Guide to Sample Form 990 Nonprofit Governance Policies
by Michael E. Malamut, Attorney-at-Law
Kopelman & Paige, P.C., Boston, MA
This guide focuses on governance-related policies envisioned in the newly revised IRS
Form 990 tax return for tax-exempt entities, effective with the 2008 tax year. The new Form
990 and its instructions are available at http://www.irs.gov/charities/article/
0,,id=185561,00.html. This guide also addresses issues discussed in the IRS Guidance on
Governance and Related Topics for 501 (c) (3) Organizations, available at http://www.
irs.gov/pub/irs-tege/governance_practices.pdf. Although the Guidance is not a regulation and
formally only applies to public charities, it states that other tax-exempt organizations should
consider addressing the topics raised in the Guidance.
Part VI, Section B, of the new Form 990 relates to Governance Policies. Section B
inquires about the following specific policies: (1) conflict of interest (including monitoring and
enforcement of the policy), (2) whistleblower policy, (3) document retention and destruction
policy, and (4) key employee compensation policy. Part XI, line 2c asks, “[D]oes the
organization have a committee that assumes responsibility for oversight of the audit, review, or
compilation of its financial statements and selection of an independent accountant?” This
question prompts requests for an audit committee charter. The policy compilations reviewed
below are discussed primarily in regard to their effectiveness in providing useful sample forms
for the governance policies promoted by the new Form 990.
The Guidance, in addition, mentions investment and fundraising policies, which are of
increasing importance to nonprofits. Many of the more comprehensive resources for sample
policies mentioned below and in the accompanying online policies compilation may contain
sample investment and fundraising policies. Such policies typically need to be highly
customized for the needs of the particular organization. In addition, Part VI, Section A,
Governing Body and Management, asks about policies for ensuring consistency of operations of
constituent units with the central organization. While this is not a concern for most nonprofits,
it is a concern for organizations with subordinate or component units. Very often subordinate
or component unit relations are addressed in such organizations’ bylaws but not in the detail
expected in the Form 990. There is a dearth of subordinate/component-unit -relations policies
in available resources and most state nonprofit corporation statutes fail to provide significant
guidance. This is an area of concern for the IRS, which has recently considered and rejected
dropping group exemptions. Because subordinate/component-unit relations vary considerably
from entity to entity, no one-size-fits-all policy is likely to work for all organizations. The need
for a highly customizable sample policy is significant.
Form 990, Part VI, Section A, line 8, requests information on whether the
organization’s governing body and committees with the power to act contemporaneously
document meetings. The Guidance interprets this question by indicating that traditional
meeting minutes are one means by which an organization may permissibly document its
actions. While a minutes “policy” is not a necessary document, nonprofits need to adopt a
Guide to Sample Form 990 Nonprofit Governance Policies
Michael E. Malamut, Kopelman & Paige, P.C., Boston, MA
October 20, 2008
Page 2
standardized method of keeping minutes, especially in light of the new Form 990 inquiry. The
addendum below provides guidance on adopting a minutes procedure from existing resources.
It should be noted that certain state statutes include a default conflict-of-interest
policies. For example, NY Not-for-Profit Corporation Law § 715, which provides a conflict-of-
interest policy that may be made stricter only through a provision in the certificate of
incorporation. In California, Cal. Corp. Code § 7233 provides a mandatory conflict-of-interest
procedure applicable to mutual benefit nonprofit corporations.
United States Internal Revenue Service, Instructions for Form 1023 (application for
501 (c) (3) charitable status), available at http://www.irs.gov/pub/irs-pdf/i1023.pdf
, contain a
sample conflict-of-interest policy for hospitals that is customizable to address other types of
nonprofits. Practitioners should be aware of this barebones conflict-of-interest policy. This
model is very basic and not suited, without modification, to the circumstances of many
organizations. Often, small nonprofits founded by volunteers adopt the IRS model unchanged
early in their lifecycles as part of their Form 1023 application process. Customization by
counsel of this basic form to suit the needs of a particular organization at later stages in its
lifecycle is often necessary.
I. Governance Policy Annotated Bibliography
Edward J. McMillan, CPA, CAE, Model Policies & Procedures for Not-for-Profit
Organizations (John Wiley & Sons 2003). This book, an earlier edition of which was titled
Model Accounting and Financial Policies & Procedures Handbook for Not-for-Profit
Organizations, attempts to provide a general, all purpose handbook for nonprofit policies.
Given the accounting background of the author and the earlier title of the book, it is not
surprising that this compilation’s strength in form policies is in policies dealing with financial
issues. Given this emphasis, the draft audit committee charter/“sample policy” (as denominated
in the book) is surprisingly short and vague. The “document shredding” policy has no retention
dates for different categories. It simply lists broad categories of documents to be shredded.
There is a separate record retention policy. The policy itself is extremely short and general.
There is a three-page form record retention information sheet, listing categories of documents
and suggested retention dates and incorporating a document destruction form. The conflict-of-
interest policy and draft conflict policy acknowledgment form are extremely open-ended and
bereft of detail. The guide also mentions a code of ethics. However, it does not provide a sample
code of ethics. There is no whistleblower policy, key employee compensation policy, or
subordinate unit policy. Wiley is one of the leading publishers of practical materials for business
and the premier for-profit publisher for nonprofit management and governance topics. This
policy guide may serve a nonprofit well for everyday administrative forms and procedures. Its
form policies in the governance area, however, are seriously lacking.
Guide to Sample Form 990 Nonprofit Governance Policies
Michael E. Malamut, Kopelman & Paige, P.C., Boston, MA
October 20, 2008
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Barbara Lawrence and Outi Flynn, The Nonprofit Policy Sampler (BoardSource 2d ed.
2006) with CD-ROM. Boardsource (formerly the National Center for Nonprofit Boards)
provides materials geared towards board-run nonprofits. The policy sampler is not lengthy, but
it is well written and easy to understand. The book contains general guidance in a number of
significant areas, with a variety of samples of a number of key governance policies on the
accompanying CD-ROM: code of ethics (typically including a conflict-of-interest policy),
conflict-of-interest, whistleblower, record retention and destruction, executive compensation,
and separate sections on financial audits and financial committees (with audit committee
charters on the CD). There is no policy on constituent unit relations. The materials in the book
discuss relevant considerations in developing policies regarding the various topics, such as
practical tips, key elements, and suggested resources. Often the hardcopy will contain one
sample policy in a topic area, but the CD-ROM will contain a number of policies relating to the
topic, of varying degrees of complexity. The sample policies in hard copy in the book are quite
simple. Some of the more detailed sample policies on the CD might form the basis of a legally
drafted policy for a nonprofit organization, but any of the sample forms would have to be
tweaked significantly to take legal and regulatory requirements and preferred practices into
account.
Robert C. Harris, CAE, How to Create a Policy Manual—Associations, Chambers, and
Nonprofit Organizations (self-published 2004). This publication aims to give advice on how to
draft a policy in addition to providing form policies. The sample policies included cover a wide
variety of administrative issues. The guide provides a barebones financial audit policy that
includes a brief description of an audit task force task assignment and an extremely simple
sample record retention policy covering approximately three different categories of records.
There is a code of conduct that proscribes conflicts of interest without defining them or
providing procedures for handling them. There is a half-page “whistleblower clause” that
contains little detail. This guide may provide basic outlines for small nonprofits with very
unsophisticated needs, but the lack of detail on governance policies could cause more harm than
help. Harris’s online site contains a wealth additional information for nonprofits, including
governance-related information, http://www.nonprofitcenter.com. Much of the material is
available free. Unfortunately, there are no direct webpage links, so each article and sample must
be reached by navigating through nested layers of categories on the sidebar. For example, there
is a document entitled Policy Samples Packet for IRS 990 that contains conflict-of-interest and
record retention policies and a sample audit committee charter. It can be found under the
Management Tips & Templates sidebar, subcategory Boards and Leadership.
Jerald A. Jacobs, Association Law Handbook: A Practical Guide for Associations, Societies,
and Charities (American Society of Association Executives 4th ed. 2007) with CD-ROM. This
book is primarily intended as a general legal resource for the association executives, so it is
geared towards the educated lay audience. The accompanying CD-ROM includes some form
policies that are also included in the text. The materials on the CD include a fairly detailed
Guide to Sample Form 990 Nonprofit Governance Policies
Michael E. Malamut, Kopelman & Paige, P.C., Boston, MA
October 20, 2008
Page 4
conflict-of-interest policy, together with a disclosure form, a sample Code of Ethics that
mentions conflicts of interest, a fairly simple records retention policy with a number of
different categories and suggested retention periods, an excess benefits model resolution, a
model CEO employment agreement and a model non-CEO employment agreement. From the
latter three documents, an author could piece together a key employee compensation policy.
This compendium does not contain a model whistleblower policy, constituent unit policy, or
audit committee charter (although a barebones description of audit committee composition
and duties is included in model bylaws). This reference work is not intended primarily as a
resource for model governance policies. Still, with the availability of a CD-ROM and
authorship by a lawyer, this book might provide some practical guidance on policy drafting.
John Carver and Miriam Mayhew Carver, Reinventing Your Board: A Step-by-Step
Guide to Implementing Policy Governance (Jossey-Bass 1997). This book, by the primary
theorist of the “policy governance” theory of nonprofit governance, includes a sample board
policy manual in an appendix. The sample manual contains a model policy for executive
limitations on compensation and benefits and a board members’ code of conduct. In keeping
with the “policy governance” theory, the nonprofit board is to minimize the number of
committees and to supervise the organization only through the Chief Executive Officer and is
not to have any direct ties with other organizational employees. This theory and some of the
model policies included in this sample policy manual may make the board’s legally mandated
oversight role difficult, particularly its financial oversight role typically realized through the
audit committee and typically requiring close interaction with the organization’s chief financial
officer.
Jack B. Siegel, A Desktop Guide for Nonprofit Directors, Officers, and Advisors: Avoiding
Trouble While Doing Good (John Wiley & Sons 2006) with CD-ROM. This reference contains
excellent guidance in many areas of nonprofit governance and management. While the book is
not intended primarily as a compendium of policy forms, a number of sample policies are
included in the text, including a sample whistleblower policy and useful list of suggested
document retention periods for various categories of documents. The text contains good
discussions of the need for conflict-of-interest and gift policies, but does not include policy
samples in these areas. The CD-ROM contains cases, Congressional reports, and IRS forms,
but no sample policies.
Policies in American Bar Association Materials:
George W. Overton & Jeannie Carmedelle Frey, eds., Guidebook for Directors of
Nonprofit Corporations (American Bar Assn. 2d ed. 2002), pp. 243–47, contains a conflict-of-
interest policy primarily geared towards health-care entities, but capable of modification for use
in other nonprofit organizations. Pp. 53–54 contain a description of an audit committee’s
duties and composition that could be readily transformed into an audit committee charter.
Guide to Sample Form 990 Nonprofit Governance Policies
Michael E. Malamut, Kopelman & Paige, P.C., Boston, MA
October 20, 2008
Page 5
Lisa A. Runquist, The ABCs of Nonprofits (American Bar Assn. 2005) contains a sample
conflict-of-interest policy at pp. 113–19.
Victor Futter & Lisa A. Runquist, eds., Nonprofit Resources (American Bar Assn. 2d ed.
2007) does not contain any sample policies itself, but points in the direction of a number of
possible sources. There is a lengthy list of internet resources for nonprofits. There are also
resources listed on audit committees, compensation, conflicts of interest, and records retention.
Victor Futter, ed., Nonprofit Governance & Management (American Bar Assn. 2002)
contains a number of sample governance policies, including a comprehensive audit committee
charter (pp. 160–62), sample conflict-of-interest policies (pp. 199–213), and a sample records
retention policy and accompanying forms (pp. 523–26). The book also contains a good
discussion of considerations involved in executive compensation, pp. 163–77, but without a
sample policy.
Addendum on Minutes:
Most traditional parliamentary authorities provide guidance on preparing minutes and
a minute template. See, e.g., George Demeter, Demeter’s Manual of Parliamentary Law &
Procedure (Little Brown & Co. Blue Book ed. 1969) pp. 21–25; Ray E. Keesey, Modern
Parliamentary Procedure (American Psychological Assn. rev. ed. 1994) p. 84; Henry Martin
Robert, Robert’s Rules of Order Newly Revised (Perseus Publishing 10th ed. 2000) pp. 451–58;
Henry M. Robert, III, et al., Robert’s Rules of Order Newly Revised in Brief (Da Capo 2004) pp.
146–50; Alice Sturgis, The Standard Code of Parliamentary Procedure (McGraw Hill 4th ed.
2001) pp. 198–202. In addition, some ABA materials provide sample guidance for preparing
minutes for nonprofit organizations. Donald A. Tortorice, The Modern Rules of Order
(American Bar Assn. 3d ed. 2007) pp. 35–39; Victor Futter, ed., Nonprofit Governance &
Management (American Bar Assn. 2002) p. 119.
II. Online Resources
A. Organization-Specific Policies available online
Bill & Melinda Gates Foundation
Conflict-of-interest and “ethical conduct and governance” (whistleblower) policies:
http://www.gatesfoundation.org/about/Pages/conflict-of-interest.aspx
http://www.gatesfoundation.org/about/Pages/ethical-conduct-and-governance.aspx
Ford Foundation
Links to codes of ethics for staff and trustees; Board committee charters; bylaws; complaints
procedure for financial matters; and more:
http://www.fordfound.org/about/governance
Guide to Sample Form 990 Nonprofit Governance Policies
Michael E. Malamut, Kopelman & Paige, P.C., Boston, MA
October 20, 2008
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The J. Paul Getty Trust
Variety of corporate governance policies, including conflicts policies for both staff and trustees:
http://www.getty.edu/about/governance/policies.html
(This page also links to the California Attorney General’s report on what went wrong with the
Getty’s corporate governance.)
The Nature Conservancy
Conflict-of-interest policy and conflict-of-interest standard operating procedure:
http://www.nature.org/aboutus/leadership/art15486.html
http://www.nature.org/aboutus/leadership/art15491.html
The following links to Board committee charters, including audit and compensation
committees: http://www.getty.edu/about/governance/committees.html#executive
The Red Cross
Links to Code of Conduct, Ethics Rules and other related policies, such as audit and
compensation committee charters:
http://www.redcross.org/services/governance/0,1082,0_234_,00.html
See also Red Cross October 2006 Report Governance for the 21st Centur. The Report discusses,
the Board’s role, composition, size and selection process; the role of a whistleblower policy; and
transparency. http://www.redcross.org/static/file_cont5765_lang0_2202.pdf
B. Policy Guides by Broad-based Nonprofit Sector Organizations
The Alliance of Artists Communities, http://www.artistcommunities.org, publishes a well-
regarded guide to help nonprofit artists communities function at optimum levels, The
Ultimate Residency Resource Guide. It contains insights and sample policies that are applicable
for most nonprofits, but is available for download only upon payment of a substantial fee:
http://www.artistcommunities.org/products/complete-residency-resource-guide-electronic-version.
The organizational groundwork and organizational development sections of the Resource
Guide are separately available at a lower fee and include most of the Guide’s governance policy
samples:
http://www.artistcommunities.org/products/organizational-groundwork-section
http://www.artistcommunities.org/products/organizational-development-section.
American Society of Association Executives, http://www.asaecenter.org. Site includes a large
database of member-accessible material including some sample policies.
CompassPoint Nonprofit Services, in its Board Café feature, addressed conflict-of-interest
policies in one of its monthly issues. Its sample policy is available at
http://www.compasspoint.org/boardcafe/details.php?id=54
Forum of Regional Association of Grantmakers, http://www.givingforum.org
. Site includes
a searchable database that contains model policies, including whistleblower policies, audit
committee charters, document and record retention policies, conflict-of-interest policies, and
personnel compensation policies. Some are publicly accessible. Most require membership.
Guide to Sample Form 990 Nonprofit Governance Policies
Michael E. Malamut, Kopelman & Paige, P.C., Boston, MA
October 20, 2008
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The Foundation Center, www.foundationcenter.org, has an online public database that
includes sample policies and references to other potential sources of policies in books and other
resource materials. The database, the Catalog of Nonprofit Literature, is available at
http://cnl.foundationcenter.org.
The Free Management Library by Carter McNamara, http://www.managementhelp.org
Contains numerous links to various organizations (not all current). The area on Board Policies
contains a sample whistleblower policy, a sample document retention policy, and a detailed
discussion of conflict-of-interest issues:
http://www.managementhelp.org/boards/boards.htm#anchor1322914
Governance Matters (formerly the Alliance for Non-profit Governance, a New York-based
and focused organization), www.governancematters.org
, has an online page listing General
Governance Resources, which includes references and weblinks to other nonprofit websites
with governance content:
http://www.governancematters.org/index.cfm?organization_id=56§ion_id=801&page_id=3222
The Legal Oversight page has additional useful links, particularly for New York based
nonprofits:
http://www.governancematters.org/index.cfm?organization_id=56§ion_id=801&page_id=3270
The Library of Forms does not yet contain significant content, but the organization intends to
include samples there in the future:
http://www.governancematters.org/index.cfm?organization_id=56§ion_id=801&page_id=3270
Idealist.org, a “global clearinghouse of nonprofit and volunteering resources” has several
samples of conflict of interest statements at http://www.idealist.org/npofaq/16/59.html.
Independent Sector
General ethics information is available at:
http://www.independentsector.org/members/code_main.html
There are also links here to much useful information on governance issues.
A compendium of links to different policies and standards, including a gift acceptance policy
and standards for relations between nonprofits and businesses is available at:
http://www.independentsector.org/issues/accountability/standards2.html
The site includes a useful internal policy on financial responsibility and reporting that could be
the basis of a good whistleblower policy:
http://www.independentsector.org/about/finresp.html
Panel on the Nonprofit Sector (convened by Independent Sector)
http://www.nonprofitpanel.org
This panel issued several reports to Congress detailing current views of non-profit corporate
governance best practices. The reference edition of its Principles for Good Governance and
Ethical Practice contains good explanatory materials and references on conflict-of-interest and
whistleblower policies.
http://www.nonprofitpanel.org/Report/principles/Principles_Reference.pdf
Guide to Sample Form 990 Nonprofit Governance Policies
Michael E. Malamut, Kopelman & Paige, P.C., Boston, MA
October 20, 2008
Page 8
National Council of Nonprofit Associations, http://www.councilofnonprofits.org
The site includes a sample whistleblower policy,
http://www.councilofnonprofits.org/?q=whistleblower
Many of NCNA’s state affiliates have also developed their own sample policies. The
Pennsylvania Association of Nonprofits, http://www.pano.org, has an audit committee.
charter sample and other policies available at http://www.pano.org/standards/standards.php
The Minnesota Council of Nonprofits, http://www.mncn.org, has a sample conflict-of-
interest and ethics policy at http://www.mncn.org/info_paccountability.htm
.
Nonprofit Coordinating Committee of NY, Inc., http://www.npccny.org
. Site includes a
databank that contains a number of publicly accessible policies, including Audit Committee
Functions and Record Retention Policy model. Members only area includes conflict-of-interest
policies and a whistleblower policy and other governance-related topics.
Michael E. Malamut
Attorney-at-Law
Kopelman and Paige, P.C.
101 Arch Street, 12th Floor
Boston, MA 02110-1162
617-556-0007 (main)
617-654-1712 (direct)
617-838-8657 (mobile)
617-654-1735 (fax)
http://www.k-plaw.com
http://www.michaelmalamut.com
