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NAPPS and the IRS


Below are several excerpts from the 2009 NAPPS filing with the IRS. It’s called a Form 990 and it’s the equivalent of tax return but for a non-profit.  The form was redesigned for the 2009 tax year and this is what the IRS had to say about the new form:

The IRS’s redesign of Form 990 addresses the demand for increased transparency and accountability from tax-exempt organizations. The service uses Form 990 as a tool to increase compliance and encourage tax-exempt organizations to “voluntarily” adopt good governance practices.

To increase board member involvement in the organization’s Form 990 filing process, the IRS added a question asking, “Was a copy of the form provided to the organization’s governing body before it was filed?” In addition, the form requires organizations to describe their internal Form 990 review process, including who conducted the review, timing of the review and extent of the review. If the organization does not have a review policy, now may be the time to put one in place. [emphasis added]

In an informational handout, the IRS takes a conversational tone when providing guidance to non-profit board members about their responsibilities when it comes to reviewing Form 990 for correctness.

As the board member of a not-for-profit organization, you have many responsibilities, one of which should include reviewing the organization’s Form 990. On the Form 990, the IRS specifically asks the not-for-profit organization if it provides a copy of the Form to its board members before filing the return, and to describe the process, if any, they use to review it. This indicates that the IRS feels it is good governance for boards to be involved in the Form 990 review. While your tax preparer is very knowledgeable about the actual form, they are not as involved in the daily operations of your organization as you are. It’s important that you review the form’s contents as well.

That is probably about as clear as the IRS can be when it comes to guidance.  Makes sense to us.

So here’s the bet:

How many board members actually saw Form 990 let alone reviewed it for accuracy before it was filed?

Before you answer, you may want to know that NAPPS answered YES to Question 11 in Part VI of Form 990 – that board members were provided a copy for its filing.

We’re willing to bet a considerable sum of money because the 2009 filing contains a number of notable errors and misstatements.  We won’t call them lies – the IRS doesn’t respond well when lying is involved.  We do know that Mr. Admin is responsible for making sure the association’s CPA has all the necessary and relevant documents.  We also know, from the IRS brochure, that a tax preparer isn’t as knowledgeable about the workings of the association as the members.

So if the board members did the review they were said to have done, why did they allow the wrong answers to be submitted to the IRS?  Maybe Mr. Admin simply told them; no worries, this is what I do, trust me, everything is in order.  Nope, it never got that far. Our bet is the board never saw it before the filing.

So who is responsible for providing incorrect information to the IRS?  No one we know wants to own up to that type of responsibility especially when your annual take is around $200K or so.

Let’s set that question aside for a moment and look at several items that caught our eye.

Question #6 – Does the organization have members – NO.

This is an interesting answer because by the IRS’s own definition of a member, it appears that NAPPS does have members.  Here is what they have to say:

Line 6. Answer “Yes” if the organization is organized as a stock corporation, a joint-stock company, a partnership, a joint venture, or a limited liability company. Also answer “Yes” if the organization is organized as a non-stock, nonprofit, or not-for-profit corporation or association with members. For purposes of Form 990, Part VI, member means (without regard to what a person, including a corporation or other legal entity, is called in the governing documents) any person who, pursuant to a provision of the organization’s governing documents or applicable state law, has the right to participate in the organization’s governance [emphasis added]

Question #8b – Does the organization document committee meetings? – YES.

Our belief is that committee minutes should be taken but we’ve never seen any.  Committee reports yes but never minutes.  Board members and Mr. Admin know committee minutes aren’t taken.

Question #12b – Does the organization require that officers and directors annually disclose conflicts of interest – YES.

Of course NAPPS answers yes and references the current policy which most members know by now is vague, ineffective, non-enforced and frankly, an embarrassment.  There is nothing in the NAPPS policy that REQUIRES any sort of ANNUAL disclosure.


The IRS created Section VI of Form 990 as a best practices guideline for non-profits.  It is our sincere hope that the incoming board of NAPPS will take their fiduciary duties seriously and carefully review IRS filings going forward.  These are not small oversights; they are significant misrepresentations and perhaps even reflect a fundamental misunderstanding of what NAPPS is and how it operates.

Oh, we almost forgot – the responsible part.  Question #15 provides that answer.


Link to 2009 Form 990 Filing  -   Several screenshots below.

3 Comments leave one →
  1. Randy Scott permalink
    2012-04-02 12:46

    Hey NAPPSWATCHER and visitors I no longer put the watermark on the documents. You must have got those when I first published the google group in January. All the 990′s and documents for all associations have been posted over at my website now without any marks from me. Feel free to access them as you please at All the documents I have are public documents already posted on the internet.

    I am surprised the lawsuit I have listed at my site involving Washington Process Servers and NAPPS from 2004 is not studied more as an example of how a trade association could be alleged to violate anti trust laws. This case was settled after numerous depositions and evidence. But it has breached the firewall should others look at this type of complaint. Has NAPPS addressed this and changed any policies to prevent this potential issue from arising in the future in our tight relations to state associations? State associations are where most of the protectionism occurs from licensing competitors out of business to creating exclusive competition groups.

  2. Randy Scott permalink
    2012-04-02 12:53

    I also asked the question in the year you chose. It shows $150,000.00 increase in revenue from the prior years. No one can answer where that 150K came from.

    When ever there is an increase of that great amount the account must balance. It must reflect either to specific revenue increases or from some deduction put back in over the previous years. It cannot just appear from thin air. The absence of where it came from must be questioned and answered.

  3. Sengbe Pieh permalink
    2012-04-03 15:46

    The thread they’d prefer we wouldn’t see.


    Checking “No” on line VI, Part 6, line 6; NAPPS is inadvertently or intentionally (someone has a very slick CPA) “suggesting” status more as a Private Foundation to skirt Sarbanes-Oxley compliance provisions for non-profits. Tisk.Tisk.

    According to SARBANES-OXLEY provisions governing non-profits (not companies in this example), there are 2 basic types, 1. Private Foundations, and 2. Other (Exempt) Organizations. Those two types are further defined, 1. 25K to 1 Million, 2. 1 Million or more.

    There are two acts governing exempt organizations, Sarbanes-Oxley and VPA-97. VPA-97 gives protections to boards & directors–Sarbanes-Oxley gives compliance provisions. Sarbanes-Oxley is legislation directed specifically at exempt organizations.

    One often hears Sarbanes-Oxley discussed mostly in conjunction with the institution of “best practices.” Have we noticed increased attention to “Best Practices?” Coincidence?

    Pay particular attention to sections of the Act which deals with the whistle-blower and document-destruction provisions, which are drafted broadly enough to encompass all organizations, including nonprofit and exempt organizations.

    What are the “salubrious” provisos of Sarbanes-Oxley?

    1. Audit Committee: Sarbanes-Oxley §301 requires an audit committee. The board of directors are to appoint, determine the compensation of, and oversee the auditor’s work. The audit committee must be independent; its members may not be affiliated with the company or its subsidiaries, and they may not receive fees from the company beyond their compensation for serving on the board of directors and the audit committee (e.g., the committee should have a financial expert, should be independent, etc.)

    “The American Institute of Certified Public Accountants (“AICPA”) has tools to assist exempt organizations in forming audit committees. These tools are included in The AICPA Audit Committee Toolkit: Not-for-Profit Organizations available for download or purchase at the AICPA website:”

    2. Independent Auditors must be changed every 5 years.

    3. Document Destruction: Sarbanes-Oxley §1102 makes it a crime, punishable by fine or imprisonment for up to twenty years, to corruptly alter, destroy, mutilate, or conceal a record, document, or other object, or to attempt to do so, with intent to impair the object’s integrity or availability for use in an official proceeding or to otherwise obstruct, influence, or impede any official proceeding, or to attempt to do so.

    It’s best NOT to keep records or expect/enforce accountability standards as there’s less to “misplace.” Charities must file Form 990, 990-EZ or 990-PF annually, and all registered charities must file Form RRF-1 annually. Classification as a private foundation carries with it several disadvantages, including a two percent excise tax on the organization’s net investment income, certain limitations on the detectability of charitable contributions by individual donors, a wide range of operational requirements and restrictions, and more burdensome reporting requirements. Private foundations are most frequently formed by a single family or corporation desiring to retain a higher degree of control over all finances, operations and participants.

    4. Whistle-blower Provisions: Under Sarbanes-Oxley, anyone who knowingly, with the intent to retaliate, takes any action harmful to any person, including interfering with the person’s lawful employment or livelihood, in response to such person’s providing to a law enforcement officer any truthful information relating to the commission or possible commission of any Federal offense, is subject to fine or imprisonment for up to ten years. Even if the employee’s claim is unfounded, so long as he had a reasonable basis to believe that fraud existed, he is protected under the whistle-blower provisions.

    NAPPS is not Sarbanes-Oxley or VPA-97 compliant nor are they attempting to be EXCEPT for the new policy of basic “Best Practices,” while allegedly “suggesting” more the Private Foundation status, having no members or stockholders…which the correct form would then be IRS 990-PF if that were true.

    JB was a would-be, whistle-blower! J.K. is a would-be whistle-blower! Nappwatcher, would-be, whistle-blower! Others, Would-be Whistle-Blowers if it can be proven, independently, individually, that a governing authority (IRS, Att. Gen., etc.) having viewed this information, or visa-versa, specifically relating to form 990 falsification (hypothetical) and proper reporting requirements.

    This could be a very serious exposure now that it’s “out there!”

    Contracts or policies which violate Sarbanes-Oxley or Fed/State laws/Acts in law are, Ab Initio, or, invalid from the beginning; => Antitrust! <=

    Falsifying (hypothetical) an IRS 990 form and retaliating against another VPA-97 protected (fact), would-be, whistle-blower (proximate to this site's foundation) board member is playing with fire.

    HE WAS NOT just another at large member at termination NO MATTER WHAT NAPPS policies were/are regarding complaint & answer provisions as they were Ab Initio on their face due to his protected level/case. He WAS NOT an offender, a thief, a convicted child molester, a murderer, a drug dealer, a stalker, whatever. He made no threats of violence.

    What were his two policy infractions specifically (besides being a unflinching loudmouth?) To be a Whistle-Blower!

    Once he stumbled onto something (records) and reported it, even if he would have been dead wrong, he would have been protected by Sarabanes-Oxley. He was already protected by VPA.

    His term is NOT up. He's still an elected board member.
    What we do have is an organizational policy crisis.

    Just Sayin

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