On December 9, 2009, the United States Internal Revenue Service issued a “Governance Check Sheet” (the “Check Sheet”) and a related “Governance Project Guide Sheet for Completing the Project Check Sheet” (the “Guide Sheet”) to be used by IRS agents to capture data about governance practices and the related internal controls of tax-exempt organizations being examined. The data from the study will be utilized by the IRS to get a better understanding of the intersection between the governance practices and tax compliance of tax-exempt organizations. More importantly, the Check Sheet and the Guide Sheet can to be utilized by tax-exempt organizations to assess their governance practices. The IRS continues to emphasize the importance of good governance practices to increase the likelihood that tax-exempt organizations will comply with applicable tax regulations, protect their charitable assets and serve their charitable beneficiaries.
The Check Sheet is broken down into the following categories: Governing Body and Management; Compensation; Organizational Control; Conflict of Interest; Financial Oversight; and Document Retention. Some of the more notable questions on the Check Sheet include:
* Does the organization have a written mission statement that articulates its current I.R.C. § 501(c)(3) purpose(s)?
* Does the organization’s bylaws set forth the composition, duties, qualifications and voting rights of the members of the governing body and the organization’s officers?
* Have copies of the most recent version of the entity’s Articles of Organization and bylaws been provided to the board members?
* Are compensation arrangements for all officers, directors, trustees and key employees approved in advance by an authorized body of the organization composed of individuals with no conflict of interest with respect to their compensation arrangement?
* Does the authorized body rely upon comparability data in making compensation determinations?
* Do any of the organization’s voting board members have a family relationship and/or outside business relationship with any other voting or non-voting board member, officer, director, trustee or key employee?
* Does the organization have a written Conflict of Interest Policy?
* How often does the organization provide board members with a written report regarding the organization’s financial activities?
* How often did the board discuss/consider reports of the organization’s financial activities?
* Prior to filing, was the Form 990 reviewed by the full board and/or a designated committee?
* Does the organization have a written policy for document retention and destruction?
* Does the board contemporaneously document its meetings and retain such documentation?
The Check Sheet can be a very useful tool for tax-exempt organizations to review their existing governance practices.
If you have any questions regarding the Check List or would like to know more about the best practices for governance of tax-exempt organizations, please do not hesitate to contact any of the attorneys at The Rogers Law Firm.