Completing the IRS Form 990 is an annual ritual for most tax-exempt organizations. Nonprofit leaders understand that this form transmits important financial and operational information to the federal government, but what they might not recognize is the impact the Form 990 can have beyond tax compliance. Since the Form 990 is a publicly available document that contains a wide range of information about a nonprofit, it is also a valuable public relations and development tool for organizations.
In particular, there are two sections of the Form 990 that can help enhance a nonprofit’s mission and message with minimal additional effort and consideration.
“Statement of Program Service Accomplishments” (Page 2, Part III)
- What it is: This section requests descriptions of an organization’s mission and program services.
- Opportunity it presents: Move beyond basic descriptions – this is an opportunity to brag about the impact the nonprofit is having on the community. Use this section to really sell the programs the organization offers by describing the program and providing quantitative information on its success. The narrative provided here will support the numbers listed throughout in the tax return.
- Tips to maximize benefit: Ask program managers for a summary of last year’s activities and achievements and use this to “beef up” your return. Craft compelling descriptions; for example, “The Children’s Home housed 40 children and was able to get family placements for 13 children in 2015,” conveys much more success and positive impact than “Running a children’s home.” Review these descriptions each year, update them for program changes and be sure quantitative measures make sense. Your development team will be able to use this information in their efforts to gain financial support throughout the year.
“Governance, Management, and Disclosure” (Page 6, Part VI)
- What it is: This section is a long list of “Yes” or “No” questions related to the management and personnel of the organization.
- Opportunity it presents: This laundry list of questions can also serve to guide nonprofits in the development of best practices. The policies that the IRS asks about in this section are not all required by law, but are policies that nonprofits should have in place. Conversely, if the organization doesn’t have these policies, this is an opportunity to understand why and be able to explain the decision if questioned.
- Tips to maximize benefit: The answers give in this section indicate who has control and voting rights within the nonprofit. It can also help illustrate any potential conflicts of interest, so take this opportunity to think through how those would be handled. This section of the return can also be helpful in recruiting and onboarding new board members or management since it provides an overview of how the nonprofit is run and what they can expect regarding committees, voting rights and policies.
These two sections of the Form 990 demonstrate its impact beyond simple financial reporting. At any given time, potential donors, grant givers, members of the media and the public can access this information to learn more about an organization, determine its worthiness for financial support and evaluate the success with which it achieves the stated mission.
Contributed by Stephanie E. Kane, CPA, Supervisor in RKL’s Tax Services Group. Her client responsibilities include serving clients in a wide variety of industries with a focus on not-for-profit entities.