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Six Things the Board President Should Check Before the 990 is Filed

Federal Form 990 is the ONLY information nonprofits are required to disclose to the public, and any member of the public can request a copy, so you want to make sure that what it says is not only accurate, but reflects what you want to communicate to the public. Form 990, required by the IRS for all nonprofit organizations except those with annual revenues of less than $25,000 and religious organizations, is frequently requested by donors and grantmakers, and increasingly available on the web. But many boards don't pay much attention to what's on their 990s, and you and other board members could have a bad surprise if you haven't made sure you feel comfortable with the "story" the 990 tells about your organization.

Your organization's 990 is due on May 15 if your fiscal year ended on December 31 (990s are due on November 15 for organizations with fiscal years ending June 30--in other words, 4 and 1/2 months after the close of the fiscal year). 990s are often prepared by the organization's CPA auditor, but can be prepared by the staff or board as well. Take 15 minutes to review the 990 for the following common problems:

1. Statement of Functional Expenses (Part II): In this section the organization must classify all expenses as one of three types: Program Services, Management & General, or Fundraising. We know one organization that put almost all expenses into "Management & General" because their work was done by management-level staff; in fact, such work was more appropriately classified as "Program Services." If the percentages for either Fundraising or Management & General appear too high, go back and make sure that your organization used appropriate guidelines when classifying expenses.
2. Addresses of board members: Part V of the 990 asks for a "list of names and addresses of officers, directors, trustees, and key employees." It is NOT necessary to list home addresses, and many board members and staff members feel that doing so encourages invasion of privacy. It IS appropriate to use the organization's business address in this section for all board and staff members.
3. Let your work show your mission. In Part III, "Statement of Program Service Accomplishments," the 990 asks for a statement of the organization's purpose and a list of program activities (examples: public awareness campaign, medical research work, home meal delivery, youth training, forest trail construction). Take the time to be sure that what you say here is what you would say to the press or the public or the IRS . . . after all, that IS the audience for the 990.
4. Check the math. (Especially if you're an education organization!) In one study of 990s, 67% had significant arithmetic errors.
5. Remind staff and other board members that Section 1D of Schedule A need NOT be disclosed to the public. Schedule A (an attachment to the 990) lists the names of major donors and the amounts given. If someone asks for your organization's 990 and Schedule A, you are required by law to give it to them, but you do NOT need to give them Section 1D of Schedule A that has this information.
6. Make sure it's filed on time. Failure to file on time results in rapidly accruing penalties, and board members could be held individually liable for those penalties (even if you have Directors & Officers liability insurance). The board president should check to be sure it is filed on or before the due date (again, 4 and 1/2 months after the close of the fiscal year).

Thanks to Bill Levis of Baruch College, Jude Kaye of the Support Center for Nonprofit Management, Peter Swords of the Coordinating Committee of New York, and Pat Read of Colorado Association of Nonprofit Organizations for contributing to this article.

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© 1998 Support Center for Nonprofit Management

The American Institute of Certified Public Accountants (AICPA) has issued Standard of Practice (SOP) 98-2 which specifies how calculations of "functional expenses" (used in completing Section 2 of the 990 and in other statements) is to be done. These new rules may require organizations which do a lot of direct mail or telemarketing seeking support to allocate more costs to "fundraising" and less to "program" which may cause watchdog agencies and careful donors to question their activities. There is a fuller discussion of the background for this new AICPA standard in the "Fundraising Issues" section of this FAQ; see http://www.nonprofit-info.org/npofaq/11/21.html

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