Fiscal Update & the New 990Fiscal Update & the New 990

The Coalition of Behavioral Health Agencies, Inc The Coalition of Behavioral Health Agencies, Inc April 24, 2008April 24, 2008

Overview of the Not-for-Profit Sector

Current Trends:

Outcome Measurements and Reporting Enhanced Transparency Increased Oversight and Audit Involvement Increased call for collaboration at all levels Enhanced Corporate Governance More Scrutiny by funders, the press, and watchdog

organizations Globalization

Overview of the Not-for-Profit Sector

Current Trends (Continued):

Sector is behind the curve and has limited resources Increased demand for services without adequate funding Need for enhanced discretionary funding Difficult to find quality staff and Board members Greater need for streamlined operations and cost effective

services Nonprofit Panel Releases 31 Best Practices (March 2007)

Nonprofitpanel.org New 990 released with entirely different focus

The New 990

First Full Make-over since 1979 Effective for the 2008 tax year (to be filed in 2009) Three basic principles the IRS considered when revising Form

990: Enhancing transparency by providing the reader with a realistic

picture of the organization and its operations, along with the basis for comparing the organization to similar organizations.

Promoting compliance by accurately reflecting the organization’s operations and use of assets.

Minimizing the burden on filing organizations by simplifying the questions and reducing unwarranted additional recordkeeping or information gathering.

The New 990

Core Schedule with approximately 16 supporting schedules to be completed based upon organization’s operations

New questions impacting fundraising activities (Part V) New questions impacting governance issues (Part VI) More emphasis on compensation reporting (Part VII and

Schedule J) More questions on fundraising and gaming (Schedule G) Disclosures regarding non-cash contributions (Schedule

M)

New 403(b) Regulations

First major changes in 40 years Generally effective January 1, 2009 Result of IRS audits showing plans out of compliance More in line with 401(k) regulations

Must have a plan document Optional Features

Loan Provisions ROTH Provisions Hardship Withdrawals Transfers

At a minimum, employees must have the opportunity to make, change, or revoke deferral elections annually

Nondiscrimination and universal availability rules apply

New 403(b) Regulations

Employers must provide employees with an annual notice explaining the “effective opportunity” to make or change their contribution to the plan.

Plan transfers to/from other 403(b) plans Distributions from custodial accounts may be made only upon

severance from employment, disability, attainment of age 59½ or death

Plans may be terminated 403(b) plans must comply with back-up withholding on direct

distributions Employers need to monitor that they don’t cross the line and

subject themselves to Title 1 requirements of ERISA, if so they will have 5500 filing requirements and audit requirements for large plans

New 403(b) Regulations

All four factors must exist to be exempt: Participation of employees is completely voluntary All rights under the annuity contract or custodial account are enforceable

solely by the employee or beneficiary of such employee, or by an authorized representative of such employee or beneficiary

The involvement of the employer is limited to certain optional specified activities

The employer receive no direct or indirect consideration or compensation in cash or otherwise other than reasonable reimbursement to cover expenses properly and actually incurred in performing the employer's duties pursuant to the salary reduction agreements.

Example: If an employer makes contributions to a Plan, it is subject to Title 1

Raffle Regulations(Not new, just clarified) Pitfalls for Nonprofits:

Anticipated level of profit will dictate filing/registration requirements $30,000 (Game of chance ID #, License, and 2% fee and annual report) Over $5,000 single, between $20,000 and $30,000 cumulative (Game

of chance ID # and annual certification) Under $5,000 single, under $20,000 cumulative (no filing requirements)

Raffle proceeds must be deposited into a separate bank account Raffle prizes cannot exceed $50,000 (up to $100,000 with prior approval) Cannot mail raffle tickets Cannot accept credit cards in payment for raffle tickets Raffle tickets are a chance to win, not a charitable donation Prizes are taxable to winners

Net prize over $600, required to file W-2G Net prize over $5,000 required to withhold 28% and remit as back-up

withholding

New Auditing Standards SAS 114

Auditors Communication with those Charged with Governance:

Supersedes SAS 61 Requires auditor to communicate to those charged with governance matters

related to the audit that are, in the auditor’s professional judgment, significant and relevant to the governing body’s oversight of the financial reporting process

Identifies specific matters to be communicated within correspondence Needs to be communication during planning (overview of planned scope and timing of

audit, representations that will be sought from management) Communication should be in writing

Requires the auditor to evaluate the adequacy of the 2-way communication between the auditor and those charged with governance

Thank You

Kenneth Cerini, CPA, CFPPartner

kenc@ceriniandassociates.com(631) 582-1600 x203

Cerini & Associates, LLP3340 Veterans Memorial HighwayBohemia, NY 11716