Regulation and Compliance Continue to Invade the World of Not-for-Profit Organizations
- posted by KLR
Once upon a time not-for-profit organizations were left alone to devote as much of the resources they could marshal together on their mission. The board, comprised of individuals from the community, was the only oversight in place charged with making sure the organization did the right thing. This lack of regulation and red tape along with exemption from Federal and State income taxes was part of society’s “gift” to the not-for-profit organization as gratitude for their mission oriented work.
All of that is changing and changing rapidly. The IRS Form 990, annual information return, completed by most not-for-profit organizations has completely changed and is now a document that will consume 40 or more pages and contain information and disclosures never before seen by the general public. Throughout 2008 we conducted half-day seminars for our clients just to get ready for the requirements imposed by this new form. As our clients struggle with the preparation of this form, the learning continues as we both examine transactions and relationships that had not been subject to this level of scrutiny in the past.
The not-for-profit pension plan created under Section 403(b) of the Internal Revenue Code was once a pension plan with an unusual ease of creation and administration. Beginning in 2009 these pension plans come under new levels of regulation including a requirement that the plan be audited by independent accountants if the plan has more than 100 participants.
Executive Directors and board members who may have been identified as the plan administrators of these 403(b) plans are suddenly hearing about the potential of fiduciary liability that has suddenly been identified with these plans. How could I as a Treasurer of a not-for-profit organization have a liability in connection with an employee of the not-for-profit deciding to save for retirement? The organization withholds the money as directed by the employee from their pay and sends it along a few days later to the investment company for deposit into an investment vehicle selected by the employee. What could be easier than that? There is so much more to this simple transaction under the new regulations that we are conducting additional half-day seminars designed to get the information out in a timely manner. The next one is scheduled for October 21, 2009 in our Waltham office.
What is behind all of this increased interest in the not-for-profit organization? One factor is that the not-for-profit organization is much more prevalent in our society than it was 30 years ago. Some estimates have the not-for-profit sector accounting for as much as one third of the general economy. Some would say that the not-for-profit sector, which has always been important to society for the mission work that it does in that society, is now such a significant factor in the economy as a whole that it needs the same level of control, monitoring and oversight imposed on the rest of American business. Another factor may be that there have been some spectacular failures in not-for-profit organizations. By this I mean not-for-profit organizations that were engaged in activities or practices that they should not have been according to their not-for-profit mission. While these failures are really a failure of the Board oversight role, the response to the failures is additional oversight and regulation from the government sector rather than training and qualification standards for Board members.
Whatever the reason, the fact is that the landscape for the not-for-profit organization has changed and the prospects of returning to those days of yester-year are non-existent.
For further information or to register for our upcoming 403(b) seminar please RSVP to Ashley Levesque at: 888-557-8557 or email ALevesque@KahnLitwin.com
By. Frank Monti, CPA
Not For Profit Group
All of that is changing and changing rapidly. The IRS Form 990, annual information return, completed by most not-for-profit organizations has completely changed and is now a document that will consume 40 or more pages and contain information and disclosures never before seen by the general public. Throughout 2008 we conducted half-day seminars for our clients just to get ready for the requirements imposed by this new form. As our clients struggle with the preparation of this form, the learning continues as we both examine transactions and relationships that had not been subject to this level of scrutiny in the past.
The not-for-profit pension plan created under Section 403(b) of the Internal Revenue Code was once a pension plan with an unusual ease of creation and administration. Beginning in 2009 these pension plans come under new levels of regulation including a requirement that the plan be audited by independent accountants if the plan has more than 100 participants.
Executive Directors and board members who may have been identified as the plan administrators of these 403(b) plans are suddenly hearing about the potential of fiduciary liability that has suddenly been identified with these plans. How could I as a Treasurer of a not-for-profit organization have a liability in connection with an employee of the not-for-profit deciding to save for retirement? The organization withholds the money as directed by the employee from their pay and sends it along a few days later to the investment company for deposit into an investment vehicle selected by the employee. What could be easier than that? There is so much more to this simple transaction under the new regulations that we are conducting additional half-day seminars designed to get the information out in a timely manner. The next one is scheduled for October 21, 2009 in our Waltham office.
What is behind all of this increased interest in the not-for-profit organization? One factor is that the not-for-profit organization is much more prevalent in our society than it was 30 years ago. Some estimates have the not-for-profit sector accounting for as much as one third of the general economy. Some would say that the not-for-profit sector, which has always been important to society for the mission work that it does in that society, is now such a significant factor in the economy as a whole that it needs the same level of control, monitoring and oversight imposed on the rest of American business. Another factor may be that there have been some spectacular failures in not-for-profit organizations. By this I mean not-for-profit organizations that were engaged in activities or practices that they should not have been according to their not-for-profit mission. While these failures are really a failure of the Board oversight role, the response to the failures is additional oversight and regulation from the government sector rather than training and qualification standards for Board members.
Whatever the reason, the fact is that the landscape for the not-for-profit organization has changed and the prospects of returning to those days of yester-year are non-existent.
For further information or to register for our upcoming 403(b) seminar please RSVP to Ashley Levesque at: 888-557-8557 or email ALevesque@KahnLitwin.com
By. Frank Monti, CPA
Not For Profit Group
Labels: Accounting, CPA, KLR, Monti, Nonprofit, Not For Profit Group, Tax
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KLR is one of New England's premier accounting and business consulting firms. With 160 team members and offices in Providence, Boston, Natick and Newport, KLR provides a wide range of services to both individuals and businesses.
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