ask your agency #8

“How will the new 990 reporting requirements change the way your billing looks to my donors?” This is the 4th post in our series of questions you need to ask your agency or consultant. This one is tricky and you’ll have to wade through some disclaimers. But stay with us, if you don’t, you may wish you’d heard this sooner rather than later.

990 reporting rules have changed (note, not “will” but “have”).

Not every nonprofit has to file a 990. But if you do, we think you need to do some research and then ask question #8. Like now. Right now.

990’s are key for many watchdog organizations, such as Charity Navigator and GuideStar for example. Low ratings might not always hurt you with your donors but more and more donors are doing online research before giving (not just new donors, all donors).

We’re not accountants or attorneys. Please mentally insert any appropriate disclaimers that you’d expect here. We want to keep you from being surprised by new 990 reporting rules and what appears to be VERY interesting (and in some cases distressing) implications. We’re going to point you to resources, you do your own digging and let us know what you think.

Here goes. The new schedule G on the 990 requires reporting of all agreements with professional fundraising services in which the fundraiser is compensated by more than $5,000 per year (written and oral agreements).

That’s not a big deal.

But here’s where it’s going to get exciting… reporting must include all fees, expenses AND gross income. Fundraiser’s fees must be reported even if income doesn’t come in that year (like maybe a Capital Campaign).

The other biggie we spotted was the printing and postage for syndication programs will have to be reported as part of the fundraiser’s expense. For example, if you pay your agency for the printing and postage, it appears that you’ll have to report that as part of the agency’s compensation in this section along with the gross income–that’s a change from the way that many report. Hmmmm…. see where that could be a change? Some agency fee structures have much of their compensation built into the printing and postage (see our Ask Your Agency Question #3). If we’re correct, this has potentially huge implications if you’re in a syndicated program or pay fee structures where your agency “makes money on your printing.”

We have tons of questions.
Does this effect “leadership” coaches that help with your fundraising?
Does this effect major donor consultants?
What about white mail?
What about Capital Campaigns?
What about planned giving?
Who gets credit for receipt mail?
What if you have two different agencies (that could make for a tussle over who brought in what income)?
What about “consulting” fees that are separate from other fundraising fees?

Is your head spinning yet?

Oh, and these changes are for the 2008 tax year. That could cause a “Yikes!”
And the Deputy Commissioner of the IRS has been quoted in the Wall Street Journal as wanting to monitor non-profits more closely.

Now the good news. This is a “phase-in.” Smaller organizations are less effected. But bigger ministries will have to report this way on 2008.

Now for some links:
IRS page for new 990 Form

New 990 Form

New 990 Form Instructions

New Schedule G (Supplemental Information Regarding Fundraising or Gaming Activities

You can also Google “changes in 990 fundraising reporting” and get a load of links–take your pick.

What do you think? Have you been preparing for this change or are you unaffected?

Here’s the list of our “Ask Your Agency/Consultant” questions so far:
Question 1: (not announced yet)
Question 2: (not announced yet)
Question 3: Have you disclosed all commissions?
Question 4: (not announced yet)
Question 5: Have you worked in a ministry?
Question 6: (not announced yet)
Question 7: (not announced yet)
Question 8: How will the new 990 requirements effect me?
Question 9: (not announced yet)
Question 10: Are you a real expert?

Steve Thomas
Partner, Oneicity


(photo credits: striatic)