FAQ and Useful Links

Useful Links and FAQ

Useful Links:

Council of Nonprofits
A really excellent comprehensive resource for nonprofit information: tools, resources, audits, FAQs, trends and policies etc.
https://www.councilofnonprofits.org
https://www.councilofnonprofits.org/frequently-asked-questions-about-nonprofits
https://www.councilofnonprofits.org/tools-resources/financial-management

AICPA Tools & Pronouncements
https://www.aicpa.org/interestareas/notforprofit.html

Sample Policies: Whistle-Blower, Conflicts of Interest, Document Retention
https://www.aicpa.org/content/dam/aicpa/interestareas/notforprofit/resources/governancemanagement/downloadabledocuments/not-for-profit-whistle-blower-policy.docx
Conflict of interest policy for NPO’s
https://www.aicpa.org/content/dam/aicpa/interestareas/notforprofit/resources/governancemanagement/downloadabledocuments/not-for-profit-conflict-of-interest-policy.docx
Document Retention Policy
https://www.aicpa.org/content/dam/aicpa/interestareas/notforprofit/resources/governancemanagement/downloadabledocuments/not-for-profit-document-retention-policy.docx

IRS
https://www.irs.gov/charities-non-profits

Frequently Asked Questions

Nonprofit Governance & Management

Reference: AICPA.org

Board Activities

Is there a rule of thumb on how many board members a nonprofit should have?

Often, the number of board members will be governed by state law. Your legal counsel can assist with your specific requirements. From a best-practice perspective, it is generally recommended that the board of a not-for-profit have at least 3-5 members, the majority of which are unrelated to each other.

What should be discussed during a new board member orientation?

For exempt organizations both big and small, it is always a good idea to provide some sort of orientation for incoming board members, in addition to a written description for their position. Topics of discussion during this new board member orientation could include the following:
• Organization’s mission
• Organization chart
• Review of Bylaws
• Review of most recent Form 990
• Board member responsibilities
• Board member fundraising obligations
• Board meeting frequency

Are nonprofits supposed to have term limits for board members? If so, what should those limits be?

Not-for-profits should evaluate whether term limits for board members would be appropriate for their organization. Some organizations may decide that limits help to keep the board dynamic and infused with new perspectives and ideas, while others may feel that term limits lead to struggles with continuity and support. Whichever approach an organization takes, it is important that it be documented and followed. For organizations with term limits, consider having a staggered-term process to support continuity and prevent large turnovers of board members at once. For organizations without term limits, consider having policies in place that keep long-serving board members refreshed on their duties and engaged with the organization.

Is it common for board members to assist with fundraising? I joined a board recently and was asked to give or raise $5,000 for the organization.

Asking board members to assist with fundraising is very common in not-for-profit organizations that rely on donations as a revenue source. The board has a fiduciary responsibility to ensure that the organizations has adequate resources to serve its mission, and fundraising is often a key component to this. Before joining a board, it is always a good idea to ask about fundraising expectations and make sure you are comfortable with the commitment.

What is a conflict of interest?

In the board context, a conflict of interest arises when a board member (or anyone considered to be related to the board member) undertakes a transaction with the not-for-profit, including transactions that involve the board member providing a discount for their services. Transactions with conflict potential need to be disclosed to and scrutinized by the board BEFORE they are undertaken. Appearances of conflict should also be reviewed as they can impact the reputation of an organization. A robust conflict of interest policy covering both financial and nonfinancial conflicts is a means to establish procedures that will offer protection against charges of impropriety involving officers, directors or trustees.

Financial Reporting

What do board members need to know about Form 990?

IRS Form 990 is an informational return that most not-for-profit organizations are required to file annually. It is a public document and the primary source of information regarding the finances, operations, executives, fundraising efforts, etc. of the filing not-for-profit. Form 990 should be annually reviewed by the board (or a subcommittee thereof) BEFORE it is filed with the IRS. Board members should fully understand and verify the information in the form 990, and should feel comfortable asking questions until they are satisfied. A good industry practice is to post the public inspection copy of the filed Form 990 on the organization’s website.

Am I required to post my financial information on my website?

There is no federal requirement to provide your financial information on your website. The IRS requires that you make your Form 990 publicly available, but does not specify the method required for doing so. Certain charity watchdog organizations require member organizations to make their financial statements available to the public. In the interest of transparency, it is considered a good industry practice to post both the IRS Form 990 and the nonprofit’s annual financial statements.

Other Considerations

Should we have an operating reserve?

An operating reserve can be a valuable tool to help a not-for-profit entity respond to temporary changes in circumstances or in its environment. By building and maintaining an operating reserve, an organization can better manage its cash flow on a day-to-day basis.

Are nonprofits’s allowed to make a profit?

Yes, absolutely. In fact, a modest surplus or increase in net assets is a good goal for most not-for-profit organizations. A positive change in net assets allows not-for-profit organizations to build up reserves and contributes to their long-term financial sustainability. The term “not-for-profit” comes from the fact that not-for-profit organizations exist for the benefit of the public and have no owners. This means that rather than distributing surpluses to shareholders or owners as would be done in a for-profit organization, not-for-profits must use those funds to carry out the purpose for which they were created.

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