JOIN MY FREE <Enter in the title, description, and main benefit of your lead magnet here>

NC logo

Ep 13 - Critical Aspects of Nonprofit Finances and the Form 990 with Genevra Williams

In this episode, we dive into critical aspects of nonprofit finances and the Form 990. Joining May as a guest was Genevra Williams, Senior Counsel at Mendrygal Law, who shared her expertise on the intricate world of nonprofit law and necessary tax reporting.

Subscribe On

Introducing Genevra Williams

In this insightful episode of The Nonprofit Counsel Podcast, hosted by May Harris, Esq., MA, the focus was on critical aspects of nonprofit finances and the Form 990. Joining May as a guest was Genevra Williams, Senior Counsel at Mendrygal Law, who shared her expertise on the intricate world of nonprofit law and necessary tax reporting.

Genevra's journey into nonprofit law was unique, evolving from a desire for a career change with her husband. From involvement in fundraising to an in-house position at a nonprofit in Dallas, she eventually ventured into private practice, accumulating a wealth of knowledge along the way.

Formation, Exemption, and Tax-Reporting

The episode delves into the complex terrain of formation, exemption, and tax-reporting for nonprofit organizations. Genevra highlights the need to distinguish between tax-exempt organizations and nonprofits, emphasizing the application process for exemption under specific sections of the Internal Revenue Code.

A significant shift in nonprofit tax-reporting over the last two decades is the requirement for even the smallest nonprofits to report their finances at the end of the financial year. There are several different levels of 990’s, which are discussed later in this episode, but always remember: you must file a report no matter the size of your organization.

The discussion then turns to the key elements that Genevra and May scrutinize in the Form 990. From a comprehensive summary on Page 1 to governance and programmatic descriptions, they share insights into deciphering an organization's financial health. Offering valuable tips, May and Genevra caution against common mistakes that new nonprofit leaders might make on their applications, stressing the need for legal and financial assistance. May highlights the significance of Schedule O, emphasizing the transparency it provides regarding board reviews and program service accomplishments. These pieces of the 990 are relevant to donors, consultants, and even the nonprofit founder and board members themselves. For your organization's health, ensure that the entire 990 is completed well and in full.

A hot tip for board members! Remember to review the Form 990 diligently. Fiduciary duty demands the attention of board members to this crucial tax reporting form. May strongly discourages the prevalence of a "bobblehead board."

Governance and the 990

The conversation then shifts to Governance Questions, with a spotlight on three fundamental policies that all nonprofits should have; a conflict of interest policy, a whistleblower protection policy, and a document destruction and retention policy. These are not intimidating policies, but they are crucial to organizational success. In fact, on the Form 990, it specifically asks if you have these policies, and May stresses that you should ALWAYS be able to check yes.

There are two additional policies Genevra adds to this; the gift acceptance policy and accountable reimbursement policy. The gift acceptance policy gives your fundraisers guidance on what gifts can or cannot be accepted, which also serves to keep the org on mission, while the accountable reimbursement policy ensures you're staying compliant on reimbursing employees and volunteers. Both May and Genevra agree that all these policies should be reviewed annually to maintain compliance with the IRS and for your organization to thrive.

The Different Versions of the 990

Finally, the episode explores the four different versions of the Form 990, tailored to the size and nature of the organization.

Firstly, there is the Form 990N. This is for small orgs on average operating under $50,000, with a fairly simple, minimal report. At this point in nonprofits' growth, you are not required to file any financials, but Genevra recommends proactive preparation of the Schedule A, even for smaller organizations operating under $50,000, as they may eventually exceed this threshold.

Then there is the 990EZ, which you must complete once you are operating over $50,000 and under $200,000, and then the full 990. These are fairly more intensive than the 990N, and an organization may require assistance when completing them.

One other version May discusses is the 990PF - the tax reporting form for private foundations. However, sometimes, nonprofits, often those who self-filed, check the wrong box reporting that they are private foundations. All private foundations, no matter their size or nature, must do the 990PF every year. So when a little nonprofit who accidentally checked that box during formation tries to file a 990N, they get rejected. There is a mechanism to convert from a private foundation to a public charity, but you must do so within the same reporting year to fix it quickly. If you leave it longer, you may find yourself in "purgatory" with the IRS with a 5-year transition period. May suggests that all new nonprofit founders should go look at their 1023 soon to check if that box was checked in error.

Closing Thoughts

​In conclusion, this episode provided a comprehensive guide to navigating the intricate landscape of nonprofit finances. From formation to tax reporting, governance policies, and Form 990 variations, May Harris and Genevra Williams offered invaluable insights for both seasoned nonprofit professionals and those new to the field. The importance of diligence, transparency, and proactive compliance emerged as recurring themes, emphasizing the critical role of legal and financial guidance in ensuring a nonprofit's success and longevity.

Subscribe to the Nonprofit Counsel Podcast today to stay on top of the latest insights and strategies about improving your nonprofit organization’s financial wellness and reinforcing long-term success and impact. For even more updates and valuable content, be sure to follow Nonprofit Counsel on LinkedIn and Instagram.