I learned a simple but extremely valuable lesson yesterday that will be useful for managing nonprofit businesses, thanks to NJCPA nonprofit conference and presenter Robert Lyons, CPA.
Many nonprofit organizations experience “mission creep” over time. That’s not a bad thing. Usually it is in response to changing real world conditions. It simply means that the programs and activities they are doing today do not match the activities that were originally in place when they filed their organizational paperwork years ago. It seems like an innocent and harmless oversight. However, the risk of IRS disqualification of the nonprofit is a real threat. The IRS is, in my opinion, very aggressive in pursuing this issue even against reputable businesses. We even know of good nonprofit companies with great programs that have been bankrupted in this situation.
The solution is simple. When filing the Form 990, simply include the new programs. No refiling or amendment of Form 1023 is required. Presumably when the statute of limitations passes, the changes are presumed accepted.
The critical part is to be thorough and precise in this annual filing. I am happy to discuss this issue as it pertains to your nonprofit organization. Other tips for managing your nonprofit business are included in this bibliography.