The new Form 990 now requires a tax-exempt organization to disclose whether it has adopted certain governance policies, including conflict of interest, whistle-blower, document retention, and joint venture policies, to name a few. Although governance policies are not legally required, it is generally accepted that adopting and following governance policies increases the likelihood of compliance with federal and state law and the identification and solution of potential issues. Despite the pressure an organization’s board may be under to adopt policies, however, it is important that an organization does not merely adopt policies in order to respond positively to the Form 990 questions. Mere adoption of a policy, without more, is generally worse than having no policy.
Instead, an organization’s board should determine the desired level of transparency for the organization and determine whether a policy is necessary; for example, if the organization does not participate in joint ventures, it is not essential that a joint venture policy be in place. Next, the organization’s board should determine whether it has the resources to implement and enforce the policy (or whether it should allocate additional resources). The organization should also ensure policies are in writing and published as necessary. Finally, the organization’s board should evaluate its policies periodically to confirm effectiveness. For additional information regarding policies, see our article, Adopting Good Policies is Good Policy in the Publications or Topic Archive sections of this site.