The 501 S(c)ene

The latest view on not-for-profit accounting issues

Internal Control Policies Reported on the 990

Lately I’ve received several questions about the policies and procedures listed on page 6 Part VI Section B, three of which are a written conflict of interest policy, whistle blower policy, and a document and retention policy. The concern always seems to be, what if the organization doesn’t have these policies in place? The IRS does not require an organization to have any or all of these policies.

However, having these policies is considered a best practice for a non-profit organization. The length and detail for each policy would depend on the size and complexity of the organization.

A written conflict of interest policy should be reviewed and completed by at least the board of directors and key employees, if not all employees to help identify any potential conflicts. Once they have been identified, there should be a process to review the impact of the conflict. You may determine that there is no impact to the organization or, for example, a board member may abstain from voting on a particular topic.

A written whistle blower policy can take several forms. A few examples are to have a compliance officer or a third party hotline to take anonymous calls. It is equally important to ensure employees are aware this policy exists and are reminded on a regular basis.

A written document and retention policy can help ensure that employees and volunteers follow consistent guidelines on any accounting, legal, or internal needs of the organization. There are documents that need to be kept permanently and others that can be disposed of after certain time periods, typically a range of 7-10 years.

If you’re not sure how to start creating these policies, there are several websites (blueavacado.org, councilofnonprofits.org) that have examples to use as a starting point. We also have a few templates on our website at www.hhcpa.com.

By Kristin Cullen, CPA