo.com/article.cfm/ObjectID/ADF48429-FBE8-4BF2-80E1A65CA117F22E/catID/ce94a6b3-efb6-4036-8498d5414328fd73/111/262/ART/

Can staff take over the board secretary's role?
http://www.boardsource.org/Knowledge.asp?ID=3.89

Executive Sessions: How to Use Them Regularly and Wisely
http://www.boardsource.org/dl.asp?document_id=555

Sample of a Board of Directors Meeting Agenda
http://www.managementhelp.org/boards/agenda.htm

Basic Sample of Board of Directors Meeting Minutes
http://www.managementhelp.org/boards/minutes.htm

How to Take Meeting Minutes- Samples of Board of Directors Meeting Minutes
http://non-profit-governance.suite101.com/article.cfm/how_to_take_meeting_minutes

Agenda and Minutes of First Board Meetings
http://dongriesmannsnonprofitblog.blogspot.com/2008/07/agenda-and-minutes-of-first-board.html

The Consent Agenda: A Tool for Improving Governance
http://www.boardsource.org/dl.asp?document_id=484 and
http://www.boardsource.org/Knowledge.asp?ID=3.70

Your Nonprofit Library Third Shelf – See What the IRS Demands of Your Tax Exempt Organization After it is Recognized as Tax Exempt

Here are the links for your nonprofit library to all the IRS forms, Publications and other material related to what you have to do after your organization is recognized by the IRS as tax exempt. Make a copy of all the publications and forms or mark them for easy access. Your local IRS office can secure copies for you without cost.

You will find here annual forms that must be filed, how to report contributions, issues over donations of motor vehicles, employment taxes, auctions, political lobbying, postal regulations and other resources. This completes the third shelf.

The single most change for reporting is the new Form 990. You should know this cold. Now!

Annual Filing to the IRS on Forms 990

Independent Sector’s article Revised Form 990, Accountability and Oversight - http://www.independentsector.org/programs/gr/draft_form_990.htm

Instructions for the New 2008 990s - http://www.irs.gov/irs/article/0,,id=186015,00.html

Forms 990 or 990-EZ and Schedules A and B – http://www.irs.gov/pub/irs-pdf/f990.pdf

990-EZ - http://www.irs.gov/pub/irs-pdf/f990ez.pdf

Instructions for Schedule A - http://www.irs.gov/instructions/i990sa/ch01.html

Instructions for Form 990 and Form 990-EZ (2007) –
http://www.irs.gov/instructions/i990-ez/index.html

e-Filing for Charities and Nonprofits, Form 990 (Return of Organization Exempt from Income Tax), Form 990-EZ (Short Return of Organization Exempt from Income Tax) and Form 990-PF (Return of Private Foundation) -
http://www.irs.gov/efile/article/0,,id=108211,00.html

E- Postcard Form 990-N New Annual Electronic Filing Requirement for Small Tax Exempt Organizations - http://www.irs.gov/charities/article/0,,id=169250,00.html

E-Postcard: Questions and Answers - http://www.irs.gov/charities/article/0,,id=173864,00.html

Pension Protection Act of 2006 Revises Exempt Organizations Tax Rules - http://www.irs.gov/charities/article/0,,id=161145,00.html

IRS Complaint Process For Tax Exempt Organizations - http://www.irs.gov/irs/article/0,,id=178241,00.html

Contributions from Taxpayers to Tax Exempt Organizations

IRS Publication 1771, Charitable Contributions - Substantiation and Disclosure Requirements – http://www.irs.gov/charities/article/0,,id=96102,00.html and http://www.irs.gov/pub/irs-pdf/p1771.pdf

Publication 526 is information for the taxpayer who makes charitable contributions - http://www.irs.gov/publications/p526/index.html

Motor Vehicles and Other Donations to a Tax Exempt Organization

New Publications Focus on Car Donations - http://www.irs.gov/newsroom/article/0,,id=124421,00.html

Form 4302, A Charity’s Guide to Motor Vehicle Donations –
http://www.irs.gov/pub/irs-tege/pub4302.pdf

Form 4303, A Donor’s Guide to Motor Vehicle Donations –
http://www.irs.gov/pub/irs-pdf/p4303.pdf

IRS Rules About Making a Motor Vehicle Donation - http://www.irs.gov/newsroom/article/0,,id=131660,00.html

Internal Revenue Bulletin 2007 – 40, Information Reporting by Organizations That Receive Charitable Contributions of Certain Motor Vehicles, Boats, and Airplanes - http://www.irs.gov/irb/2007-40_IRB/ar09.html

Exempt Organizations Abusive Tax Avoidance Transactions - http://www.irs.gov/charities/article/0,,id=128722,00.html

IRS Testimony: Charitable Giving Problems and Best Practices - http://www.irs.gov/newsroom/article/0,,id=124186,00.html

Independent Sector’s Comments about car donations - http://www.independentsector.org/programs/gr/vehicledonations.htm

Gaming

In addition to any state laws, see the material published by the IRS, Gaming Publication for Tax Exempt Organizations -

http://www.irs.gov/pub/irs-pdf/p3079.pdf

Topic 419 - Gambling Income and Expenses

http://www.irs.gov/taxtopics/tc419.html

Instructions for Form 990 and 990-EZ (2007)

http://www.irs.gov/instructions/i990-ez/ix01.html

Employment Taxes and Other Employer Instructions for Tax Exempt Organizations

Links to IRS articles concerning Employment Taxes for Exempt Organizations - http://www.irs.gov/charities/article/0,,id=128716,00.html

2008 Form 15, Circular E Employer's Tax Guide (revised annually) - http://www.irs.gov/pub/irs-pdf/p15.pdf

2008 Form 15–A Employer's Supplemental Tax Guide (revised annually) - http://www.irs.gov/pub/irs-pdf/p15a.pdf

2008 Form 15-B Employer's Supplemental Tax Guide on the employment tax treatment of fringe benefits - http://www.irs.gov/pub/irs-pdf/p15b.pdf

2008 Form 941 Employer’s Quarterly Federal Tax Return 941 Form (Rev. January 2008) - http://www.irs.gov/pub/irs-pdf/f941.pdf

2008 Instructions for Form 941 - http://www.irs.gov/pub/irs-pdf/i941.pdf

Publication 78, Cumulative List of Tax Exempt Organizations described in Section 170(c) of the Internal Revenue Code of 1986, a search for charities - http://www.irs.gov/charities/article/0,,id=96136,00.html

2008 Publication 509 (changes annually), Tax Calendars for 2008 - http://www.irs.gov/publications/p509/index.html

Publication 598 - Form to Declare Unrelated Business Income of a Tax Exempt Organization (NOTE: Tax Exempt organizations should be very aware of this Publication and its implications for Exempt status)- http://www.irs.gov/pub/irs-pdf/p598.pdf

Disclosure of Unrelated Business Income Tax Returns - The IRS has provided interim guidance (Notice 2007-45) on the requirement for 501(c)(3) organizations to make available for public inspection a copy of their unrelated business income tax (UBIT) returns (Form 990-T). The disclosure procedures are generally the same as those required for disclosure of an organization's Form 990. Some organizations not subject to other public disclosure requirements, such as churches, are required to disclose a Form 990-T; see Publication 598 immediately above - http://www.irs.gov/irb/2007-22_IRB/ar12.html

Intermediate Sanctions, Excise Tax on Excess Benefit Transactions (NOTE: Tax Exempt organizations should be very aware of this Publication and its implications for Exempt status. The purpose of this is to impose sanctions on the influential persons in charities and social welfare organizations who receive excessive economic benefits from the organization, rather than to punish the exempt organization itself.) - http://www.irs.gov/charities/charitable/article/0,,id=123298,00.html and http://www.irs.gov/pub/irs-tege/eotopice03.pdf

Political Activity and Lobbying

IRS Reminds Charities and Churches of Political Activity Ban - http://www.irs.gov/charities/charitable/article/0,,id=175825,00.html

Political Activities - Particularly important given the election season, the IRS released a revenue ruling (Rev. Rul. 2007-41) regarding what political activities are prohibited for tax-exempt organizations. To illustrate, the revenue ruling describes 21 situations and discusses which are permissible and which are not. http://www.irs.gov/irb/2007-25_IRB/ar09.html

Political Activities Compliance Initiative (2008 Election) http://www.irs.gov/charities/charitable/article/0,,id=181565,00.html

On February 3, 2009 the Chronicle of Philanthropy reported on an IRS vs Church-audit case involving alleged lobbying and candidate support. The article says in part:

Court Rules Against IRS in Church-Audit Case, By Grant Williams

The Internal Revenue Service has suffered another setback in its effort to pursue an audit of a church in Minnesota in a case that has ramifications for the tax agency and churches nationwide.
A U.S. District Court judge in Minneapolis ruled that the Living Word Christian Center, in Brooklyn Park, Minn., does not have to comply with an IRS summons for information because the summons was not authorized by a government official of sufficient rank.

The ruling by Judge Ann D. Montgomery concurs with a decision in December by U.S. Magistrate Judge Jeffrey J. Keyes.

Some tax-law experts have said that the IRS’s defeat could spur challenges to audits by other churches and force the IRS to engage in a lengthy, formal rule-making process to determine who has the authority to order an investigation into a church’s finances.

The IRS began to investigate Living Word in April 2007, following reports that the Rev. Mac Hammond had endorsed U.S. Rep. Michele Bachmann, a Minnesota Republican, from the pulpit—an act that would violate charity tax laws.

(Snip)

http://philanthropy.com/news/updates/7005/court-rules-against-irs-in-church-audit-case

Faith leaders and other nonprofit leaders may want to monitor this over the next several years. It could take that long.

IRS Miscellaneous Material

IRS Field Memoranda - http://www.irs.gov/charities/article/0,,id=96374,00.html

IRS Published Guidance and Bulletins - http://www.irs.gov/charities/content/0,,id=125361,00.html

IRS Revenue Rulings - http://www.taxlinks.com/rulings/findinglist/revrulmaster.htm and http://www.irs.gov/irm/part7/index.html

IRS Frequently Asked Questions (FAQ) - http://www.irs.gov/charities/content/0,,id=96986,00.html

ABC's for Exempt Organization
http://www.irs.gov/charities/article/0,,id=187787,00.html

United States Postal Service and Tax Exempt Organizations

United States Postal Service Publication 417, Nonprofit Standard Mail Eligibility; Explains and discusses eligibility for Nonprofit Standard Mail rates, application procedure, and mailing requirements - http://pe.usps.gov/text/pub417/welcome.htm and
http://pe.usps.gov/cpim/ftp/pubs/Pub417/Pub417.pdf

Other Resources

The Center for Non-profits of New Jersey has a booklet about Thinking of Forming a Non-Profit? What to Consider before You Begin: http://www.njnonprofits.org/ThinkingOfFormingDesc.html

See the Forming a Nonprofit Organization: A Checklist for incorporating at BoardSource, http://www.boardsource.org/Knowledge.asp?ID=3.367

Foundation Center Establishing a Nonprofit Organization - What are the characteristics that define an effective Nonprofit Organization? - http://foundationcenter.org/getstarted/tutorials/establish/

American Institute of Certified Public Accountants Understanding the Responsibilities of a Not-For-Profit Board Member [Download]
http://www.cpa2biz.com/AST/Main/CPA2BIZ_Primary/AuditAttest/AuditPreprationandPlanning/PRDOVR~PC-017248PPT/PC-017248PPT.jsp

American Institute of Certified Public Accountants How Fraud Hurts You and Your Organization http://www.cpa2biz.com/AST/Main/CPA2BIZ_Primary/FraudDetectionandPrevention/PRDOVR~PC-056513HS/PC-056513HS.jsp

American Institute of Certified Public Accountants The AICPA Audit Committee Toolkit: Not-for-Profit Organizations http://www.aicpa.org/Audcommctr/toolkitsnpo/homepage.htm

Six Things Every Board Member Should Know About the NEW 990 http://www.blueavocado.org/node/269

Planned Giving Design Center Tax Consideration in Charitable Auctions http://www.pgdc.com/pgdc/tax-considerations-charitable-auctions

Previous Related Blog Articles

Your Nonprofit Library Third Shelf – Getting the U.S. IRS to Recognize Your Nonprofit as Tax Exempt

The Role and Non-Role of Nonprofits and Churches in Elections – Your Nonprofit Library Third Shelf

IRS Makes Filing For Nonprofit Tax Exemption Easier, Sort Of

Effect of IRS Ruling Eliminating Advanced Rulings On Form 1023

IRS Rules on the Phase-in for Nonprofit Organizations to File the New 990 Series Forms

Fiscal Sponsorship or Agent: A Yellow Light

There are other articles here on incorporating a nonprofit. You are invited to add to this list.

Thank you.

Developing a Nonprofit Tax Exempt Organization - Outline of First Steps

Developing a Nonprofit Tax Exempt Organization – Outline of First Steps

1. Form the initial, incorporating board of trustees, minimum number of 3 people 18 years old or older
2. Incorporating board members donate funds to pay initial fees
3. Approve the agenda for the first meeting of the board of trustees
4. Approve the membership of the initial board
5. Approve a mission statement for the organization
6. Develop a business plan for the organization for the first 1-3 years
7. Approve a registered agent
8. Approve name of organization and file reservation of name with state. (Fees vary from state to state $50-$60)
9. Approve the state incorporation papers, signature(s) and file with state, and be sure to use the language that both your state and the federal government require; they complement each other. Your state may require that the approved incorportion papers are a public document. (Fees vary from state to state, about $75; you may receive a state identification number that you will need to have available for correspondence and filing with your state, but the state may use the Federal Employer Identification Number - FEIN, see #s 10 and 13 below)
10. Approve filing for Federal Employer Identification Number
11. Prepare and approve minutes of all meetings, dated and signed by secretary or other officer following approval
12. Develop and approve bylaws in conformity with both state and federal laws
13. Approve opening bank account in name of the corporation and signatories (You will need the FEIN and Certificate of Incorporation from the state; DO NOT open the account in any person's name as that will make the deposit taxable to that peson as income)
14. Complete developing the (membership if there are to be members) board and elect officers following the bylaws; form committees as required or desired
15. Secure all necessary Federal forms and publications for filing with the Internal Revenue (see future blogfor your library list)
16. Secure documents for recognition as a tax exempt organization
17. Prepare IRS Form 1023, approve signature and filing with the IRS (Fee $300-$750 on February 1, 2006); save at least one copy with original signatures. This will be a public document along with many others.
18. Upon recognition by the IRS, file for sales tax exemption with the state if there is such a tax
19. Approve and file all other necessary forms at the local, county and state level (e.g., zoning, building codes, games of chance, etc.)
20. Develop and approve necessary policies, procedures and recordkeeping for all mission activity, fiscal and administrative records and for grant compliance
21. Approve and file all necessary annual reports on time

And there is more...