Nonprofit Form 990: It's More than Just Numbers

8/16/2021 - By Emily Lalas

The Federal Form 990 is an informational return that most tax-exempt entities are required to file with the Internal Revenue Service (IRS). This can sometimes be referred to as a nonprofit tax return. Most organizations are familiar with their annual IRS 990 filing requirement. However, many organizations see this merely as a “checklist” item to get done, and in doing so, may miss the opportunity to capitalize on the benefits of a well-prepared 990. While it is understandable that some believe the 990 is simply a document used to report basic financial information, nonprofit professionals know that the numbers represent so much more than just numbers. Each number is a piece of the nonprofit’s story: telling the users how it is accomplishing its mission, helping real people, and serving its community.

Users of the 990 range from potential donors, banks and creditors to potential board members and beyond. Before making donations and awarding grants, the professionals charged with evaluating applicants for these awards will usually request a copy of the applicant’s most recent 990 in addition to any other required documents. The reason for this is to assist the awarding agency with evaluating not only the proposed use of the funding communicated through the basic application but also the financial health and historical accomplishments of the applicants which are communicated through the 990. It is a way to determine whether the organizational activity is truly aligned with the mission that the awarding agency is wanting their funding to accomplish. It also determines whether the applicant has a history of good financial management and best practices when it comes to governance.

Since the 990 is a significant determinant of an organization’s ability to finance its operations, nonprofits should consider the following best reporting practices:

Consistent data. As mentioned, the 990 is often provided to potential donors as part of an application package meant to assist the donor in evaluating whether they will be a good match for their funding. As one of the only documents that is made fully available to the public, it is important to make sure that the information within the 990 is consistent with the information that donors and the public see presented on your website, marketing and fundraising materials, grant applications, etc. The information should paint a clear picture of the services that you provide and the people you help, and should directly relate back to your stated mission.

Collaborative review. The 990 is often prepared by the nonprofit’s CPA, reviewed by the Executive Director and/or the Board of Directors and then filed with the IRS. It may be helpful to consider including program managers or the marketing team in the review process. While your CPA can help make sure the core financial information is presented correctly, including program managers or someone from marketing can help to make sure that the narratives within the 990 are clearly stated, consistently presented and complete.

Less is not always more. Since the 990 is filed with the IRS, some organizations feel it may be risky to include more than the bare minimum required information. While we highly recommend that organizations solicit advice from their CPA on the form and content of the information presented, nonprofits should also be thoughtful while preparing the narrative data within the various schedules of the 990 to ensure that the users are able to clearly understand the following information:

Who did you serve? This should include accurate, descriptive phrases such as “women and children in Northwest Florida”, “teens ages 13 - 18”, “disabled dogs”, etc.
How many people did you serve? Including both quantitative data to supplement the qualitative descriptions helps users see how wide your organization’s reach is.
What did you provide? Whether the nonprofit provided food and coats to the homeless or medical services to trafficking survivors, it is important to communicate what you provided to the people you helped.
How did your services help the people you serve? For example, did providing coats to the homeless lower hypothermia cases by 10% in your city? Or did providing medical services to trafficking survivors result in 200 survivors being successfully admitted to long-term recovery programs?

When prepared with intentionality, the 990 can be a very useful marketing tool for an organization to build confidence and gain trust with its stakeholders. If your organization needs assistance with preparing or reviewing your annual 990, scheduling a time to meet with professionals with proven experience in the nonprofit sector is a great start to revamping this important document!

Questions?

Contact our Non-Profit Team for any questions regarding Federal Form 990, and make the most of this document!

About the Author | Emily Lalas

Emily is a senior in the Audit & Assurance Services Department of Saltmarsh, Cleaveland & Gund. Her primary areas of expertise include providing audit and assurance services to the firm’s non-profit, construction, and governmental clients. Before joining Saltmarsh, Emily worked in bookkeeping and office administration for a regional law firm.