New Form 990, Same Old Behavior
In 2009, a wave of low-grade anxiety swept across the association community about the Internal Revenue Service's revisions to the Form 990. For the first time, nonprofits were asked to disclose whether they had policies in place regarding (among other things) conflicts of interest on boards, whistleblowers, and document retention. In an Acronym post at the time, Larry Sloan summed up the general feeling that the IRS was delivering a strong hint about what would happen if associations didn't establish those polices: "associations should answer affirmatively [to those questions] to minimize the chance of the dreaded IRS audit," he wrote.
The ASAE Foundation has been collecting data from the Form 990 for the past few years, and it's now clear that, however anxious those questions made associations at the time, they haven't produced any substantive overall behavioral change in the industry. I could plot all the data in a pretty chart, but that'd be a lot of effort to show you what would essentially be three horizontal lines. Here's what we know:
- Between the tax years of 2008 and 2010, the percentage of associations* with a written conflict of interest policy increased slightly, from 54 to 57 percent.
- The percentage of associations with a written whistleblower policy nudged up from 34 to 38 percent.
- The percentage of associations with a written document-retention policy ticked up from 43 to 45 percent.
What to make of this? I'm eager to read your thoughts in the comments (or in my inbox for a potential future story), but a few interpretations seem safe to make. A polite nudge about best practices from the IRS clearly isn't enough to move the needle---there's nothing illegal about lacking those policies, so associations may just be waiting to see if anybody actually does get audited as a result of ticking "no" on those boxes. Moreover, there may be some anxiety about what these policies should look like. It's one thing to get in hot water over how you filled out a tax form, yet another to get in hot water over some ancillary materials around which no firm best practices exist. You can't screw up the contents of a document you never wrote in the first place.
But I wonder if these horizontal lines also reflect something deeper about the culture of associations---a resistance to say more about themselves, financially speaking, than they absolutely need to. That may be reasonable advice from an accountant's perspective, but is it in the overall best interest of your association? In a roundtable on legal issues that ran last fall in Associations Now, Jerald A. Jacobs argued that associations should think of the 990 as an opportunity for self-promotion. "The next wave is considering and using the Form 990 as a marketing tool for the organization in your legislative and advocacy or regulatory goals, in selling memberships or sponsorships or exhibit booths or the public on what your organization does. It's a wonderful opportunity to tell your story... Within a relatively short time I'm going to be able to sit across a lunch table from you with my PDA, and if you're an association executive I'm going to know if you have an employer-paid cellphone. That's how detailed the information is going to be, and that's how easy it's going to be to access."
If this is the information people will want to instantly access in the coming years, why not get ahead of the curve?
* For the purposes of its 990 analysis, the ASAE Foundation defines an association as a nonprofit organization reporting a minimum of $200 in membership dues and at least one paid employee.